Change in profit determination when discontinuing the operation?
March 29, 2014 | 40,00 EUR | answered by Dipl.-Kfm. Frank-Olaf Illiges
Dear tax advisor, I have dissolved/cancelled my business (mediation of courier services) as of 31.12.13. Until now, I have always submitted a profit and loss statement (subject to sales tax). Now I wanted to create the profit and loss statement as of 31.12.13 via Elster (my turnover in 2013 was 20,000 euros). I sold my car in 2013, as of 31.12. there was no fixed assets left. Now the program tells me I have to change the method of determining profit? What do I have to do now, or how do I proceed. (I want to handle everything myself for cost reasons). Sincerely
Dear inquirer,
Thank you for your inquiry, which I will gladly answer taking into account your input and the rules of this platform.
Please note that my explanation is based on the facts presented, and that adding, omitting, altering information, or ambiguity in the information can change the tax result. Please be aware that this cannot replace individual comprehensive advice.
The discontinuation of a business is considered a business cessation (§ 16 para. 3 sentence 1 Income Tax Act (EStG)). Therefore, when discontinuing a business, a cessation profit must also be determined. The cessation profit is calculated according to § 16 para. 2 and 3 EStG as follows:
Selling prices of individual assets
+ Fair value of assets withdrawn
./. Selling costs
./. Book value of withdrawn and sold assets
The cessation profit is subject to a reduced tax rate (§ 34 EStG). Furthermore, a tax-free amount of up to 45,000.00 EUR must be considered if you have reached the age of 55 or are permanently incapacitated (§ 16 para. 4 EStG).
To determine the cessation profit, it is mandatory to prepare a tax balance sheet at the time of business cessation, i.e. as of December 31, 2013. Therefore, a change in the method of profit determination must be made as of December 31, 2013, from the simple income and expense calculation to full accounting. This may result in a so-called transitional profit, which is subject to income tax as the ongoing profit of the calendar year 2013.
Therefore, by December 31, 2013, you need to:
1. Prepare the income and expense calculation as of December 31, 2013
2. Prepare the tax balance sheet as of December 31, 2013
3. Calculate the transitional profit
4. Calculate the cessation profit
If you need assistance with profit determination, I am of course available to help.
Best regards,
Dipl.-Kfm. Frank-Olaf Illiges
Tax Advisor
Am Wieksbach 55
33378 Rheda-Wiedenbrück
Phone: 05242/4055666
Fax: 05242/4055677
e-mail: office@illiges-steuerberatung.de
Website: www.illiges-steuerberatung.de
