New regulated inheritance and gift tax starting from 2007 lets duties explode – non-profit trust foundation as effective solution for medium-size entrepreneurs
Almost completely unnoticed by the public, a fundamental reform of the inheritance and gift tax is imminent in 2007.
This is like a time bomb for the entire middle class, because the details are only now becoming known step by step. Experts and tax experts – for example from the Association of German Chambers of Industry and Commerce (DIHK) – state: “This is how small and medium-sized businesses are being reformed to ruin them”. For example, the tax value for medium-sized companies is to rise sharply in the case of inheritance tax and company succession. Business assets could even be divided into good and bad assets for tax purposes in the future. The so-called evil assets = unproductive assets (cash, cash on hand, bank balances, investments in corporations on the balance sheet) would then be taxed immediately. And gift and inheritance tax is then immediately due. Under the proposed tax reform, the tax burden on the transfer of company assets between generations will increase almost eightfold. For the unproductive assets, the tax burden is still almost three times as high as the old tax, but for the entire business.
Final withholding tax to be added in 2009
The new tax regulations, which have yet to be adopted, will affect almost the entire SME sector. They apply above all to sole proprietorships, partnerships, but also to entrepreneurs who hold at least a 25 percent stake in their own GmbH or AG. The new final withholding tax on interest income does the rest. It was originally also planned for 2007, but was postponed due to the corporate tax reform. Now it will come into force – according to the latest reports – in 2009. The final withholding tax will probably start at 25 percent. For this reason, intelligent solutions are required which allow decisive legally founded scope for structuring, above all for the medium-sized entrepreneur for his own company – but also for the private sphere. This leads automatically to a means little known in the public – the non-profit foundation, which is promoted besides particularly by the Federal Government with substantial tax privileges. This legal possibility of combining meaningful action for a charitable purpose with advantageous legal tax privileges was previously used primarily by large corporations. In the meantime, however, it is also very well earning sportsmen and celebrities in Germany who are looked after by top advisors in tax and foundation law. The own tax advisor is often not trained in this special field and therefore – also for liability reasons – first refers to doing nothing. This is a glaring mistake, as medium-sized companies in particular could benefit enormously from setting up a charitable foundation. Straight lines for acting partners of medium-size enterprises (GmbHs) in addition, for owners of partnerships, physicians, or pharmacists is to be seen the non-profit trust donation among other things as optimal problem solution. Shareholders can transfer their company shares to their own charitable trust foundation. In doing so, it must be ensured that these shares are assigned to the private assets of the company owner for tax purposes: This is because in the case of so-called business splits or group structures, the company shares are attributed to the business assets for tax purposes. ■
Information is available at www.fiala.de and from Frank M. Strobelt, Gesellschaft für Stiftungsförderung (GfS), telephone 030/ 28598782, www.stifter.org.
(Macher December/January 2006 / 2007, p. 8)
Courtesy ofwww. macher.volksfreund.de.
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Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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