The DIHK is sounding the alarm: The “key figures” on inheritance tax reform that have now been published by the Federal Ministry of Finance (BMF) will lead to an additional tax burden on the transfer of “large” family businesses - in contrast to what was promised in the coalition agreement. family businesses. According to a DIHK press release, the proposals go far beyond what the constitutional judges called for in their ruling of December 2014.
The question is how to regulate the needs test required by the court for ‘large’ companies. companies should be regulated. Already today, successors must continue to run the business for at least five years and maintain the jobs if the transferred business assets are to be spared from inheritance tax. The inheritance tax reform must be integrated into the exemption concept confirmed by the Federal Constitutional Court (BVerfG). Furthermore, it should be constitutionally sound and less bureaucratic.
Needs test required for ‘large’ companies Companies
The lynchpin of the needs test that will be required in future is the definition of ‘large’ enterprises. companies. In the view of the DIHK, this must be based on the corporate structure in Germany and the international competitive situation of the companies. The BVerfG has given an example of a value of 100 million euros per inherited company share. According to today’s valuation methods for business assets, this corresponds to a value of at least 300 million euros. The exemption limit of 20 million euros per acquisition brought into play by the BMF and the inclusion of private assets will very likely lead to heirs of family businesses having to pay inheritance tax on the business assets even if they continue to run the business unchanged.
Need test in two stages
The needs test must take into account the special capital commitment and contractual structures in family businesses. The DIHK, together with other umbrella organisations, therefore proposes a two-stage examination: The first step is to check whether the company is capital market-oriented, i.e. whether shares and debt instruments are traded on regulated markets. Companies for which this is not the case should be granted exemption without further examination, subject to compliance with the holding periods and wage sums. This is because in the case of these companies it can be assumed that the successors have close long-term contractual, personal and financial ties to their company. They thus fulfil the core characteristics that the BVerfG considers worthy of exemption in terms of jobs.
In a second step, a needs test could be carried out for the capital market-oriented companies on the basis of five criteria:
- Restrictions on the disposal of shares in the company,
- Restrictions on compensation in the event of transfer of company shares to other shareholders,
- Withdrawal or distribution restrictions on net profit for the year,
- personal influence on the management by the successors and
- personal influence on controlling bodies (supervisory board, advisory board) by the successors.
If at least three of these five criteria are met by the successor, the tax exemption would apply. If companies fail to meet this hurdle, they also lose the justification for being able to claim the tax exemption.
Make inheritance tax reform constitutional
Businesses now need legal certainty quickly. The business community therefore expects the reform of the inheritance tax to result promptly in an amended, constitutionally sound law that dispenses with retroactive measures. It trusts in the coalition agreement, which clearly assures that the transfer of businesses will not be impaired by a higher tax burden. | Source: DIHK press release of 26.02.2015
