Participation in (arbitrary) business assets

Participation in (arbitrary) business assets

The different tax treatment of private and business assets repeatedly raises questions in practice. According to the preponderance method, mixed-use properties that are used entirely or predominantly for self-employment are allocated in their entirety to business assets.

A special case is represented by what is known as discretionary business assets. Holdings of at least 20% of the share capital or stock capital in a corporation can be voluntarily declared as business assets at the time of acquisition, regardless of whether they are used for self-employment or not. The declaration of discretionary business assets is generally only possible at the time of acquisition (exception: in the case of relocation), but no later than in the first tax return after the acquisition.

Arbitrary business assets are subject to the book value principle. Consequently, it is not the asset tax value according to KS 28 SSK that is decisive for asset tax purposes, but the book value (i.e., acquisition value with regard to necessary depreciation).

Income (dividends and capital gains, i.e., the portion of the proceeds exceeding the book value) from equity interests in discretionary business assets is classified for tax purposes as income from self-employment. Partial taxation depends on whether the necessary requirements are met.

From a tax perspective, it is advantageous that capital losses and depreciation on arbitrary business assets can be deducted from taxable income. Due to the fact that partial taxation can be applied to income, capital losses and depreciation are of course only deductible to the extent of the corresponding partial taxation rate. Experience has shown that the tax authorities are willing to discuss the determination of capital losses and depreciation, and it is usually possible to find an approach that is acceptable to both sides.

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