deregistration of a business
January 27, 2015 | 30,00 EUR | answered by Dipl.-Kfm. Frank-Olaf Illiges
Good day!
I operate a vacation home rental business, which I will be closing on July 1, 2015 for health reasons (business deregistration).
I still have the following items on my depreciation list:
I. Furniture for a rented vacation apartment;
(i.e. I rented the apartment unfurnished, furnished it at my own expense, and then rented it out to vacation guests.)
The furniture has been depreciated at 10% (net) per year for the past 3 years.
Current book value: net: 9,417.88 €
I already claimed the VAT as input tax when I purchased the furniture 3 years ago.
I intend to sell the furniture to the owner at the current book value.
Is it correct that when I close the vacation rental business (selling the furniture to the owner at the current book value), I only have to pay the VAT on the above book value, i.e. 1,789.40 €, to the tax office?
II. Office furniture
The furniture has been depreciated at 10% (net) per year for the past 3 years.
Current book value: net: 2,458.92 €
I already claimed the VAT as input tax when I purchased the furniture 3 years ago.
I intend to gift the furniture to my son (free of charge).
Is it correct that neither I (the donor) nor my son (the recipient) have to pay taxes to the tax office when I close the vacation rental business (gifting the furniture to my son as part of anticipated inheritance)? Does the contract need to be notarized?
III. Vehicle
The vehicle has been depreciated at 16.66% (net) per year for the past 3 years. (Depreciation period: 6 years)
Current book value: net: 6,395.89 €
I already claimed the VAT as input tax when I purchased the vehicle 3 years ago.
I intend to gift the vehicle to my son (free of charge).
Is it correct that neither I (the donor) nor my son (the recipient) have to pay taxes to the tax office when I close the vacation rental business (gifting the vehicle to my son as part of anticipated inheritance)? Does the contract need to be notarized?
Dear inquirer,
Thank you for your inquiry, which I am happy to answer taking into account your efforts and the rules of this platform.
Please note that my explanation is based on the facts presented, and that adding, omitting, changing information, or the ambiguity of information can change the tax result. Please be aware that this cannot replace individual comprehensive advice.
Since you are transferring or selling all essential operating assets (furniture, vehicles) of your business into private assets within a short period of time, a business cessation according to § 16 para. 3 of the Income Tax Act (EStG) is present.
The business cessation generally leads to the disclosure of hidden reserves in the assets of your business and they must be taxed as business cessation profits. The business cessation profit is subject to income tax, but not to trade tax. Additionally, you may be able to claim the tax-free allowance of EUR 45,000.00 according to § 16 para. 4 EStG as well as the tax concession according to § 34 EStG for income tax.
To determine the cessation profit, you must switch from cash-basis accounting (§ 4 para. 3 EStG) to profit determination according to inventory comparison (balance sheet according to § 4 para. 1 EStG).
The cessation profit is calculated as follows (§ 16 para. 3 EStG):
Selling prices of the sold assets in total (§ 16 para. 3 sentence 6 EStG)
+ Fair values of the assets not sold but transferred into private assets (§ 16 para. 3 sentence 7 EStG)
- Cessation and sales costs
- Book value of the business assets (§ 16 para. 2 sentence 2 EStG)
= Cessation profit
The office furniture and the vehicle are transferred from your business to your private assets and must be taxed by you at their fair value (current replacement value). You can then gift these assets to your son from your private assets. The gift is tax-free, as it falls below the tax-free allowance of EUR 400,000.00 (§ 16 para. 1 No. 2 Inheritance Tax Act (ErbStG).
Both the sale of individual assets and their transfer into private assets are generally subject to value-added tax (VAT) based on the selling price or fair value (§ 1 para. 1 No. 1, § 3 para. 1b No. 1 Value Added Tax Act (UStG).
Kind regards,
Dipl.-Kfm. Frank-Olaf Illiges
Tax Advisor
Am Wieksbach 55
33378 Rheda-Wiedenbrück
Phone: 05242/4055666
Fax: 05242/4055677
Email: office@illiges-steuerberatung.de
Website: www.illiges-steuerberatung.de
