In a most recent decision, the Supreme Tax Court held that the termination of the right to usufruct is a non-taxable transaction if the holder of the right to usufruct over shares in a private limited company (GmbH) is not also the economic owner of the shares in the GmbH.
The plaintiff is a natural person who, in 2012, transferred shares in a GmbH, which accounted for 20% of the share capital in the amount of EUR 250,000, to her son free of charge by way of anticipated succession. The plaintiff retained the usufruct of the shares which included the entitlement to profits. A German usufruct („Nießbrauch“) is the right to use and enjoy real or personal property in accordance with §§ 1030 to 1067 of the German Civil Code. Usufruct is generally acceptable for tax purposes. The usufructuary (i. e. the beneficial owner) and not the (civil) owner is generally subject to income tax on income derived from the asset encumbered with the usufruct.
In 2018, the son sold the shares he had received to co-shareholders for a purchase price of EUR 2.4 million. In this connection, the son concluded an agreement with the plaintiff according to which the plaintiff waived her usufruct in return for payment of around EUR 1.93 million. The payment was made directly to the plaintiff by the buyers.
