Taxation on the disposal of shares in a partnership

Under the statutory provisions, gains arising from the disposal of a partnership interest constitute income from business operations for the partner, who is to be regarded as the proprietor or partner of the business. Taxation usually takes place on the agreed reference date of the year of disposal. This applies regardless of whether the agreed purchase price is due immediately, payable in instalments, deferred over the long term, or when the proceeds of the sale are actually received by the seller. Any subsequent reductions or increases in the purchase price are usually adjusted to this reference date, provided that the agreed purchase price has not yet been paid in full.

If, upon the disposal of a partnership interest, a variable component of the purchase price dependent on turnover or profit – a so-called earn-out payment – is agreed in addition to a fixed purchase price, then, by way of derogation from the statutory rule mentioned above, this is only taxable as subsequent business income in the year in which it is received. This does not increase the capital gain arising in the year of the disposal. This is because, at the time of the disposal, it is not certain whether, and if so to what extent, a purchase price claim will arise in subsequent years.

In a judgement dated 9 November 2023, the Federal Fiscal Court (BFH), confirming its previous case law, further ruled that variable components of the purchase price, the basis and amount of which are still uncertain at the time the contract is concluded, do not constitute subsequent purchase price payments; taxation is therefore only due upon receipt as subsequent business income.