A bv sells a vessel at a profit in 2018 and forms a reinvestment reserve. In 2019, the bank waives part of the debts. The bv claims the remission profit exemption, but the court puts a stop to this. The reinvestment reserve causes too many deductible losses to remain.
Two ships sold
A parent company heads a fiscal unity. Through a general partnership (vof), it owns half of a cargo vessel. In 2018, that vessel is sold with a book profit of over €724,000. She allocates this profit to the reinvestment reserve. In 2019, the general partnership is dissolved. The bank grants final discharge for the remaining debts. The waived part that the parent company takes on amounts to almost four tonnes.
Reinvestment through the fiscal unit
The replacement investments will not be made by the parent company itself, but by two subsidiaries within the fiscal unity, which will purchase new vessels in 2019. The parent company will write off the reinvestment reserve against these investments.
Exemption claimed
In the 2019 tax return, the parent company applies the remission profit exemption for the full amount of almost four tonnes. This exemption applies insofar as the remission profit exceeds the offsettable losses. The idea: if there are no more losses to offset, the remission profit need not be taxed.
Problem: the tax unit
Special rules apply in the case of a fiscal unity. The exemption applies only insofar as the bv would have been entitled to it even if it had remained independent. The parent company argued that it could not have formed a reinvestment reserve then. After all, the replacement investments were made by the subsidiaries, not itself. Without that reserve, its 2018 profit would have been over €830,000 and all previous losses would have been offset. In that case, no loss remains and the exemption applies in full.
Court: reinvestment reserve counts
The court does not follow this argument. In the independent profit calculation, the reinvestment reserve must be included with the company that made the book profit. Now, that is the parent company. Without a book profit, there is nothing to allocate, so the reserve cannot be created at another company. Moreover, one of the subsidiaries did not exist in 2018. Allocation to it is therefore inconceivable. With the reinvestment reserve, the independent profit 2018 amounts to only €107,000, resulting in over €727,000 remaining in offsettable losses. Those losses exceed the remission profit. The exemption expires.