Dr. Stefan Lammel, Fachanwalt für GesellschaftsrechtDr. Jan Henning Martens, Fachanwalt für Handels- und Gesellschaftsrecht

Liability for Trade Tax in Corporate Sales: Caution when Selling the Limited Partner's Share(s)

If a company is selling its limited partner's share(s), the resulting sales profit is attributed to the business revenue of the limited partnership. Thus, the company is also liable for trade tax although it is not directly involved in the sale. This also applies if individuals participate in the limited partnership as additional partners. Insofar, according to the Fiscal Court Düsseldorf (judgment of 26 May 2015, file no. 10 K 1590/14), the total profits are generally considered for trade tax calculations. In this case, the profits distribution key of the seller will not be considered and neither will be the resignation of a partner during the year. The plaintiffs had claimed that due to the limited partnership's profit share (50%) and the resignation after six months, only 25% of the sales profit should be considered for trade tax calculations.

The general tax liability is regulated by the law in sec. 7 s. 2 no. 2  of the German Trade Tax Law (Gewerbesteuergesetz – “GewStG”), insofar the judgment of the Fiscal Court Düsseldorf is not surprising. However, it is debatable whether the profits distribution key and the time period have to be considered when calculating the trade tax. For this reason, the plaintiff has appealed to the German Federal Fiscal Court (Bundesfinanzhof – “BFH”, file no. IV R 31/15).

When selling limited partnership shares through other companies, a share sales agreement should regulate who has to bear the trade tax incurred for the partners. An applicable regulation could also be included in the partnership agreement of the limited partnership to encourage the partner to consider a corresponding regulation.

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