No further payment of paid-in nominal capital in the case of a new economic formation

In order to be able to separate the non-taxable repayment of capital contributions from profit distributions that are generally taxable, a corporation with unlimited tax liability must recognise the contributions not made to nominal capital in the tax contribution account at the end of each financial year in accordance with Section 27 (1) sentence 1 of the German Corporate Tax Act. In contrast, the (genuine) nominal capital provided through contributions - which is also not taxable in the event of repayment - must be recognised as such in the commercial balance sheet and therefore not determined separately. Against this background, the German Federal Fiscal Court had to clarify in its ruling of February 25, 2025 (case no. VIII R 22/22) in the case of a new economic formation of a virtually assetless corporation whether the contribution made by the new sole shareholder should be recognised as nominal capital or in the tax contribution account.

In the case in dispute, a Public limited company (AG) with a largely depleted balance sheet and financial position had, among other things, subscribed capital of EUR 50,000 as at December 31, 2017, of which 75 % was still outstanding. In 2018, a new sole shareholder acquired all no-par value shares in the AG. In addition to the amendment of the Articles of Association, the company name, the registered office and the purpose of the company, a new economic formation was filed with the commercial register. This application contained the assurance that the AG had at least total assets amounting to 25 % of the share capital (EUR 12,500) and that these were at the free disposal of the Management Board. In order to fulfil these capital-related requirements, the new sole shareholder had transferred an amount of EUR 12,500 to the AG's current account with the reference ‘Contribution of 25 percent share capital’. The tax office did not recognise this payment in the tax contribution account as at December 31, 2018, but treated it as another contribution to the nominal capital of the AG. The Fiscal court upheld the appeal against this decision. The German Federal Fiscal Court followed suit.

A contribution claim that has already lapsed due to a contribution made by the original founders of an AG is not revived even in the event of the new formation of the company: It is true that an AG must demand a portion of the contribution from the shareholders after all shares have been acquired by the founders in the course of the formation prior to registration in the commercial register, unless contributions in kind have been agreed. The shareholders are then obliged to pay in the contribution owed and demanded at the free disposal of the Management Board in order to satisfy creditor protection. By doing so, the shareholders effect a payment into the nominal capital of the AG and extinguish the company's contribution claim in the amount of the contribution made. In the opinion of the German Federal Fiscal Court, this had already taken place in the present case with the payment of 25 % (EUR 12,500) into the nominal capital of the AG by the original founders. This original payment into the nominal capital remains as such - as do the outstanding contributions of EUR 37,500 - even in the case of a new economic formation and must continue to be recognised unchanged in the balance sheet. As there was no reason to pay the outstanding contributions and the AG had not demanded this, the capital contribution of the new sole shareholder was to be recognised as a capital reserve in accordance with Section 272 (2) No. 4 of the German Commercial Code, resulting in an increase in the tax contribution account. Taking into account the circumstances of the individual case, the incorrect designation of the payment as ‘contribution of 25 percent share capital’ was harmless in this respect. The new sole shareholder clearly only wanted to fulfil the requirements for the commercial register entry of the new economic formation.