Anyone who gifts or bequeaths shares in a company must have their value assessed for gift or inheritance tax purposes. The so-called simplified income-based valuation method is frequently used for this purpose, which is based on the average annual profit over the last three financial years. A recent ruling by the Federal Fiscal Court (BFH) now clarifies how a provision for an antitrust fine should be treated in this context.
What was the dispute about?
A GmbH & Co. KG had been fined just under 6 million euros by the Federal Cartel Office for illegal price-fixing. The fine was purely punitive in nature; in other words, it was intended to penalise the unlawful conduct. There was no economic benefit that would have had to be recouped. The company subsequently recognised a corresponding provision in its accounts.
In 2017, a limited partner transferred part of her shareholding to her son by way of a gift. To value the shareholding for gift tax purposes, the company used the simplified income approach. However, the tax office added the provision for the fine – treated as an extraordinary expense – to the base value, which increased the income relevant for valuation and, consequently, the value of the business. The claimant contested this decision, but without success.
The Federal Fiscal Court’s ruling
In its judgement of 25 March 2026, the Federal Fiscal Court (BFH) upheld the tax office’s view (case number II R 17/23). The court clarified that expenditure arising from a provision for a cartel fine of a purely punitive nature must be added to the base value as an extraordinary expense.
In its reasoning, the Federal Fiscal Court (BFH) stated that extraordinary expenses are those which do not normally arise in the course of ordinary business activities. A fine for breaches of competition law does not fall within the scope of ordinary business activities, as it penalises conduct that is outside the legal framework. The fine is intended to deter companies from future infringements and to act as a deterrent to potential imitators. It is therefore a one-off, unusual event.
Why is this important in practical terms for businesses?
The inclusion of extraordinary expenses in the simplified income approach is intended to prevent the value of the business from appearing artificially low due to one-off exceptional costs. Otherwise, a fine incurred in any of the three valuation years would drive down the average annual return and thereby reduce the gift or inheritance tax liability.
This adjustment is intended precisely to avoid that: the average return is meant to reflect the sustainable return – in other words, what the company earns under normal conditions. A cartel fine does not form part of those normal conditions.
What does this mean for your situation?
If you wish to gift shares in a company or transfer them by way of inheritance, and intend to use the simplified income approach for this purpose, you should carefully check which expenses were incurred during the valuation years. One-off or unusual expenses, such as fines, can significantly affect the valuation result. Conversely, the same applies to extraordinary income, which would need to be excluded from the valuation basis.
As it can be difficult to draw a clear distinction in individual cases, it is advisable to seek tax advice before submitting the valuation to the tax office.
Source: Haufe: Tax
This article was created with the help of AI and has been editorially reviewed.
