In its decision (Ra 2021/15/0053) of 17.11.2022, the VwGH has now denied the transferability of hidden reserves by way of a capital increase and payment of a premium in the case of an existing wholly-owned subsidiary of a private foundation.
Pursuant to Section 13 (4) KStG, private foundations can transfer profits from the sale of a share in a corporation not held as business assets, in which the foundation has held at least one percent of the shares within the last five years, to a newly acquired shareholding of more than 10% in a corporation in the calendar year of the sale (“replacement shareholding”). The transfer of hidden reserves leads to a reduction in the acquisition costs of the newly acquired shares and thus to deferred taxation of realized hidden reserves only at the time of the sale of the replacement participation.
Hidden reserves are transferable if a subsidiary is newly established by the private foundation. As a rule, the same also applies if an ordinary capital increase is carried out at a company and the private foundation acquires (an additional) share of at least 10% in the corporation. If only those who pay a premium for the new shares can participate in the capital increase, this premium, which is to be allocated to the acquisition costs of the newly acquired shares, is available to the acquirer of the new shares for a transfer of hidden reserves within the meaning of § 13 para. 4 KStG 1988; there are no subsequent acquisition costs of the existing shareholding. Payments for a shareholder contribution, on the other hand, represent additional acquisition costs for the shareholding, but in the given context are not to be regarded as the acquisition of a shareholding. This follows from the purpose of the provision as an investment incentive, which is intended to enable the replacement acquisition of new shares, but not to promote the provision of additional funds to existing subsidiaries. The acquisition of new shareholdings is not given in the case of shareholder grants – regardless of whether they are paid in the year of acquisition or later – because they are not granted for the acquisition of a shareholding, but rather to provide this shareholding with capital.
In the case in question, the appellant acquired a 100% stake in F GmbH in 2009. Subsequently, a capital increase including a premium was carried out, after which the appellant continued to hold 100% of the shares. Whether the premium paid, which was not granted to compensate for the higher value of the share exceeding the nominal value, but to provide an additional capital contribution from the 100% shareholder, should be considered a shareholder contribution from an economic point of view, could be left open according to the VwGH, because in both cases a transfer of hidden reserves was not considered permissible in the case under appeal.
In the case of a capital increase by the 100% sole shareholder, which is only to be subscribed by her, according to the decision of the VwGH, there is neither a change in the extent of the shareholding nor an acquisition of an additional 10% shareholding . As a result of the capital increase, the private foundation did not acquire an additional share in its subsidiary of more than 10% because it already held a 100% share in the company. Therefore, no new shares of more than 10% were acquired within the meaning of § 13 para. 4 KStG 1988, which is why the capital increase does not entitle to a transfer of hidden reserves. As the share premium was to be allocated to the newly issued shares and, moreover, was not caused by the equalization of the contributions of the various shareholders of the corporation, no hidden reserves could be transferred to the share premium.
If you require further information or legal advice, please do not hesitate to contact us. The tax consultants in our network will be happy to assist you with tax matters. Contact us at 01/505 77 00 or office@toplaw.at.