Donation of business assets subject to reservation of usufruct

In contrast to an assignment, an irrevocable authorization of the donor to exercise the voting rights is not detrimental to the tax privilege of business assets.

If the donor reserves the right of usufruct when transferring shares in a company, this can be a pitfall for tax purposes. Although business assets are generally subject to gift tax, the new owner must become a co-entrepreneur in order to benefit from this tax advantage. However, if the acquirer cannot exercise the voting rights from the shares, he is not considered an entrepreneur for tax purposes either. However, the Düsseldorf Fiscal Court has now ruled that a variant of the reservation of usufruct is harmless for tax purposes. In the case in question, the father had transferred his limited partner's share to his son. The son, in turn, did not assign the voting rights to his father, but only irrevocably authorized him to exercise them on his behalf. However, because the son was not prevented by the power of attorney from exercising the voting rights himself, the court found that there was sufficient co-entrepreneurial initiative for the beneficiary status.