In a proceeding for suspension of enforcement, the Federal Fiscal Court (BFH) has concluded that also disproportionate contributions into the capital reserve do not constitute a gift tax-relevant increase in the value of shares within the meaning of Section 7 (8) of the German Inheritance Tax Act (ErbStG) if the respective capital reserve is allocated to the contributing shareholder on the basis of a contractual agreement (see BFH decision dated June 6, 2025, Ref. II B 43/24 (AdV)).
In the case under consideration, several shareholders held shares in a limited liability company (GmbH). According to its articles of association, the GmbH's profits were not to be distributed in proportion to the formal shareholders' participation ratio, but in proportion to the shareholders' financial contributions to the GmbH's investments. For the purpose of such investments, one of the shareholders made contributions into the capital reserve, which were allocated to him individually in the relevant shareholder resolutions and the GmbH's annual financial statements.
The relevant tax office took the view that this contribution into the capital reserve led to an increase in the value of the other shares in the company and is thus subject to gift tax pursuant to Section 7 (8) sentence 1 ErbStG. The tax office based its opinion in particular on the argument that although the relevant capital reserve contribution had been agreed to be allocated to the contributing shareholder and actually been implemented accordingly, this would not be sufficient since such agreement should have been permanently implemented in the articles of association.
The relevant shareholder filed an appeal against the gift tax assessments and applied for suspension of enforcement.
In its summary examination of the application for suspension of enforcement, the Federal Fiscal Court concluded that shareholder contributions do not lead to an increase in the value of shares within the meaning of Section 7(8) sentence 1 ErbStG if at least the following cases occur:
With regard to the question under consideration, if such a shareholder-related allocation of the capital reserve may only be relevant if provided for in the articles of association and which has not yet been clarified by the highest court, the BFH expressly refers to the tax literature, according to which mere contractual agreements are sufficient; furthermore, the published financial administration opinion (see R E 7.5 (11) p. 13, p. 14 ErbStR 2019) also supports this view.
In the opinion of the BFH, the contrary view of the tax office already raises serious doubts as to the legality of the tax assessment. In addition, the BFH points out that an increase in the value of the shares within the meaning of Section 7 (8) ErbStG could also be denied because corresponding profit distribution agreements were made in connection with the capital reserve contribution.
For a final clarification of the legal question, formally, the main proceedings must be awaited. However, with the present decision, the BFH has very clearly stated its opinion and thus also the framework conditions for such a decision.
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