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The potential impact of the Corona pandemic containment measures on inherited or donated business assets from a tax perspective.

For taxable business assets that were inherited or given away as part of an anticipated succession, the so-called business asset relief of the Inheritance and Gift Tax Act is often claimed. It is then possible to transfer such assets at a discount on the market value of 85% under the standard exemption and 100% under the option exemption.

However, these very generous provisions of the legislator are linked to compliance with holding periods and the fulfillment of further criteria. However, due to the restrictions enacted to contain the Corona pandemic and the economic impact of these measures, it may no longer be possible to meet the holding periods and criteria in individual cases. This may have significant consequences for the affected entrepreneurs, as additional inheritance and gift tax may then be due retroactively. Entrepreneurs should therefore include the following holding periods and criteria in particular in their planning.

1. Payroll regulation

As a rule, the total of the relevant annual payroll of the business must amount to 400 percent (in the case of option relief: 700 percent) of the average payroll of the last five years before the acquisition within five (in the case of option relief: seven) years after the acquisition. If the business is discontinued, this requirement can no longer be met and inheritance or gift tax is subsequently due, which is calculated on the basis of the ratio of the actual relevant wage totals to those specified. It is questionable how short-time work affects the wage numbers. In this regard, for the Corona pandemic, the tax authorities have positioned themselves with identical state decrees dated October 14, 2020. According to this, in cases where the short-time working allowance paid to the employer by the German Federal Employment Agency is treated as a transitory item in the balance sheet and neither an expense nor income is recognized, it is to be taken into account in addition to the wage and salary expense reported in the income statement when determining the payroll total, provided that the corresponding account is presented. Although this is very welcome, it only helps to a very limited extent, because the real problem is that the wage expense for the company is reduced in the event of any necessary staff reductions or even if the company ceases to operate or becomes insolvent. However, this reduction in the wage expense has an effect on the determination of the wage total, i.e. whether the 400% or the 700% is reached. In any case, in those cases where the decrease in the wage bill is a consequence of the measures ordered by law to combat the Corona pandemic, in my opinion, the legislator or the tax administration should provide a remedy through administrative decrees or equitable measures so that these decreases are not considered detrimental to the fulfillment of the minimum wage bill. In my opinion, it is not in the spirit of the legislator of the Inheritance Tax Act to impose this risk on the taxpayer quasi as a general life risk.

2. Retention periods

Furthermore, it is necessary that the business continues to be operated for a period of five years (Regelverschonung) or seven years (Optionsverschonung) after the transfer. In particular, the sale, but also the discontinuation of the business, is detrimental. Particularly in view of the effects of the Corona pandemic, it is extremely problematic that the legislator has not differentiated in any way in Sec. 13a ErbStG according to who is responsible for the discontinuation of the business. The wording of the law therefore also covers the cessation of operations due to the effects of the Corona pandemic. It can only be recommended to the affected taxpayers not to simply accept this, but to defend themselves against it with legal remedies. At the very least, an attempt should be made to see whether the tax authorities will not waive the tax by way of equity or, if necessary, whether a tax court will decide that the provision should be interpreted restrictively, as it would otherwise be unconstitutional. For, in the author's opinion, it is difficult to blame the taxpayer if the government imposes measures to contain the pandemic that bring the taxpayer's business to a standstill.


Heiko Wunderlich

Heiko Wunderlich


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