The Federal Constitutional Court permits the tax-neutral transfer of assets even between partnerships with identical shareholders
An important provision in this context is § 6(5) of the Income Tax Act (EStG). This provision permits, in various scenarios, the transfer of individual assets at book value, for example from one business asset to another business asset of the same taxpayer, but also from the business assets or special business assets of a partner in a partnership to the assets of the partnership and vice versa.
However, according to the wording of this provision, it has not been possible until now to transfer assets at book value directly from one partnership to another, even if they have identical ownership structures—that is, if the same partners hold interests in both.
Criticism has long been voiced in case law and legal literature that this is inappropriate and incompatible with the requirements of the Basic Law, in particular the general principle of equality under Article 3(1) of the Basic Law. It is not apparent why this particular scenario should be treated differently from the cases mentioned in § 6(5) of the Income Tax Act (EStG). After all, even in the case of a transfer to a partnership with identical shareholders, neither are the hidden reserves contained in the transferred asset realized, nor is their subsequent taxation jeopardized. The Federal Constitutional Court has now also adopted this view.
The exclusion of the transfer of book value of assets between partnerships with identical shareholders violates Article 3(1) of the Basic Law and is therefore incompatible with the Basic Law. The legislature is obligated to enact new regulations retroactively for transfer transactions occurring after December 31, 2000. Until such regulations take effect, Section 6(5), sentence 3 of the Income Tax Act (EStG) remains applicable, provided that the provision also applies to the transfer of assets without consideration between partnerships with identical ownership structures.