Tax entanglement

Tax entanglement is a term of the conversion tax law (conversion tax law). If a partnership is converted into a corporation, the assets can be brought in at partial value, at book value (book value continuation) or at an intermediate value. If the company chooses a value below the partial value (current fair value), components of the hidden reserves are not revealed.
The legislature waives the taxation of hidden reserves at the time of conversion. However, since the sale of shares in a corporation that are held as private assets is not taxable, the taxpayer could avoid the taxation of hidden reserves by selling his shares. To ensure taxation, § 21 I UmwStG was introduced.

Werden demnach Anteile an einer Kapitalgesellschaft veräußert, die der Veräußerer durch eine Sacheinlage unter dem Teilwert erworben hat, so gilt der Betrag um den der Veräußerungspreis die acquisition cost übersteigt als Veräußerungsgewinn i. S. d. § 16 EStG. Solche einbringungsgeborene Anteile sind steuerverstrickt. Durch die Steuerverstrickung der Kapitalgesellschaftsanteile wird die Besteuerung der stillen Reserven gewährleistet.

The final taxation (unstripping) takes place at the latest with the sale of the individual assets or with the sale of the shares brought in. An early tax evasion can also be carried out on request. This is particularly useful if an increase in the value of the shares is to be expected. A general tax evasion fact is not standardized.

Against the background of possible unrestricted evasion offenses in cross-border situations, a general de-entanglement offense is under discussion.

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