TRANSFER OF COMPANY NAME TO PARTNER

Instead of the financially demanding transfer of real estate from the company’s assets to the partner and the subsequent liquidation of the company, which would mean multiple taxation, it is possible to transfer the company’s assets to the partner, when the partner (even a natural person) takes over all the company’s assets and liabilities and the company is dissolved and deleted from the commercial register in one single process.

By default, a company should transfer property (property) to another person (including a partner) at market value, and the income from such a transfer would be part of the company’s income tax base. It is then a question of how many tax-deductible costs the company can set against this, however, as a rule, the company’s income tax will be based on 19%. In addition, this procedure does not deal with the existence of the company or the money or claims in the company’s property after the property (real estate) has been sold. If the partner wanted to dispose of the money as an individual, he would probably have to proceed with the payment of the dividend, which is taxable income on the part of the partner at a rate of 15%.

LIQUIDATION OF THE COMPANY AND TAKEOVER OF THE PROPERTY AS LIQUIDATION BALANCE

Another alternative is to liquidate the company, with the partner taking over the property as part of the liquidation balance in non-monetary form.

Although the share of the liquidation balance is generally paid in money, the agreement of the partners or the partnership agreement may stipulate otherwise. A non-monetary payment of the liquidation balance can then be made by transferring the items constituting the liquidation substance to the partner. The reason for such a procedure can be a direct interest in the acquisition of individual items owned by the company by a specific partner or the fear that the price will not be favourable enough when monetizing them.

In this case, the partner does not continue with depreciation and the entry price of the tangible property acquired by the partner of the defunct business corporation as part of the liquidation balance in non-monetary form will be determined according to § 29 paragraph 1 letter d) ZDP replacement purchase price according to a special legal regulation, which is the Property Valuation Act and its implementing decree. In the case of real estate, the replacement purchase price will be the ascertained price, and in the case of movables and services, it will be the usual price, or the market value.

As far as VAT is concerned, in the case of a non-monetary liquidation balance, the provision of § 6b, paragraph 2 of the VAT Act does not apply, i.e. if a company that is a VAT payer is dissolved as part of the liquidation, the partner acquiring the property constituting the liquidation substance does not become a VAT payer.

Taking over the real estate as a liquidation balance within the liquidation also makes it possible to solve a situation where there are several partners and each one has an interest in part of the assets (other real estate) of the company. As part of the distribution of the liquidation balance, each partner can receive property (real estate) according to the partners’ agreement.

However, liquidation is a more complicated process, when you have to publish the entry into liquidation in the trade journal and then wait 3 months for any applications for creditors’ claims. Furthermore, it is necessary to communicate with the regional state archive regarding the archiving of the company’s documents and also to obtain the consent of the relevant financial authority to delete the company from the commercial register.

WHAT ABOUT INCOME TAX ON THE PARTNER’S SIDE

A frequently asked question then is, what about the income tax on the part of the partners in the case of both of the above transactions? However, the result of taxation is completely individual and depends on the amount of the partner’s contributions to the share capital, the amount of the partner’s extra payments outside of the share capital or contributions to other capital funds, as well as the company’s obligations towards the partner, etc.

Both of the above transactions take place under different conditions, so you need to consider all the invoices and set up the transaction as needed.

If you are interested in more detailed information, please do not hesitate to contact us. After submitting the necessary documents, we are able to propose a specific procedure in advance and confirm the total final cost of the given transaction.