There is a so called “lock” on shares, which were produced during the conversion of BaumInvest GmbH & Co. KGs into a shareholder company. According to §22 of German UmwStG this means that investors who obtained shares with this feature as part of the conversion must retroactively pay taxes for the year of purchase when selling them. The profit made with the sale of the shares is then considered a profit (according to §16 German EStG) within the year of purchase. In case of BaumInvest, the date of purchase is the foundation of BaumInvest AG on 14.09.2018. The “lock” does, however, expire after 7 years. After those 7 years, the shares are not considered locked anymore – the same holds true after a so called “harmful” transfer of shares (e.G. selling in return for payment on the secondary market). If an “unharmful” transfer takes place, the shares stay locked, however (e.G. inheriting shares or gifting them). If a share loses the feature “locked” for one of the reasons above, it furthermore loses the feature “Company of origin…” (predecessor companies BaumInvest 1, 2, 3), as this feature for traceability is no longer relevant. To answer your questions on share transfers, we advise you to talk to your tax consultant.
Background knowledge on the “lock”
Under German law, conversing any company into a shareholder company (AG) takes the option to sell their shares away from investors. This is based on a shift in tax systems that comes with the conversion. Taxes will no longer be determined individually, but rather in form of a flat rate withholding tax, which generally turns out to be less expensive. The lawmaker chose a 7-year period, in order to prevent companies from abusing this system. Within this time frame, sellers of shares are considered to have sold their shares at the exact date of conversion. The investor must calculate and pay taxes for any profits according to his or her individual tax rate. In reality, the calculation is even more complex than this, so our message for investors is: “If you sell your shares, you will have to pay a considerable amount of taxes for BI 1.”
For 5,000 shares: Using a retail price of 8,425 (= compensation offer for 5,000 shares) at an asset value of about 5,000EUR (Caution: this holds true for this amount to BI1 only. See §15b German EStG) the profit of the sale results in 3,425EUR. Using an individual tax rate of 35%, the tax amounts to circa 1,200EUR. After the 7-year lock, the calculation is very different. In case of a sale after the expiration date, merely the difference between 8,425EUR and the actual retail price falls under taxation law. As a result, the investor will generate a profit of 1,200 by simply waiting. In the example used here, the income returns for 5,000EUR within 7 years is at about 3,5% per year.