The OFD Frankfurt am Main has pointed out the application of a BFH decision on the classification of a discount investment in the form of a so-called private placement.
With judgment v. On March 16, 2023, VIII R 10/19, the BFH commented on the question of whether participation in a company whose aim was to generate losses in one year, in particular through payment of a discount, constitutes a tax deferral model in the sense of. S. of Section 15b EStG was to be viewed. The BFH denied the applicability of Section 15b EStG and permitted loss offsetting. To understand these questions and the outcome, the facts of the decision must be outlined.
Participation in an asset-managing limited partnership
The taxpayer had high income from real estate sales in the year in dispute and was looking for a way to offset the income against losses in the year in dispute. On the advice of his advisor, he invested in an asset-managing limited partnership (KG). This company purchased bonds in Luxembourg bearing a fixed interest rate of 4%. No interest payments were made in the year in dispute because the interest was paid in arrears.
To finance it, the KG took out a loan domestically; the interest was paid in advance in the year in dispute. The company also paid a discount in the year of the dispute. In the year in dispute, the company had interest expenses, but no interest income. However, there was a positive result over the entire period. In the year in dispute, the taxpayer had losses, which he offset against profits from the sale of real estate.
Tax deferral model according to Section 15b EStG?
The tax office adopted a tax deferral model in the design and did not allow offsetting. It was only the BFH that came to the conclusion that there was no tax deferral model. The decision shows the pitfalls in the legal application of Section 15b EStG by the tax authorities. It should be noted here that although this was a model that was developed by a tax advisor and apparently offered to several taxpayers, the taxpayer made an individual investment. In particular, the investor did not behave like a passive investor, but rather had an influence on the design and was also involved in the negotiations with the banks.
Regulation according to Section 15b EStG
Section 15b EStG regulates a restriction on the offsetting of losses in the case of a so-called tax deferral model. This occurs if tax losses are to be achieved as a result of a model design, which are then to be offset against other, positive income. Section 15b (1) EStG stipulates that if there is a tax deferral model, offsetting is not possible. It is obvious that it is often controversial as to what is to be viewed as a tax deferral model and what is not.
OFD Frankfurt takes a stand
The essential content of the OFD order can be summarized as follows:
- The OFD initially represents the discount concept. An asset-managing KG is founded, which is also not commercial in nature, since in addition to the GmbH, at least one limited partner is also the managing director with sole power of representation. The KG invests in bonds, which are financed through external financing. Due to a discount of 5%, a tax loss is generated in the first year. However, there is a total surplus over the entire period.
- In such a case, the representatives of the tax administration have so far taken the view that there is a tax deferral model within the meaning of Section 15b EStG, since the taxpayer’s actual influence on the design and implementation of the concept is only insignificant.
- The BFH does not share this view and states that the taxpayer’s own activities included the fact that he himself founded the KG that made the investments and that he himself wrote the partnership agreement of the KG. He was also the managing limited partner and negotiated with the banks in advance about the bond and loan terms.
- This means that such a discount model is an individual investment that cannot be subsumed as a tax deferral model under Section 15b EStG.
- Since the BFH ruling was published in BStBl 2023 II p. 817, it is not only applicable in individual cases.
OFD Frankfurt/M, Verfügung v. 4.7.2024, S 2241b A-00003-0357-St 517
