The GmbH has 5 significant advantages over other types of companies: a tax of 15% corporation tax and on average 15% trade tax on profit, a very favorable taxation on dividends achieved, tax advantages at Immobilien-GmbH and tax advantages in the treatment of managing directors’ salaries and other services. This logic is also followed by approximately 80% of our clients. On this occasion, we would also like to introduce you to the tax advantages of the GmbH.

1.1. Taxation of profits of sole proprietors and partners of partnerships

A sole trader or a partner of a partnership taxes his profits as part of the assessment for income tax. The top tax rate is 48 %. So up to half of the profit can accrue to taxes.

1.2. Taxation of the GmbH profits at the shareholder

1.2.1. Capital gains tax as withholding tax

In comparison, a GmbH shareholder achieves a dividend, which is generally taxed uniformly at 25% under the capital gains tax. This is therefore a compensation tax. Moreover, it is clear that this form of taxation is particularly advantageous above a personal tax rate of more than 25 %.

1.2.2. Partial income method

However, under certain conditions it is possible to subject the dividend to the partial income procedure instead of by capital gains tax. Only 60% of the dividend is taxed. Thus, even 40% is tax-free. However, the condition of a participation of at least 25 % must be met. Alternatively, a minimum shareholding of 1 % can also be met if the taxpayer is simultaneously in a senior position. Especially in the case of a one-man GmbH, these requirements are usually met. In any case, this is a very advantageous form of taxation, which is also granted by the tax office during the cheaper examination.

Another advantage can be drawn from this context if you also involve your family members in the GmbH. Because the parts income method is then also applied to them. Ideally, 25% of the participation is divided between four people.

Incidentally, the partial income procedure also comes into consideration for a capital gain achieved by the limited company. However, this is subject to the condition that the shareholder’s participation in the previous 5 years was at least 1 %.

2nd tax advantages of the GmbH in the management salary and other services

2.1. Taxation of the remuneration of the managing director of a partnership

Even if a partner of a partnership concludes an employment contract with the partnership, his remuneration is regarded as income from business operations instead of from self-employment. Under tax law, any income earned by shareholders in connection with such a participation is classified as commercial. Consequently, this leads to an income tax, which may be subject to the 48 % top tax rate. However, the recognition of remuneration as an expense at the partnership is excluded.

2.2. Taxation of the salaries of GmbH shareholders

2.2.1. Income from employed persons

Now, of course, there is also the possibility that the GmbH shareholder is employed as managing director of the GmbH. In this case, he receives a managing director salary that corresponds to income from non-self-employment under tax law and is therefore taken into account quite regularly in the determination of income tax. So here too, the top tax rate of 48% is expected to apply.

2.2.2. Approach of shareholder salaries at the GmbH

In contrast to a partnership, the salary of a GmbH shareholder represents an operating expense of the company. Thus, this leads to a deduction of the profit of the GmbH. Consequently, the dividend paid is also higher. However, it must be noted that the managing director salary remains within the usual. Otherwise, the excess amount will be considered a hidden distribution of profits and thus treated as a prepaid dividend.

2.2.3. Taxation of further income for the shareholder’s services to the GmbH

In addition to working as an employee of the GmbH, a shareholder can also charge his company for other services. Classic examples of this are loans or the rental of assets or real estate to the GmbH. In doing so, the GmbH regularly recognises the consideration for interest, rent or other services by the shareholder as operating expenses. As a result, this leads to a lower tax at the GmbH. On the part of the shareholder, the income is valued as independent income and taxed accordingly. Therefore, the application of the partial income procedure is excluded in such cases.

By the way, there may also be a hidden profit distribution in this context. It has the same consequence as an excessive salary of the shareholder: the taxation of the excess amount by capital gains tax as a correction.

In addition, in particular when renting movable objects or real estate to the GmbH, the possible existence of a business split must be observed. This can also lead to a potential tax on the shareholder in this context.

As already mentioned, a private person is subject to capital gains taxes of a flat rate of 25% when dividends are paid to him. And, of course, there is then also under the mentioned conditions the option to use the part income method.

3.2. Taxation of dividends of a subsidiary with the GmbH

If instead of a natural person a GmbH receives a dividend from a subsidiary, then the taxation takes place within the framework of corporate tax and business tax. In this context, these dividends are in principle tax-free according to § 8b KStG. However, 5 % of the income must be added to profit as a flat-rate operating expense in connection with the participation. In fact, this means that 5% of the dividend is taxed with 15% corporation tax and on average about the same amount of business tax. In any case, this is significantly cheaper from a tax point of view than even the partial income system, because the effective tax rate is then only about 1.5%.

4. tax advantages of the GmbH in the sale of subsidiaries

4.1. Taxation of the capital gains of a company with a private individual

Here you have to distinguish the two cases described below.

4.1.1. Taxation under income tax

On the one hand, an entrepreneur can sell his business, so that the capital gain achieved in this case must be included in the income tax. Thus, the tax rate can be up to 48 %. Since the sale of a company often leads to a larger profit, the top tax rate approach is very likely.

4.1.2. One-off capital gain tax reduction

On the other hand, there is also the option to tax this reduced. However, the tax office grants this advantage only once. Furthermore, this is only possible if the entrepreneur has reached the age of 55. Alternatively, this also applies to entrepreneurs who can prove a disability. For example, if a 60-year-old entrepreneur runs two companies and wants to sell them in order to retire, then the reduction is applicable only to one of the two sales. He must therefore decide for one of the two capital gains and then communicate this to the tax office by application.

First of all, it should be noted that an allowance of EUR 45,000 can be used here. However, the allowance is reduced proportionally if the capital gain exceeds EUR 136,000. Thus, the allowance is used up from a capital gain of EUR 181,000 (EUR 45,000 + 136,000 = 181,000). In such a case, however, the submission of an application shall be waived.

4.2 Taxation of the capital gains of a subsidiary with the GmbH

Similar to the taxation of the dividend of a subsidiary, its sale at Mutter-GmbH is in principle tax-free. However, the limitation with regard to the flat-rate operating expense also applies here. Thus, in this case too, there is a taxation of 5 % of profit with 15 % corporation tax and business tax each. So we are also talking about a tax of just 1.5%.

5. Tax advantages of the GmbH in the rental of real estate

5.1 Taxation of income from letting and leasing of natural persons

In this context, the provisions of the Income Tax Act must also be dealt with again. Thus, rental income is to be treated as tax as most other income of a private person. In other words, a peak tax rate of up to 48 % is also to be expected here.

5.2 Taxation at a Immobilien-GmbH

In contrast, the GmbH has a significantly lower tax rate of only 15 % corporation tax available for renting and leasing. In addition, a GmbH can even obtain tax exemption from trade tax. However, the prerequisite for this is that the GmbH only holds and manages real estate, which it characterizes as pure real estate GmbH. Any other commercial activity is harmful and leads to the withdrawal of the tax privilege. If, for example, a warehouse equipped with shelves is rented by a GmbH, then the rental of the shelves constitutes a harmful event because, unlike the rest of the property, they are considered as independent movable assets.