Termination of part-time business
February 20, 2022 | 40,00 EUR | answered by Steuerberater Knut Christiansen
Hello,
I would like to deregister my part-time business as it is not profitable. When I started the part-time activity, I was able to offset the initial costs with the income tax return from my main job, resulting in a refund of approximately 12,000 euros from the tax office.
My question is: do I have to expect the tax office to reclaim the above-mentioned amount? Based on my activities and advertising measures, I can explain to the tax office that the activity is not a hobby. However, expenses exceed income.
If the tax office could reclaim the amount, how can I prevent this preventively?
Thank you for your reply and have a nice day.
Good day and thank you for using ask-a-professional.com!
Regarding your question, I would like to provide you with the following feedback in the context of an initial consultation and considering the fee provided.
A retroactive cancellation of tax assessments from the past is only possible by the tax office if these assessments were issued provisionally (§ 165 AO) with regard to the intention of profit-making (hobby) or if the assessments were issued subject to review (§ 164 AO). If this information is missing in the explanations/notes or the reservation note in the respective tax assessments, the tax office cannot retroactively cancel these assessments/losses for you. However, if the assessments were issued with the provisional reservation or subject to review, the chances of preventing this are rather slim.
A "timely" closure of the business may be useful here before the tax office eventually determines the hobby due to ongoing, or further, losses or decides to issue the assessments provisionally. By closing the business, you are clearly stating that you want to avoid further losses. In any case, it would be helpful if you summarize the actions taken beforehand (marketing etc.) to make it clear that this was not just a "hobby." Please send this summary to the tax office when they request a statement from you.
Furthermore, it may be necessary to determine if any existing materials or equipment transfer to personal property upon closure of the business, resulting in a profit-increasing removal (i.e., an increase in income). This removal or sale should be used to reduce the accumulated losses.
Please note that this forum cannot replace a conclusive and personal consultation but only allows for an initial tax assessment.
Kind regards,
Knut Christiansen
Tax consultant
