Taxation on the sale of co-partner shares

Oct 30, 2025

According to the statutory provisions, profits from the sale of a co-partner's share constitute income from business operations for the shareholder who is considered to be the entrepreneur or co-entrepreneur of the business. Taxation usually takes place on the agreed date of the year of sale. This applies regardless of whether the agreed purchase price is due immediately, payable in installments, deferred in the long term, and when the proceeds of the sale actually accrue to the seller. Any subsequent reductions or increases in the purchase price are usually to be corrected on this date, provided that the agreed purchase price has not yet been paid in full.

If, in addition to a fixed purchase price, a variable purchase price component dependent on sales or profit, known as an earn-out payment, is agreed upon when selling a co-partner's share, this is taxable as subsequent operating income in the year of receipt, in deviation from the above-mentioned legal rule. This does not increase the capital gain arising in the year of sale. The reason for this is that at the time of sale, it is not certain whether and, if so, to what extent a purchase price claim will arise in subsequent years.

In confirmation of its previous case law, the Federal Fiscal Court (BFH) ruled in its judgment of November 9, 2023 that variable purchase price components, the basis and amount of which are still uncertain at the time of conclusion of the contract, do not constitute subsequent purchase price payments, meaning that taxation only takes place upon receipt as subsequent operating income.