Deloitte Tax-News: Print
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Deloitte Tax-News: Print
URL: http://www.deloitte-tax-news.de/german-tax-legal-news/bfh-rules-on-taxtreatment-of-sales-price-receivable-write-off-following-a-share-transfer.html 30.03.2011 BFH rules on tax treatment of sales price receivable write off following a share transfer A German partnership sold its shares in a Mexican subsidiary and realized a tax-exempt capital gain in an amount equal to the excess of the sales price of the shares and the tax book value of the shares at the time of the transfer. Five percent of the capital gain was treated as a nondeductible business expense and thus subject to corporate income tax and trade tax; in effect, the capital gain was 95% tax exempt. Because the full sales price for the shares was not paid immediately, the German partnership capitalized a receivable. Approximately two years later when it was determined that the remaining purchase price receivable was irrecoverable, the partnership wrote off the receivable, taking the position that the write-off led to a tax deductible expense. Both the Lower Tax Court and the Federal Tax Court (BFH) (I R 58/10) rejected this view and ruled that the write-off of a portion of the purchase price receivable must be considered an adjustment of the tax-exempt capital gain. The courts held that the impairment of the receivable had to be taken into account for the taxation of the “triggering one-time event,” i.e. the disposal of the shares in the Mexican subsidiary, and they confirmed that the adjustment was effective retroactively to the year in which the sale took place for German tax purposes. Consequently, the 5% nondeductible business expenses that had been deemed to arise on the capital gain had to be reduced. If you have any questions, please contact the authors of the article at [email protected] or your regular Deloitte contact. www.deloitte-tax-news.de Diese Mandanteninformation enthält ausschließlich allgemeine Informationen, die nicht geeignet sind, den besonderen Umständen eines Einzelfalles gerecht zu werden. Sie hat nicht den Sinn, Grundlage für wirtschaftliche oder sonstige Entscheidungen jedweder Art zu sein. Sie stellt keine Beratung, Auskunft oder ein rechtsverbindliches Angebot dar und ist auch nicht geeignet, eine persönliche Beratung zu ersetzen. Sollte jemand Entscheidungen jedweder Art auf Inhalte dieser Mandanteninformation oder Teile davon stützen, handelt dieser ausschließlich auf eigenes Risiko. Die Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft übernimmt keinerlei Garantie oder Gewährleistung noch haftet sie in irgendeiner anderen Weise für den Inhalt dieser Mandanteninformation. Aus diesem Grunde empfehlen wir stets, eine persönliche Beratung einzuholen. This client information exclusively contains general information not suitable for addressing the particular circumstances of any individual case. Its purpose is not to be used as a basis for commercial decisions or decisions of any other kind. This client information does neither constitute any advice nor any legally binding information or offer and shall not be deemed suitable for substituting personal advice under any circumstances. Should you base decisions of any kind on the contents of this client information or extracts therefrom, you act solely at your own risk. Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft will not assume any guarantee nor warranty and will not be liable in any other form for the content of this client information. Therefore, we always recommend to obtain personal advice.