The coalition's agreement of June 20, 2016 heralds the provisional end of a reform process that has lasted more than 18 months. The reform, pronounced a minimally invasive intervention, leaves many things unchanged related to the tax privileges for business assets, however, some amendments exceed the requirements of the German Federal Constitutional Court.
Almost unchanged: Relief models (Verschonungsmodelle)
There are two relief models for persons or companies subject to taxation on the transfer of business assets. The first is the standard exemption, according to which 85% of the value of the business assets is excluded and, in order to avoid subsequent taxation, the transferee must continue to operate the acquired business for five years (retention period) and maintain at least 80% of the business' payroll (jobs) (wage regulation). The second exemption option excludes 100% of the value of the business assets, but in this case the requirements are a retention period is seven years and maintenance of 100% of the business' payroll.
In contrast to previous options, the choice of one option or the other is now no longer dependent on the business assets consisting of only a certain quota of the assets that are excluded from preferential tax treatment (management assets). In the future, the person or company subject to taxation can choose freely between the two models.
In addition, there is a tightening of regulations for small businesses. While the wage regulation clause was previously not applicable from the outset to businesses with fewer than 20 employees, in the future, one must pay attention to the payroll regulation if one acquires a business with even six employees. However, when utilizing the standard exemption, the acquirer is only required to maintain 50% of the business' payroll if there are no more than 10 employees and only 60% if there are no more than 15 employees. In utilizing the second option for relief, the quota increases to 71%, respectively 81%.
As hitherto: Assets allowed preferential tax treatment
The provision for assets allowed preferential tax treatment also remains unchanged. This is still determined based on very formal criteria. All taxable business assets (thus also the commercial GmbH & Co. KG), as well as qualified shares in corporate enterprises (shareholding of more than 25% - alone or with others within the context of a pooling agreement) shall continue to remain eligible for preferential tax treatment. In order to clarify this point and in contrast to the...