Minimum value rule and group valuation

The deterioration of the inheritance-tax related alleviation regulations to be expected through a decision of the German Federal Constitutional Court has motivated several medium-sized companies to implement planned order of succession. In this connection, the company to be transferred must be assessed for tax purposes. In doing so, the minimum value regulation based on the net asset value introduced in 01/01/2009 by the legislator and the inheritance tax reform law must be observed. In practice, increased problems concerning the application of this minimum value regulation in accordance with Article 11 para. 2 p. 3 of the BewG [German Fiscal Law] were mainly observed in companies in group structures. The question to be answered is:

“Does the minimum value regulation in corporations have to be applied at Group company level or does the comparison take place between the capitalised value and/or discounted cash-flow value and the net asset value at group level?”

The solution presented by Wollny in DStR 42/2014 leads to a comparison at group level. The first approach that was presented refers to Article 2 BewG and deduces the Group as a subject of valuation from its scope of provisions on the economic unit. The second approach that was presented, explains the logical contradictions which resulted from an observation at Group company level and proves this by using the “sale of a business” course of action by supporting the approach of net asset values. The understanding of the minimum value regulation demonstrated by the second solution is directly applicable to evaluation processes according to civil law.