GERMANY Law and Practice Contributed by: Tanja Schienke-Ohletz, Flick Gocke Schaumburg
transmortal/postmortal effect) can ensure the capacity of the heirs or an executor to act. • Contractual arrangements: It should be checked as to whether the terms of use of platforms or wallet providers exclude or restrict inheritance. To date, the legislator has not created any special regulations for succession in digital assets or crypto- assets.
optimally utilised and valuation effects are taken into account at the same time, for example through the gradual transfer of company shares within the family. 8.2 Legal and Tax Considerations Tax breaks and valuation rules play a particularly important role in succession planning for family busi- nesses in Germany. Tax Breaks for Business Assets The transfer of business assets by inheritance or gift is subject to tax breaks under certain conditions in accordance with the Inheritance Tax and Gift Tax Act. The aim of these regulations is to ensure the con- tinuation of businesses and jobs. There are two main exemption models for eligible business assets, such as shares in a limited liability company or interests in partnerships. • Standard exemption: 85% of eligible business assets remain tax-free, provided that certain condi- tions are met – in particular a five-year retention period and requirements regarding the total wage bill. • Optional exemption: Under stricter conditions (in particular a seven-year retention period and stricter payroll requirements), a 100% tax exemption can be achieved. The aim of the exemption rules is to preserve jobs and ensure that the company does not have to be sold to finance inheritance tax. So-called administrative assets (eg, surplus funds or certain rental properties) are not eligible for relief if they exceed certain limits. Special rules apply to very large corporate assets. 9. Trusts, Foundations and Related Entities 9.1 Choice of Planning Vehicle In practice, the following legal forms are particularly popular for succession planning: foundations with legal capacity (especially family foundations), tra- ditional corporations and partnerships (especially GmbH & Co KG).
8. Family Business Succession Planning 8.1 Succession Strategies Family Companies
A family business often has special provisions in its articles of association. These include, for example, special provisions for the transferability of shares, redemption of shares, withdrawal in the event of misconduct, marriage contract clauses, succession clauses and severance payment rules. This ensures that only family members are and remain sharehold - ers, and that measures can be taken in the event of misconduct. Valuation of Family Businesses For inheritance and gift tax purposes, the valuation of company shares is based on the Valuation Act. The fair market value is generally decisive. Initially, the stock market price or actual sale price is used as a basis. In the case of unlisted companies, the purchase prices within a year may also be decisive if there have been sales. If this is not the case, the sim- plified statutory income approach is often used. This involves capitalising the sustainable annual income of the company. Alternatively, other recognised valu- ation methods may also be used if they reflect the fair market value more realistically. In this respect, the taxpayer has a right of choice. Restrictions in the articles of association, such as transfer restrictions or compensation provisions, have no particular influence in the regular valuation proce- dure, although they do limit the actual realisability of the shares. In practice, succession plans are therefore often designed in such a way that tax advantages are
61 CHAMBERS.COM
Powered by FlippingBook