gmn CONFERENCE - TAX MEETING IN VeroNa on 23 June 2015 CASE STUDY: Verona 2015 gmn CONFERENCE - TAX MEETING IN VeroNa on 23 June 2015

CASE Study Company Shareholders CASE STUDY: VERONA 2015 - VERONA - 23 June 2015

CASE Study Matters of Interest/Key Issues CASE STUDY: VERONA 2015 - VERONA - 23 June 2015 Fusszeile hier einfügen

1. Split-off Target structure CASE STUDY: VERONA 2015 - VERONA - 23 June 2015

1. Split-off Splitt-Off Rune CASE STUDY: VERONA 2015 - VERONA - 23 June 2015

1. Split-off Follow-up merger(S) CASE STUDY: VERONA 2015 - VERONA - 23 June 2015

2. Selling the investments Acquire cash CASE STUDY: VERONA 2015 - VERONA - 23 June 2015

2. Selling the investments Tax exemption Tax exemption for capital gains by corporate entities (corporate income tax & trade tax) gains on the sale of a share in a corporate entity will be excluded when determining income, if the shareholder is a corporate entity too 5% of the respective gain will be deemed to constitute expenses that may not be deducted as business expenses Attention: On 12th November 2014 German “Bundestag” makes a legislative proposal: tax reliefs for capital gains by corporate entities should be eliminated in case of minority investments  purpose: equal treatment for dividends and capital gains tax reliefs for dividends in case of minority investments had been eliminated for fiscal years commencing after 31th December 2012 Investment/shareholding < 10%  neither corporate income tax exemption nor trade tax exemption Investment/shareholding ≥ 10% < 15%  corporate income tax exemption but no trade tax exemption Investment/shareholding ≥ 15%  both corporate income tax exemption and trade tax exemption CASE STUDY: VERONA 2015 - VERONA - 23 June 2015

2. Selling the investments Tax exemption General taxation of gains on the sale of shares in a corporate entity Capital gains: 7.000.000€ tax consequences “Mountaineering equipment” CASE STUDY: VERONA 2015 - VERONA - 23 June 2015 Fusszeile hier einfügen

3. tax reliefs IP/R&D availability There are no tax reliefs for intellectual property respectively research and development in Germany available CASE STUDY: VERONA 2015 - VERONA - 23 June 2015

4. Reacquisition of shares Share buy-back by the holding company CASE STUDY: VERONA 2015 - VERONA - 23 June 2015

4. Reacquisition of shares Share buy-back by the holding company tax consequences of the share buy-back by the holding company tax consequences of the acquirer (holding company) regarding the German tax law, acquisitions and sales of own shares do not constitute a disposal and purchase act being relevant in terms of tax the acquisition of own shares by the corporation constitutes a capital decrease the sale/resale of shares by the corporation leads to an increase of the tax-contribution- account if the acquisition price exceed the par value an acquisition lower than the par value leads to a decrease of the tax-contribution account you may have to consider the principles of hidden profit distributions tax consequences for the shareholder (senior employee) The acquisition of own shares in general leads to a capital gain The partial income procedure is applied in case of an acquisition price above fair market value you have to consider the principles of hidden profit distribution CASE STUDY: VERONA 2015 - VERONA - 23 June 2015

5. Share option planning example CASE STUDY: VERONA 2015 - VERONA - 23 June 2015 Fusszeile hier einfügen

5. Share option planning Stock options Example of share option planning tax consequences for the “future/new” senior employees offering of stock-options to senior employees in case of exercising stock-options will be qualified as wage (monetary advantage) the monetary advantage is defined as the difference between fair market value and subscription price tax reliefs example: fair market value: €5,50 subscription price: €1,50 number of shares: 10.000 tax consequences for the corporation monetary advantage = €40.000 (10.000 x [€5,50 - €1,50]) CASE STUDY: VERONA 2015 - VERONA - 23 June 2015 Fusszeile hier einfügen

6. share transfer to hans Target structure CASE STUDY: VERONA 2015 - VERONA - 23 June 2015 Fusszeile hier einfügen

6. Share transfer to hans Share transfer by gift Germany has a unified inheritance and gift tax: it is imposed on any transfer of property at death or by gift if the decedent (donor) or the beneficiary (donee) is resident in Germany (domicile in Germany) or having habitual abode in Germany, any transfer of worldwide net property at death or by gift is subject to inheritance/gift tax (unlimited taxation) any individual who is not resident in Germany (no domicile in Germany) and not having habitual abode in Germany is subject to German inheritance/gift tax upon the transfer of net property being regarded as German-situated privileges of 85% or 100% for the transfer of agricultural, forestry or business assets CASE STUDY: VERONA 2015 - VERONA - 23 June 2015 Fusszeile hier einfügen

6. Share transfer to hans Types of tax Tax rate CASE STUDY: VERONA 2015 - VERONA - 23 June 2015 Fusszeile hier einfügen

6. Share transfer to hans Types of tax Tax rate CASE STUDY: VERONA 2015 - VERONA - 23 June 2015 Fusszeile hier einfügen

6. Share transfer to hans Types of tax Tax allowance (*) depends on the relationship to the decedent or donor CASE STUDY: VERONA 2015 - VERONA - 23 June 2015 Fusszeile hier einfügen

6. Share transfer to hans Current inheritance/Gift tax law Recent Decision by the federal constitutional court Under certain conditions business assets can be transferred with a tax exemption of 85% respectively 100% (§§ 13a & 13b ErbStG = inheritance tax law) On December 17th 2014 the federal constitutional court declared these current inheritance tax law provisions partly unconstitutional new provisions: some aspects regarding the tax exemption must be adopted till 30th June 2016 at the latest until this date, the current law is still applicable under certain conditions Attention: “wholly artificial arrangements” which will be implemented during this period could be harmful for the tax exemption On 1st June 2015 the federal ministry of finance published a draft bill of these new inheritance tax law provisions regarding the tax exemption CASE STUDY: VERONA 2015 - VERONA - 23 June 2015 Fusszeile hier einfügen

6. Share transfer to hans Current inheritance/Gift tax law Privileges of 85% or 100% for the transfer of business assets To benefit from these privileges, a company has to fulfill certain conditions: The payroll of the company transferred may not fall below certain values within a period of 5 respectively 7 years You have to consider a retention period of 5 respectively 7 years In case of a sale of shares/interests within this period the privileges will be denied retroactively The privileges are not applicable if the business assets include too many administrative assets (“tax harmful administrative assets”) If the administrative assets exceed the allowed maximum rate of 50% (optionally 10% 100% exemption) the privilege is not applicable In case of subsidiaries you have to check every company at all group levels regarding administrative assets The requirements for the 100% privilege are more strict than for the 85% privilege CASE STUDY: VERONA 2015 - VERONA - 23 June 2015 Fusszeile hier einfügen

6. Share transfer to hans Current inheritance/Gift tax law Privileges of 85% or 100% for business assets CASE STUDY: VERONA 2015 - VERONA - 23 June 2015 Fusszeile hier einfügen

6. Share transfer to hans Current inheritance/gift tax law “administrative assets” are defined as land, leasehold rights and buildings available to third party for use shareholdings ≤ 25% shareholdings > 25% and interests, if the administrative assets rate is > 50% art objects cash … CASE STUDY: VERONA 2015 - VERONA - 23 June 2015 Fusszeile hier einfügen

6. Share transfer to hans Current inheritance/gift tax law “Administrative asset test” CASE STUDY: VERONA 2015 - VERONA - 23 June 2015 Fusszeile hier einfügen

6. Share transfer to hans Example of administrative test Share transfer from 20% out of Johan’s 75% group structure after split-off structure after share transfer to Hans (target structure) CASE STUDY: VERONA 2015 - VERONA - 23 June 2015 Fusszeile hier einfügen

6. Share transfer to hans Example of administrative test “Administrative asset test” CASE STUDY: VERONA 2015 - VERONA - 23 June 2015 Fusszeile hier einfügen

6. Share transfer to hans Example of administrative test Tax consequences of the share transfer from 20% out of Johan’s 75% no harmful administrative assets rate You have to consider the payroll of the company for the next 5 (7) years In case of decrease under 400% (700%) within this period the privilege will be denied retroactively You have to consider the retention period for the next 5 (7) years In case of a sale of shares within this period the privileges will be (partly) denied retroactively 1 2 3 Under these conditions the inheritance/gift law privileges of an 85% respectively 100% tax exemption are applicable in case of 100% privilege  no tax consequences as a result of the gift CASE STUDY: VERONA 2015 - VERONA - 23 June 2015 Fusszeile hier einfügen

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