In a decision issued in November 2009, the BFH ruled on the spin-off of a business from a partnership that had two distinct business divisions and had transferred the second business division to a newly formed partnership granting partnership interests in the new partnership to the partners of the transferring partnership.
The local tax office disputed the treatment of the trade tax liabilities stemming from profits generated in the second business division that was later spun-off. The taxpayer and the local tax court of Saxony-Anhalt argued that due to a provision in the Civil Law Restructuring Act, these trade tax liabilities were transferred together with the second business to the receiving new partnership, which should therefore be the legal successor of these tax liabilities. The local tax office, however, argued that these liabilities remained with the transferring partnership since they dated from a period preceding the spin-off. According to the local tax office, the tax liabilities did not pertain to the assets and liabilities that were transferred with the second business division, which would result in the transferring partnership being the taxpayer for these trade tax liabilities.
The BFH overturned the decision of the local tax court of Saxony-Anhalt and held in favor of the local tax office. The BFH concluded that a spin-off represents a transfer of a business division by way of singular succession of the receiving entity into rights and obligations of the transferring entity. It stated that the entity/person liable for certain taxes is determined by the general tax rules. A transfer of such a tax liability is generally only possible by way of universal succession of the receiving entity into the rights and obligations of the transferring entity. Due to the civil law classification of the spin-off as a transfer with singular succession, the trade tax liability was not transferred and the transferring partnership was still liable for this trade tax originating from a period before the spin-off, even though it resulted from profits originating from the business division that was later spun-off.
