Mergers & Acquisitions
Last reviewed 21 Aug 2023
Financing
Financial assistance by the subsidiary
N/A
Subordinate debt (mezzanine capital)
The use of subordinate debt is allowed.
Interest expenses for acquisition financing
N/A
Interest expense on subordinate debt
Non deductable
EU interest barrier
N/A
Squeeze-out options
Buy-out of minority shareholders (squeeze-out)
N/A
Capital gains – corporations and partnerships
Sale of shares in a joint stock corporation
N/A
Sale of shares in a limited liability company
The gain of legal entities on the sale of ownership interest in a limited liability company in general is taxable income.
For international holdings different regulations apply.
Sale of interest in a partnership
The gain on the sale of an ownership interest in either a limited or general partnership (OG or KG) is normally taxable income for both limited and general partners.
International participation exemption
N/A
Sale of business
Definition
Sale of the business by individual sale of assets and liabilities (“asset deal”) is possible.
Special labor law, leasing law etc. regulations have to be observed if employment contracts, leasing contracts etc. are to be transferred.
Valuation
For the sale of individual assets, the acquisition cost principle is applicable. The total purchase price is allocated to individual assets and liabilities at fair value, the difference constitutes goodwill. Badwill is not allowed for tax purposes.
Goodwill
no goodwill amortisation but impairement
Mergers and demergers
Types of mergers described by commercial law
Upstream merger (possibly down-stream), side- stream merger, takeover of the business by the main shareholder (not in case of a corporation), demerger.
Valuation
For financial accounting purposes, as a rule valuation of assets and liabilities is optional.
Valuation in financial accounting
Method 1 – carrying values Assets and liabilities recognized at carrying values, with difference possibly recognized as surplus on reorganization (under certain circumstances, as goodwill).
Method 2 – revaluation Assets and liabilities are valued at fair value, the difference is recorded as goodwill.
Provision requirements have to be considered (e.g. deferred taxes).
Goodwill amortization
no goodwill amortisation
Tax treatment of revaluation
N/A
Contributions (transfer of assets into the capital of a company)
Contributions in kind
In general, the contribution of assets is allowed (services cannot be contributed).
Tax treatment
The exchange of individual assets against an interest in the company is treated like a purchase and sale transaction (at market value).
Specifically, transaction expenses (e.g. property transfer tax and registration fees) and possible VAT ramifications should be taken into account.
A tax-neutral contribution in kind is generally possible in the case of the contribution of businesses and qualified capital shares.
Goodwill amortisation
N/A
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