SNP wins legal dispute at the BFH

The GmbH, successfully represented by SNP as plaintiff, was a minority shareholder in an AG with 9.898% of the share capital in 2013. By way of a purchase and transfer agreement, this GmbH acquired further shares in the AG from the majority shareholder under the condition precedent of payment of the full purchase price. However, the date of the conclusion of the contract (December 2013) and the actual payment of the purchase price (only in 2014) fell apart in time, so that the GmbH was not yet the owner of the shares to be transferred under civil law as of 1 January 2014.

For the dividends received in 2014 from the previous years, the GmbH declared tax-exempt income within the meaning of section 8b (1) KStG in its submitted corporate income tax return. However, the tax office refused to apply section 8b (1) KStG on the grounds that the plaintiff had not yet reached the required participation threshold of 10% at the beginning of 2014 and took the dividends into account in full when determining the plaintiff’s income.

In fact, however, the plaintiff was already the beneficial owner of the shares in the AG on 1 January 2014 in accordance with the provisions of section 39, paragraph 2, no. 1, sentence 1 of the German Fiscal Code (AO) and had thus exceeded the required participation threshold of 10%. According to this provision, an asset is to be attributed to the person who exercises the actual control over this asset in such a way that he can, as a rule, exclude the (civil law) owner from the economic influence on the asset for the normal useful life.

In its ruling, the BFH clarified that the term “participation” in the calculation of the participation threshold of section 8b (4) sentence 1 KStG for so-called free float dividends (10%) refers to the general principles of the attribution of assets under tax law (section 39 AO). The decisive factor is therefore the economic ownership of the shares (BFH, ruling of 7.6.2023 – I R 50/19; published on 14.9.2023). The practical significance of the ruling is enormous, as it addresses the frequently relevant question for transactions as to when shares are transferred for tax purposes.