Management investments are part of almost every private equity investor's investment. However, consultants and advisory board members are often given the opportunity to participate on the same or similar terms as management. While there are already a number of court decisions on the taxation of salaried managers with such equity interests, this has not yet been the case for the taxation of advisory boards and consultants. The Tax Court of Baden-Württemberg has now decided a first case on June 26, 2017 (- 8 K 4018/14).

In principle, proceeds from management equity investments are subject to taxation as capital assets and thus to the reduced tax rate of the final withholding tax and, in the case of equity investments of 1% or more, to the so-called partial income procedure. Under certain conditions, however, taxation at the normal income tax rate is also possible if the proceeds are attributed to the manager's employment as income from employment. In comparison to taxation as income from
capital assets, this is associated with an additional tax burden of approx. 20% (top income tax rate 45% versus final withholding tax of 25%).

The question of whether, and if so under what conditions, advisory boards or consultants can also be investors in management shareholdings has not yet been clarified by case law.
must reckon with the fact that their proceeds will be attributed to income from self-employed work as remuneration for activities in accordance with Section 18 of the German Income Tax Act (EStG). In the practice of tax audits, it is sometimes found that the tax authorities do not differentiate between managers and advisory boards in these cases.