The gift tax-free transfer of even large assets between spouses can be achieved relatively easily by changing the matrimonial property regime. However, caution is required here, as this can trigger income tax in individual cases. The Lower Saxony Fiscal Court recently ruled on this in its judgement of 14 December 2022 (9 K 162/21).
Equalisation of gains in the event of separation of property is considered tax-free
In the judgement case, a married couple had decided to switch from the statutory matrimonial property regime of community of accrued gains to separation of property. The assets of the spouses were therefore determined on the chosen cut-off date and the wife was entitled to half of the profit made by the husband during the marriage. This is the equalisation of gains. This is a claim for payment of a sum of money. The special feature is that the equalisation of accrued gains is always free of gift tax under Section [SD1] 5 of the Inheritance and Gift Tax Act, regardless of the amount. The husband fulfilled this equalisation by transferring shares in his GmbH to his wife.
Jürgen Lindauer
Director, Tax
KPMG AG Wirtschaftsprüfungsgesellschaft
If taxable income is associated with the equalisation of accrued gains, income tax is payable.
However, neither the couple nor a tax advisor they consulted considered that the transfer constituted a profit-realising exchange, which led to high taxable income in accordance with Section 17 of the Income Tax Act. This means that although no gift tax is payable, income tax is. As a result, the couple wanted to reverse the change in the matrimonial property regime, as they had assumed that the change in the matrimonial property regime would not trigger any tax.
If you want to play it safe, choose cash or property held for more than 10 years
The tax office did not follow this. However, the tax court appealed to saw the taxation as an interference with the basis of the transaction in accordance with Section 313 BGB and allowed a retroactive amendment. The tax office lodged an appeal against this with the Federal Fiscal Court (case no. IX R 4/23), which has to make a final decision on the matter. In this respect, the income tax side should always be taken into account when changing the matrimonial property regime. It is better to transfer money or property held for more than ten years as compensation.
