Extraction and leasing in agriculture.
September 16, 2011 | 60,00 EUR | answered by Oliver Burchardt
1. Farmer X wants to transfer a property from business assets to personal assets. Value according to tax assessment on 30.06.2010 = 1,247.55 euros. How does this withdrawal affect taxes (accounting according to 4/3) - withdrawal at book value = booking as income? How should this withdrawal be explained to the tax office and where should it be recorded in the tax return form L+F?
2. What special considerations arise if the farmer leases his entire business to his wife (due to incapacity to work).
Best regards
Dear inquirer,
Thank you for your inquiry, which I will gladly answer as part of an initial consultation.
1. Withdrawal of a property
The withdrawal must be based on the fair value of the property at the time of withdrawal. The fair value is the actual value of the property. The difference between the fair value and the book value results in an adjustment to the taxable income. However, this difference is not recorded in form L+F, but as other income in the income-statement. Your accounting software should have a corresponding account for this.
2. Effects of operating lease
The question is very open-ended, so I can only address the effects of an operating lease in general terms.
After leasing out the business, you will continue to generate income from agriculture and forestry equal to the lease income.
However, you have a choice. You can also declare the termination of the business simultaneously with the operating lease and trigger the taxation of the hidden reserves in the business. You should seek detailed advice from an agricultural accounting firm on this matter, as the taxation naturally results in a high tax bill in the year of business termination. Subsequent increases in value, however, are tax-free. A general statement about the advantages cannot be made and always depends on the individual circumstances. If you declare a business termination, you will generate income from rental and leasing from that point onwards.
At the same time, the lease income is subject to the regular VAT regime, and an assessment according to § 24 UStG is no longer applicable for this income. Depending on the circumstances, a correction of input tax for previous years may be considered if you retain assets.
The tax treatment of the income generated in the leased business remains unchanged, regardless of how you exercise your choice for business termination. Income from agriculture and forestry will continue to be generated. The paid lease payments are considered business expenses.
Since you intend to lease to your spouse, it is essential to ensure compliance with the arm's length principle in drafting the lease agreement. With close relatives, the lease must be carried out as if it were with unrelated third parties if the contractual relationship is to be recognized for tax purposes. Furthermore, it is important to document the actual execution of the contract (such as the actual payment of lease payments).
I hope my explanations have been helpful to you.
Best regards,
Oliver Burchardt
Tax consultant
