On 8 May 2019, the Federal Ministry of Finance published the draft bill "Act on further tax incentives for electromobility and amendments to other tax regulations".

With reference to the BFH judgement of 12.04.2018 - IV R 5/15, the legislator has now taken action to regulate the deduction in accordance with Section 15 para. 3 no. 1 EStG. This has an impact on the Content of the blog post from 01.05.2019 "Business splitting - opportunities and risks to avoid the "colouring" of asset management income by the BFH ruling of 12.04.2018 - IV R 5/15".

In the previous version of the law the legal standard according to Section 15 (3) No. 1 EStG reads as follows:

"The activity of a general partnership, a limited partnership or another partnership undertaken with the intention of generating income shall be deemed to be a commercial enterprise in its entirety if the company also carries out an activity within the meaning of paragraph 1 sentence 1 number 1 or generates commercial income within the meaning of paragraph 1 sentence 1 number 2."

In the draft bill of 8 May 2019, the following text passage is included in the wording of Section 15 (3) no. 1 EStG:

"This applies irrespective of whether a profit or loss is generated from the activity within the meaning of paragraph 1 sentence 1 number 1 and whether the commercial income within the meaning of paragraph 1 sentence 1 number 2 positive or negative are."

Furthermore, with regard to the application of this law, the first sentence of Section 52 (23) EStG will in future state that Section 15 (3) no. 1 sentence 2 EStG also applies to assessment periods before 2019 be applied.

The reason given for this is that the previous view of case law and administration has applied without interruption for a period of more than 10 years and this view is now merely to be enshrined in law.

This justification in the draft bill can be viewed critically in view of the BFH ruling of 12 April 2018 - IV R 5/15.

With reference to the blog post from 1 May 2019, this means that regardless of whether positive or negative commercial income is generated, always will result in the other asset management activities becoming commercial income. The BFH ruling of 12 April 2018 - IV R 5/15 will therefore no longer have any effect if this draft bill ultimately passes through the legislative process.

Consequently, there is always a case of a business split, insofar as the conditions of factual and personal interdependencies arising from "judicial law" are met. The income from this is entirely commercial income.

Yours TAXGATE Team will be happy to answer any questions you may have about structuring.

 Patrick Bubeck is a tax consultant at TAXGATE, a law firm specialising in transactions, investments and tax compliance.

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