Anyone who gifts a share in a company must have it valued for gift tax purposes. The so-called simplified income approach is a commonly used method for this. In its judgement of 25 March 2026 (Ref. II R 17/23), the Federal Fiscal Court (BFH) ruled that provisions set aside for an antitrust fine may increase the calculated enterprise value, with significant tax implications.
What is the simplified income-based valuation method?
The simplified income approach determines the value of a business on the basis of the sustainable annual income it can generate. The starting point is the operating results for the last three financial years. Certain exceptional expenses which have had a one-off negative impact on profit and are not expected to recur in the future are added back to the base figure. This is intended to provide a realistic picture of the company’s long-term earning power.
The case: a fine for price-fixing
A GmbH & Co. KG had been fined around 5.9 million euros by the Federal Cartel Office for illegal price-fixing. The fine was purely punitive in nature; no economic benefits were recouped. The company set aside corresponding provisions – i.e. contingency reserves in its accounts – in 2014 and 2015. In 2017, a limited partner’s share was transferred to a son by way of a gift. When valuing the share for gift tax purposes, the tax office added the amounts set aside as provisions back to the operating profit. This increased the assessed value of the share from around 4.5 million euros to over 7 million euros.
This is what the Federal Fiscal Court (BFH) says
The Federal Fiscal Court (BFH) upheld the tax office’s approach and dismissed the company’s appeal. Provisions for an antitrust fine of a purely punitive nature are therefore to be treated as extraordinary expenses within the meaning of section 202(1), second sentence, no. 1, letter c of the Valuation Act (BewG). They must be added to the base value because:
- illegal price-fixing is not part of normal business practice and is prohibited by law,
- there were no indications that such fines would be imposed again in future,
- the cost therefore does not accurately reflect the sustainable annual return that can be achieved.
The Federal Fiscal Court (BFH) did not accept the company’s argument that the abolition of the separate disclosure of extraordinary items in the profit and loss account, brought about by the 2015 Act Implementing the Accounting Directive, had altered the legal position. The amendment under commercial law does not apply directly to the valuation rules under the Valuation Act (BewG).
What does this mean for clients?
The decision is particularly relevant for business owners who wish to transfer shares by way of anticipated succession or as a gift. Exceptional expenses incurred in the past, such as fines, but also other one-off costs, can have a significant impact on the company’s value for gift tax purposes, as they are excluded from the calculation. This is particularly true when the valuation is carried out shortly after such events.
Anyone planning business succession or wishing to gift shares should carefully examine the basis for valuation. In individual cases, personalised tax or legal advice can help to realistically assess the tax implications.
Source: BFH rulings
This article was created with the help of AI and has been editorially reviewed.
