Capitalization of shareholder loans as acquisition costs of an investment

The Higher Tax Authority (Oberfinanzdirektion, OFD) Frankfurt am Main issued a ruling on 17 November 2017. November 2017 ruling on the tax treatment of the redemption of shareholder loans or collateral through shareholder contributions as subsequent acquisition costs. The following design measures were the starting point for the ruling.

A shareholder had granted a loan to "his" corporation (GmbH) that qualified as a loan left in crisis. In principle, the legal consequence of the default of such a shareholder loan is that there are only subsequent acquisition costs on the shareholder's GmbH participation in the amount of the partial value of the loan at the time of the occurrence of the crisis. The partial value of such a shareholder loan is regularly EUR 0 in a crisis, so that a complete loss of the loan does not affect the GmbH investment for tax purposes in the form of subsequent acquisition costs.

To avoid this negative legal consequence, the following arrangement had been implemented: The shareholder made a cash contribution to the corporation in the amount of his loan receivable, which he refinanced with a bank. With the newly received liquidity, the corporation in crisis repaid the loan liability to its shareholder. The latter, in turn, repaid its liability to the bank with the liquidity recovered from the corporation.

If the corporation filed for insolvency after the implementation of this arrangement, the taxpayer had suffered the same economic loss as without the implementation of this arrangement: with the arrangement, he lost his subsequently made contribution to the corporation; in the other case, he lost his shareholder loan. Alternatively, the granting of a new

Shareholder loan to repay the old shareholder loan conceivable. This would have extinguished the older claim and, in the event of the insolvency of the corporation, the new loan would have to be assessed as a crisis loan and taken into account in full as subsequent acquisition costs for the GmbH investment. However, an additional risk for the shareholder would have arisen if the insolvency administrator had contested the repayment of the original shareholder loan as a disadvantage to the estate.

In its ruling of 26. In its ruling of September 2012, the Lower Tax Court (FG) of Lower Saxony ruled that the above-mentioned contribution with subsequent repayment constituted an abuse of tax planning.S.d. § Section 42 of the German Fiscal Code (AO) applies insofar as the newly injected funds are used exclusively to redeem loans granted by the shareholder to the company. Insofar as the corporation can only repay the original loans because it has previously received a new shareholder loan or a contribution from the shareholder, neither the economic position of the corporation nor that of the shareholder changed as a result of the offsetting payments. The aim of this arrangement is exclusively to reduce the tax burden on the shareholder by taking into account the loan loss.

In economically comparable proceedings, the Dusseldorf Regional Court (FG Dusseldorf) ruled in three rulings dated 18 December 2009. In December 2014, the opinion of the Lower Saxony Tax Court was confirmed. In the rulings handed down by the Dusseldorf Fiscal Court, the shareholders had made contributions to the company's capital reserves that had been used to repay bank loans for which the shareholders had provided guarantees. In the opinion of the Dusseldorf Regional Court, the payment by the shareholder into the capital reserve of the company served to redeem the collateral provided by the shareholders. Accordingly, the guarantee of the shareholder and not the payment into the capital reserve is to be used for the treatment as subsequent acquisition costs.

The ruling of the Lower Saxony Regional Court is final; appeal proceedings against the rulings of the Dusseldorf Regional Court are pending before the BFH under file numbers IX R 5/15, IX R 6/15 and IX R 7/15. The legal assessment by the BFH remains to be seen at the current time, which has requested the Federal Minister of Finance to intervene in the proceedings in case IV 5/15.

Similarly, it should be noted that the above presentation merely reflects the legal understanding of the OFD Frankfurt am Main. Until the BFH decides on the three pending appeal proceedings, it is not possible to derive from this a general validity of the legal understanding described, since an order of the OFD Frankfurt am Main exclusively binds the tax offices subordinate to this OFD in their exercise of the law, but not the taxpayers.

Here, the OFD Frankfurt am Main has commented on a situation that arose prior to the 27. September 2017 had been realized. Since that date, shareholder loans and equity investments must be strictly separated for tax purposes. After the BFH's decision on 11. July 2017 (IX R 36/15), losses from shareholder loans can no longer be included in the acquisition costs of an investment (s. also Newsletter January 2018, S. 2). For loans held as business assets, only a partial write-off can now be taken into account. In the case of loans held as private assets, the new BFH ruling of 24. October 2017 (VIII R 13/15) with the possibility of loss deduction opened there to be applied.

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