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Individual enterprises

Starting point | Operative GmbH

Submission (§ 20 UmwStG) | Holding-GmbH

Share exchange (§ 21 UmwStG) | Holding GmbH & Co. KG

Deposit in the limited partnership

How quickly can a sole proprietorship be converted into a double holding structure? How much time does it take, what does it cost and what preparations are required? These questions reach us especially at the end of the year – because who wants to move abroad in the following year without triggering the exit tax, should set the course in time.

The good news: The last and decisive step – from simple holding to double holding – is the easiest. The two previous steps are more demanding and bound by deadlines. In this article, we show you the complete 4-step model, the respective deadlines and what you have to pay attention to later emigration.

1. The 4-step model at a glance

The aim of the design is to hold a so-called dual holding company at the end – i.e. a holding GmbH, which in turn is held by a holding GmbH & Co. KG. This structure makes it possible to emigrate to a country of your choice without triggering the exit tax according to § 6 AStG. The path to this is in four stages:

Not every client has to go through all four stages. Anyone who already owns a GmbH starts at level 2; anyone who already holds a holding structure only needs the last step. In the following we describe each stage individually.

2. Stage 1 → 2: Transfer of the sole proprietorship to the GmbH

The first conversion process — from the sole proprietorship to the GmbH — is called tax transfer and is governed by § 20 UmwStG. The operation of the sole proprietorship is transferred to a GmbH against the granting of new shares. Upon request, this is done tax-neutrally at book values, so that no hidden reserves are revealed.

2.1. The tax retroactive effect of eight months

The contribution is to be regularly related to a balance sheet date, typically 31 December. The law allows for a tax retroactive effect of up to eight months (§ 20 para 5 and 6 UmwStG). If 31 December 2025 is chosen as the contribution date, the contribution must therefore be made by 31 December 2025. August 2026 can be registered with the Commercial Register.

Precisely for this reason, the first half of the year is the typical phase in which we implement the integration of the sole proprietorship into the GmbH with most clients.

2.2. The retroactive tax advantage

The charm of the retroactive contribution lies in the tax rate: will the contribution be on the 1. Referred to January 2026, the profits of these first eight months of the year 2026 are already regarded as profits of the GmbH. Instead of the high income tax burden of the sole proprietor (top tax rate up to 45 % plus tax). Solidarity surcharge) they are only subject to the GmbH taxation of around 30% (corporation tax, solidarity surcharge and business tax).

Practical example:

For one of our clients (Mr. W.), the retroactive contribution of the sole proprietorship to the GmbH alone led to a tax saving of around €200,000 – simply because the current profits of the retroactive period were already subject to the lower GmbH tax rate instead of being burdened with the personal income tax rate.stung of the prosecuting authorities is the decisive background against which the question of a self-disclosure must be re-evaluated.

3. Stage 2 → 3: Exchange of shares in Holding-GmbH

In the second step — usually in the second half of the year — operative GmbH is transferred to a newly founded, initially empty Holding GmbH. Tax law is an exchange of shares according to § 21 UmwStG: The shareholder contributes his GmbH shares to the holding company and receives shares in the holding company. This process can also be designed to be tax-neutral at book values if there is a qualified share exchange.

3.1. Why the share exchange before 31. December should be

We recommend completing the share exchange before 31 December. The reason lies in the so-called box privilege: In order for profits of operative GmbH to be distributed almost tax-free into the holding company in the future, the holding company must have been involved at the beginning of the calendar year.

Therefore, the share exchange will take place until 31. Consumed on December 1, 2026, can be distributed with full effect from January 1, 2027. The decisive factor here is in particular the trade tax box privilege (§ 9 No. 2a GewStG), which requires a participation of at least 15 % at the beginning of the collection period – and does not know any under-year acquisition fiction. Therefore, you always have to wait for the turn of the year.

3.2. The distribution with only 1.5% tax burden

If these conditions are met, operative GmbH can distribute profits to the holding company, which there pursuant to § 8b para. 1 KStG remain 95 % tax-free. Only 5% are considered non-deductible operating expenses (§ 8b (5) KStG). This 5 % is subject to corporation and business tax — resulting in an effective tax burden of around 1,5 % on the dividend paid.

Remarkably, This advantage affects not only future profits, but also all old profits that have already accumulated in the GmbH over many years – and even profits that were originally generated in the individual company. So if you want to “get” profit reserves from operative GmbH almost tax-free for the last ten years, you should complete the share exchange shortly before 31 December in order to be able to distribute on 1 January with full effect.

4. Level 3 → 4: Transfer to the dual holding company (GmbH & Co. KG)

The last step – from the simple holding GmbH to the double holding structure – is the easiest. For this purpose, an initially empty GmbH & Co. KG is founded, which will in future stand above the Holding GmbH. Subsequently, the shares in Holding GmbH will be transferred to GmbH & Co. KG in a tax-neutral manner by way of contribution.

4.1. Observing identical ownership

It is important that the participation relationships remain consistently identical. Whoever holds the Holding-GmbH 100% must also hold the GmbH & Co. KG 100%. In the case of a 50/50 shareholding with a business partner (or with a spouse, son or daughter), the other shareholders with the same shareholding must be involved in GmbH & Co. KG.

4.2. Why This Step Avoids the Exit Tax

The exit tax according to § 6 AStG is linked to shares in corporations within the meaning of § 17 EStG. However, if these shares are transferred to the operating assets of a commercial co-entrepreneurship — GmbH & Co. KG — the shareholder no longer holds a direct share of the company in private assets, but a share of the company. Co-entrepreneur shares are not covered by § 6 AStG. The later departure thus does not trigger an exit tax.

5. The blocking periods of the first two conversions

Both the transfer (§ 20 UmwStG) and the share exchange (§ 21 UmwStG) trigger a seven-year blocking period according to § 22 UmwStG. During this period, the transferred shares may not be sold, otherwise a transfer profit (transfer profit I or II) is taxed retroactively, which is reduced by one-seventh annually.