Tax advantages of crisis loans
If a shareholder loses a loan that she granted to “her” company, she at least wants to reduce the economic loss by claiming the loss of the loan as a tax-deductible deduction. However, in the case of loan losses in connection with acquisitions within the meaning of 17 Income Tax Act, they are only taken into account when the investment company sells or quits – and only if the credit risk triggers subsequent acquisition costs.
The prerequisite for this is that the loan has taken the place of equity. In addition, if possible, the loss of the loan should be carried at its nominal value and not at the going-concern value at the time of the crisis. To ensure this situation, it is advisable from a tax point of view to grant a planned financial loan or a crisis loan. The following article is now about crisis loans.
The four “loan options” given in the crisis period are crisis loans left over during the crisis. If a loan has been awarded before the crisis and, despite the fact that neither a financial plan nor a crisis loan has been identified, has survived the crisis, the loss of the loan will only result in later purchase costs equal to the value of the 17 condominium asset Time of “task” still had.
Lending granted during the crisis situation
This is expected to be EUR 0 or just under EUR 0. Lending granted during the crisis situation must be fully taken into account in the event of damage, but the main problem is to determine when the crisis situation will occur. According to the general definition, there is a crisis situation if under the given circumstances the company would no longer receive a loan from an external third party under normal market conditions.
However, the time of crisis decisive for the determination of the subsequent acquisition costs of a GmbH participation in the case of an arithmetic over-indebtedness is not stated without further ado. Because there is no crisis situation with positive profit development. In fact, the ambiguity of the “timing of the crisis” means that the tax authorities can claim that the loan was granted before the crisis.
Consequence: This is only a “residual credit”, which should be assessed at the beginning of the crisis situation with the respective share value. In the opinion of the BFH, the review of the occurrence and the becoming aware of the shareholder’s crisis situation can be waived if the shareholder has already made a binding declaration to the company or the creditors of the company at an earlier date that he will leave the loan even in a crisis situation (BFH 10.11.98, BStBl Il99, 348, BFH 8.3.99, BFH / NV 99, 1203).
For a lender who is not also a shareholder, he would not normally be entitled to such a statement. If the shareholder defaults on such a crisis-related loan on the dissolution of the company, as a rule, subsequent acquisition costs of the investment arise in the amount of the nominal value of the loan amount. According to the BFH, this is due to the fact that for certain loans in the crisis period the commitment already takes place with the cessation of a normal and extraordinary termination at the time of the crisis and that the discontinuation of the loan is therefore due to this loss and not only to the subsequent legal consequences of the crisis situation which distinguishes this case group substantially from that of “unpaid credits” .
In order to determine the crisis situation, the lender’s legal obligation is required to enable the lender to survive even in times of crisis – and not just in the event of insolvency (!). The borrower must therefore exercise his right to ordinary and extraordinary termination upon occurrence of the crisis waiver.
Only under this condition can the loan be treated as capital replacement. Even if the financial position of the enterprise is not endangered, a mere subordination agreement or the decree of the ordinary termination of the credit can not justify its capital substitute effect.
The taxpayer assumes the material burden of proof for the existence of a crisis-related loan, which claims the credit loss as additional costs within the meaning of the 17 StG. The crisis determination does not already have to be in the granting of credit, but can also take place until just before the creditworthiness of the company.
However, the evidence of the crisis should already be given in writing in the case of lending. In addition to the agreement, it is advisable to substantiate the findings of the crisis in the financial statements, for example by a note in the notes to the consolidated financial statements. Note: In the absence of a written agreement on the determination of the crisis, an attempt can be made to justify an implicit exclusion from the termination (resulting in a crisis loan).
However, the chances of success of such an experiment are not very great, as the judgment of the BFH of 13.7.99 (loc. Cit.) Shows. In addition to financial plan credits, crisis loans are useful instruments from a tax perspective. On the other hand, the practice shows that many shareholders do not deduct their loans despite the right of termination in a crisis situation anyway, so that the explicit crisis regulation in loan agreements is in many cases acceptable.
The following is a model formulation for crisis identification in loan agreements. Even if the company is in a crisis situation or in such a situation. A crisis in this sense occurs when the company would no longer receive loans from non-shareholders under normal market conditions. The lender has no right to termination.
If necessary, adding a subordination: The lender assigns the claims of all other lenders to the subordinate with all claims under this loan agreement according to the claims of all other lenders. Loan repayments, interest payments and expenses may only be serviced from retained earnings, from a liquidation result or from the assets exceeding the other liabilities of the Company. In addition, the repayment of the claim as well as the payment of interest and costs may take place only if the company is not in a crisis situation in the sense mentioned above.