Purchase of a GmbH
December 16, 2009 | 50,00 EUR | answered by Matthias Wander
Dear Sir or Madam,
My husband and I are planning to buy my parents' GmbH and have the following questions:
1. Both of my parents are shareholders and have each invested 12,500 euros as share capital in the company. If the purchase takes place, assuming a fictional amount of 100,000 euros, would the 25,000 euros be added to the purchase price (meaning 125,000 euros)? What is the usual practice in this case? I understand that it is a matter of negotiation, but doesn't the share capital belong to the company and therefore included in the purchase price (purchase price of 100,000 euros including share capital of 25,000 euros)?
2. In order to pay the purchase price, the new owners will need to take out a bank loan. What is the tax-efficient and ideal way to do this? As shareholders through the existing company, so that the loan can be repaid from the current earnings, or as individuals from taxed net income?
Another consequence would be that either I or my husband, as new shareholders and owners of the company, would have to buy out the previous owners (should the GmbH not have enough liquid assets). Is it correct that this investment would then have to be reported as an 'uncovered deficit' in the financial statements and what would be the consequences?
3. Are there tax advantages or disadvantages to making a one-time payment of the purchase price compared to an annuity?
4. Does it make tax sense to potentially split the purchase price over two years (splitting it between the current two shareholders)?
5. Should the current shareholders continue to work in the GmbH for a transitional period and receive a salary, is this salary typically deducted from the purchase price? Again, I understand that it is likely subject to negotiation, but what is the usual practice?
6. Is there a tax-free allowance for the purchase price that depends on age? I have heard that a certain amount is supposed to be tax-free for those over 55 years old, and then a 1/5 rule applies afterwards. (What exactly does the 1/5 rule entail?)
Thank you for a prompt response.
Dear inquirer,
Thank you for your inquiry, which I would like to answer based on the information provided in an initial consultation.
First of all, the purchase of GmbH shares does not affect the assets of the GmbH, unless the GmbH itself buys its own shares.
1. When purchasing GmbH shares, the purchase price usually includes the share capital. The amount of the purchase price is negotiable.
2. Since according to the facts you and your husband want to buy the shares, you must also bear the financing. You can take out a loan from the GmbH to finance the purchase. However, caution is advised here. If a lower interest rate than market rate is agreed upon in the loan you receive from the GmbH, the difference constitutes a hidden profit distribution, which you would have to declare as capital income for your income tax. The same applies if the GmbH takes over the complete financing. In that case, the entire loan would have to be taxed as income.
3. If the purchase price is paid immediately, the sales price minus the acquisition costs and selling costs is taxed under the partial income procedure.
In the case of a sale for annuity, there is an option for immediate taxation or ongoing taxation. With immediate taxation, the sales price is set at the present value of the annuity and taxed immediately after deducting acquisition costs and selling costs. The yield portions contained in the annuity payments are considered other income.
With ongoing taxation, the capital portion of the annuity payments is taxed as subsequent income from business operations. In this case, a profit is generated if the capital portion of the annuity payments exceeds the acquisition costs plus any selling costs. The interest portion included in the annuity payments already constitutes other income at the time of receipt. The partial income procedure is only applicable to the capital portion. Ongoing taxation continues until the annuity ceases.
4. If the purchase price is paid in installments, the purchase price must be discounted. The partial income procedure is only applicable to the discounted amount. The remainder constitutes interest and may be taxed as income from capital after deduction of the saver's lump sum.
5. The acquisition costs of the GmbH shares only have tax effects upon sale or liquidation. The purchase price is subtracted from the later selling price and the difference is subject to tax. The ongoing salary constitutes immediately deductible operating expenses. The salary is paid for the work provided. Since this is not related to the purchase of the GmbH shares, it cannot be credited against the purchase price.
6. For sales of shares held in private assets, there is a tax-free allowance of €9,060. The tax-free allowance is reduced by the amount by which the capital gain exceeds €36,100. For holdings below 100%, the amounts are to be reduced according to the participation ratio. Furthermore, the sale of shares is subject to the partial income procedure. The 1/5 method does not apply to the sale of GmbH shares.
Due to the complexity of the situation, I recommend that you consult a tax advisor in your area before transferring the GmbH shares.
Best regards,
Wander
Tax consultant
