Business transfers - tax benefits

As a preliminary point, it should be noted that the July 2001 client information brochure addressed this topic, highlighting the legal changes effective January 1, 2001. The following focuses on the tax benefits provided by the 2002 economic stimulus law, the amendment to the new-found-business-support law, the Euro contributions, and the changes in labor law regulations.

1. Limitation of liability under labor law

Section 6, paragraph 2 of the AVRAG was amended by BGBLI 2002/52 to remove the end-of-service retention of the operating entity in favor of a limited liability for severance and pension claims. The operating entity’s retention liability ends after 5 years from the date of the operating entity’s sale. If significant collateral (securities, collateral insurance, etc.) is transferred to the operating entity, the liability is reduced to 1 year. The change applies to operating transfers that took place after June 30, 2002 and before that. For the latter, the liability ends on June 30, 2007. For service contracts concluded after January 1, 2003, the new service transfer eliminates this liability. However, the change is significant for old service contracts that have not yet been transferred to the new service transfer system as well as for company pension commitments.

2. Proceeds from disposals or transfers

2.1 Business, part-time business or share of an entrepreneur § 24 EStG

2.1.1 Tax exemption € 7,300
If the profit is entirely received in the year of sale or disposal, the tax-free allowance is deducted ex officio. In the case of partial sale, the corresponding share. The excess amount is subject to the full income tax rate.

2.1.2 Distribution over 3 years
The profit attributable to the disposal and assignment year can be allocated to Application paid out evenly over 3 years, with the exemption applied. The minimum period of 7 years since opening/acquisition of the business must have passed.

2.1.3 Distribution over 5 years
If there is a sale or disposal gain as a result of (threatened) expropriation or an administrative intervention, a uniform distribution over 5 years can be made. applied for They will not be distributed. Silent reserves according to § 12 EStG cannot be distributed. The exemption is not available. The 7-year period mentioned above must have expired.

2.1.4 Half-tax rate
For the profit fully realized in the year of sale, half of the income tax rate can be taxed upon request – without applying the exemption – if the following conditions are met:
– At least 7 years must have passed since the establishment or acquisition of the business.
–The taxpayer is either deceased, incapable of work, or has ceased all his or her professional activities after reaching the age of 60.

2.1.5 Deducting inheritance and gift taxes
On Application The inheritance and gift tax paid within the last 3 years in connection with the acquisition of the business can be counted towards the tax.

2.1.6 Determination of the sale or disposal gain
– The Capital gain is the difference between the proceeds from sale and the tax book value of the business assets or the share of the company. If the tax book value is negative, it must be added to the proceeds, unless the seller neutralizes it (e.g., filling the negative capital account with the withdrawing co-partner). The transfer of a business that is book-overloaded without payment to close relatives qualifies as a gift.

– The Revenue from tasks is the difference between the tax book value of the business assets and the proceeds generated from the sold assets as a result of the disposal of the business, as well as the fair values of the assets taken over into private ownership. The tax gain thus determined is only attributable to a tax period, as it must be determined on a day-by-day basis.

3. Silent reserves in operational buildings in the event of the entire operation being terminated

3.1 Tax exemption
Are the prerequisites for the Half rate (Z. 2.1.4) before, then remain on Application during operation the breast milk reserves from Operational building tax-free under the following conditions:
– The building served until the closure of the business as a tax-paying entity Principal residence (without a minimum term).
– However, the building may not be sold or used to generate income for the taxpayer themselves or for anyone else.
– No silent reserves were transferred to the building.

3.2 Retrospective adjustment
In the event of a change in designation within 5 years of the closure of the business, a reassessment will take place as follows:

3.2.1 Half tax rate due to official duties (Rz 5714 EStR)
In the case of alienation by the taxpayer or their heirs, in the case of donation, in the case of use for income generation by the taxpayer themselves or by another person.

3.2.2 Half tax rate spread over 10 years (Rz 5715 EStR)
When used for income generation by the taxpayer themselves or when transferred for income generation by another, in addition to the half tax rate of the Application It is set to be evenly distributed over 10 years. This results in a double tax benefit for the taxpayer. However, the distribution rule does not apply if the building is sold or given away.

4. Sale against pension

4.1 Purchase price interest (Rz 5672 and 7031 EStR)
The tax liability only becomes due when the pension payment, together with any one-time payment, exceeds the book value of the business assets. When this disposal gain is recognized in more than one taxation period, the normal tax rate applies.

4.2 Maintenance or support pension
While the benefit of maintenance for the obligor is deductible as a special allowance and is subject to taxation as a subsequent business expense for the recipient, the benefit of maintenance remains tax-neutral on both sides. For the criteria regarding when which benefit is due, reference should be made to Rz 7013 et seq. of the EStR.

5. Sale in installments (Rz 5676 EStR)

The difference between the cash value of the pension and the book value of the sold business is the gain on sale. The interest component represents subsequent business income.

6. Enjoying fruit during a transfer of operations

In this case, it is a mixed donation or a donation with conditions. In this case, Enjoying reserved fruit If the civil-law property is transferred, the fruits remain with the former civil-law owner.
At the Enjoying the benefits of funding Nothing changes regarding civil-law property rights; only the right to derive the fruits thereof is transferred. From a tax perspective, the problem can be solved by allowing AfAzu to be taxed as it generally belongs to the civil-law owner. However, since tax law is based on the economic owner, care must be taken in contract drafting. Furthermore, it is possible to minimize the gift tax by properly structuring the contract; since the capitalized fruit enjoyment reduces the basis for calculating the gift tax (Rz 111 et seq. EStR).

7. Transfer of ownership through actual conduct

In principle, no legal transaction (purchase, exchange, donation, etc.) is required for a transfer of ownership. The mere change of the owner responsible for the further development of the business is sufficient (e.g. taking over the employees and the machinery).

8. Transfer reserve under § 12 EStG

Retained earnings from the discovery of hidden reserves constitute, according to the case law, "parked" ongoing profit. The dissolution in the course of a business transfer is to be taxed as ongoing profit and not as a transfer profit (Rz 7373 EStR).

9. Sale of participations in capital companies

9.1. Share issue/speculative gain
If the shareholding exceeds 1 % of the total capital, the profit is taxable according to § 31 of the EStG. In the case of a sale below 1 % within the one-year period, a capital gain is subject to tax according to § 30 of the EStG if it exceeds € 440 per annum. The capital gain is subject to the normal tax rate, while the profit from the shareholding sale is subject to the half-tax rate.

9.2. To one tax-specific feature It should be noted that when the shareholding is transferred, the capital Increase in social resources has become.
The Acquisition of share rights in this manner (free shares, free units, etc.) pursuant to § 3, paragraph 1, Z 29 in conjunction with § 94 Z 9 EStG, to the shareholder tax and duty free. However, if a refund is made within 10 years as a result of a reduction in capital, this is subject to tax under § 32 Z 3 EStG (half tax rate pursuant to § 37 (4) Z 1 lit c EStG). However, after 10 years, the refund is tax-free.
The tax qualification is different in the case of Sale of the stake to be assessed in accordance with § 31 of the EStG. The Social resources (Profit reserves, balance sheet profit) stemming from Capital increase they also remain subject to tax after the 10-year period has expired, Because the tax purchase costs remain unchanged, as there is no other provision to the contrary.

9.3. Share issue in connection with acquisition-related negative costs
The March 2002 client information pointed out that the negative acquisition costs to be recorded in the tax records pursuant to § 4, paragraph 12 of the EStG not only increase the sales or liquidation gain but also pass on to the heirs or recipients of the gift and become taxable to them in the given case.

10. Tax advantages for business transfers as of 1 January 2002

The benefits of the New Foundation Promotion Act They are now also partly applicable to business transfers.

10.1. Requirement is that the operator changes and the new operator Young entrepreneur If the transferring person remains in the company, they may no longer hold a dominant position - according to a broad interpretation. This includes all cases of takeover under the takeover tax law.

10.2. Tax exemptions
– The exemption from the land acquisition tax exists insofar as the value to be taken into account in the land acquisition tax calculation, € 75,000, has not been exceeded (exempt amount)
– Stamp fees and federal administrative fees for documents and official acts
– Court fees for entries in the company register and the land register
– Corporate taxes

Note:
The exemptions apply only to transactions that are directly related to the transfer of the business (e.g., paid-for transfer, mixed gift, partnership arrangement, contributions, etc.). The acquisition of a property during the transfer of the business is not subject to the exemption.

10.3. Application submission
The following forms are available for these purposes:
– New Fö3 declaration of (partial) transfer of operation
This signed declaration must be submitted to the relevant authority (tax office, court, municipal authority, etc.) or to representatives of the parties (e.g. notary), thereby ensuring that it is valid. immediate liberation comes from taxes and fees.
– New Fö4
Since the law was enacted retroactively to January 1, 2002 and the Form Neu Fö3 was not issued until September 1, 2002, the Form Neu Fö4 was issued for those business transfers that took place between January 1 and August 31, 2002, with which those persons who had already paid the taxes and fees during that period could file a request for a refund. Refund can be provided.

11. Tax benefits for gifts and inheritance

If the requirements of § 15a ErbStG are met, corporate transfers by death or gifts up to a value of € 365,000 (freehold value) are tax-free. It should be noted that the book values according to the balance sheet do not apply for this, but the valuation rules of the valuation law (e.g. unit value for land, fair value for capital shares, etc.) apply.

12th assessment of companies

The corporate evaluation must include a careful examination (due diligence) of the market and competitive situation, financial position, taxes, risk, human capital, etc. It is well known that the annual financial statements alone usually cannot provide insightful data.

Here is the following short story:
The auditor is presented with the balance sheet and he asks the entrepreneur to show him the business. He visits the building, the machinery, the office equipment, etc., and compares them with the values indicated in the balance sheet.
Finally, he asks the entrepreneur what is the most valuable asset in his business. My employees are the answer he proudly gives. However, there is no balance sheet for this position; it is rather the largest expense item in the profit and loss account. A discussion about the potential savings in this regard ensues.

So what is a company worth?

Even Moses read the Levites to his people regarding this matter. In the third book (Leviticus, Verses 25, 14-16) it is written:

&# #132;When you sell something to your tribal relative or buy something from him, you must not take advantage of each other. If you buy from your tribal relative, then take into account the number of years after the jubilee year; if he sells to you, then he should take into account the remaining years of yield. The greater the number of years, the higher the purchase price; the smaller the number of years, the less he demands from you; for it is the number of harvest yields that he sells to you.&147;

Neither the past values in the annual financial statements nor the existing intrinsic value determine the company value; rather, it is its economic value. If the benefit is lower than the cost, the purchase is a mistake. However, future-oriented values, by definition, are based on uncertainty about the future. From the quoted Bible verse „…Number of years after the jubilee year…“ It is inferred that the number of harvest yields is not unlimited, because in the Jubilee Year (also known as the Prach or Erlass year), which is the seventh year in each cycle, the debtor is to be released. The sustainability of the yields is therefore limited.

13. Final remarks

Given that in the next 10 years Austria is expected to see a change in ownership of one-quarter to one-third of small and medium-sized businesses, which will affect approximately 440,000 employees, the tax qualification of these offenses takes on increased significance. Given that inheritance of savings and other end-taxed securities is tax-free in unlimited amounts, one can probably speak of discrimination against venture capital in the inheritance of business assets, since there is only a tax exemption of €365,000 for this purpose.

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