BFH doubts gift tax in the case of disproportionate contribution

In its decision dated June 6, 2025, II B 43/24 (AdV), the German Federal Fiscal Court (“BFH”) commented on the application of Art. 7 (8) sentence 1 ErbStG (German Inheritance Tax Act) in connection with disproportionate contributions to the capital reserve of a German limited liability company (GmbH). As a result, the court expresses serious doubts about the tax liability of such transactions in the context of interim proceedings – especially if the capital contributions are clearly allocated to the contributing shareholder under a contract.

Starting point: Notional gift in the event of an increase in value due to a non-company benefit

Art. 7 (8) sentence 1 ErbStG assumes a notional gift between the transferor and the other shareholders if the fair market value of their shares increases as a result of a contribution to a corporation. The provision is particularly important in the case of disproportionate contributions if not all shareholders contribute capital in proportion to their shareholding.

In the case decided, a capital increase was only performed by individual shareholders. The contributions were allocated to the capital reserve on the basis of shareholder resolutions, but were clearly allocated to individuals – both with regard to any repayment in the event of liquidation and in the event of a later distribution.

Decision: No clear increase in assets for the co-shareholders

On summary examination, the BFH considers a taxable gift to the other shareholders to be seriously doubtful if provisions in the articles of association or contractual agreements ensure that the contribution is allocated exclusively to the shareholder making the contribution. In this case, there was no actual increase in value for the other shareholders.

The tax authorities nevertheless subjected the contributions to gift tax – wrongly in the view of the BFH. The relevant administrative instruction (R E 7.5 (11) sentences 13 and 14 ErbStR 2019) also stipulates that there is no taxable transfer of assets in the case of clearly personal capital reserves.

Significance for practice

The decision underlines the need for a clear, documented allocation of disproportionate contributions in order to avoid unwanted gift tax liability. From a company law perspective, the personal repayment of contributions should be reflected both in the shareholder resolutions and in the balance sheet. According to the BFH, the annual financial statements have a binding effect on the internal relationship between the shareholders.

Particular attention must be paid to ensuring that there is no de facto increase in assets for the other shareholders – for example, through unrestricted access to the funds or a lack of repatriation agreements. Particularly in the case of disproportionate allocations for the purpose of investments or acquisitions (such as the acquisition of shares in a target company in the present case), forward-looking structuring under tax and company law is essential.

Open question: Articles of association or contractual regulation?

Whether such a personal capital reserve must be regulated in the articles of association or whether contractual agreements are also sufficient has not yet been decided by the highest court. The BFH has expressly not made a decision in this respect but refers to the practical relevance of such a differentiated approach. The literature predominantly argues that a contractual agreement is sufficient.

Conclusion

Companies with several shareholders, in particular family companies or investment companies, should carefully document and contractually secure disproportionate capital injections. This BFH ruling provides tax-relevant information on the conditions under which such arrangements do not lead to a taxable gift – and thus provides an important basis for argumentation in the context of tax planning and structuring advice.