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Nexia Ebner Stolz

Tax Advice

Inheritance tax rules for Cash GmbH's are harmful to medium-sized businesses

In order to exclude Cash GmbH's from the tax exemption for inherited business assets, the prerequisites for the exemption were modified by the Mutual Assistance Directive Implementation Act [Amtshilferichtlinie-Umsetzungsgesetz].

Spe­ci­fi­cally, the chan­ges con­cern the defini­tion of “harm­ful” non­bu­si­ness assets, which pre­vent tax exemp­tion of 85% of the com­pany’s assets if the harm­ful non­bu­si­ness assets amo­unt to more than 50% of the com­pany’s value. Further­more, busi­ness assets can only be com­p­le­tely tax exempt if the harm­ful non­bu­si­ness assets acco­unt for no more than 10% of the com­pany’s value.

The fol­lo­wing rule app­lies to busi­ness assets acqui­red after June 6, 2013: assets that remain after sub­trac­ting the total value of debts and are in the form of cur­rency, busi­ness cre­dits, cash receivab­les or other receivab­les, are coun­ted as harm­ful non­bu­si­ness assets if they acco­unt for more than 20% of all busi­ness assets.

Medium-sized com­pa­nies also face ano­ther disad­van­tage. The new rule exempts cer­tain com­pa­nies, such as those whose pri­mary pur­pose is to finance affi­lia­tes.

Finan­cing com­pa­nies for large cor­po­rate groups will cle­arly bene­fit from this because their sole pur­pose is to pool cash for the groups. In con­trast, the practice in medium-sized com­pa­nies is gene­rally for the hol­ding com­pany in which the equity inte­rests are con­cen­t­ra­ted to assume res­pon­si­bi­lity for finan­cing while also per­for­ming ser­vices rela­ted to the com­pany’s pur­pose. The ans­wer to whe­ther these com­pa­nies may also be exemp­ted from the tigh­ter res­tric­ti­ons is likely to be nega­tive in many cases or lead to legal dis­pu­tes with the tax aut­ho­ri­ties.

In order to exclude Cash GmbHs from the list of assets entit­led to favora­ble inhe­ri­tance tax tre­at­ment, the law­ma­kers were wil­ling to adver­sely affect medium-sized com­pa­nies. A more nuan­ced rule whe­reby only funds that are nones­sen­tial in the parti­cu­lar case are con­s­i­de­red harm­ful non­bu­si­ness assets would have been desi­ra­ble.

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