Minimum shareholding – Is beneficial ownership sufficient for tax exemption?

In the case in question, a corporation had held 9.898% in a joint stock company (Aktiengesellschaft, AG) up to 2013. In view of an intended distribution by the AG in 2014, the claimant had concluded a purchase agreement with the main shareholder, on 16.12.2013, for 50 shares in order to get over the 10% limit.

The purchase agreement included a condition precedent according to which ownership of the shares would be transferred to the claimant only once the purchase price had been paid. However, due to an oversight by the claimant, the planned immediate electronic bank transfer was not executed and the transfer of the purchase price was actually carried out at the start of 2014. Consequently, the Munich tax court had to decide whether or not the claimant had held the necessary 10% minimum shareholding at the start of 2014.

In their ruling from 11.9.2019 (case reference: 7 K 2605/17), the judges took into account the beneficial ownership that, in their opinion, had been transferred in December 2013 via the conclusion of a definite agreement for the purchase of the shares. Through the agreement, the claimant had acquired a position that included the right to profits and any potential changes in value of the shares that could no longer be withdrawn against its will and which had still existed on the relevant cut-off date of 1.1.2014.

Please note: The ruling is not yet final and thus not yet legally binding as there is an appeal pending at the Federal Fiscal Court under the case reference: I R 50/19.