With the extended reduction according to § 9 no. 1 sentence 2 GewStG, companies managing real estate avoid paying business tax. The scheme is of particular interest to corporations such as Immobilien-GmbH, since the total tax burden thereby falls to only 15.8% of income. Through a design with sister companies under a common holding company, there is particularly extensive potential, but there are also pitfalls to consider!
1st sister companies under a joint holding
The term “sister society” is not standardized by law, but largely results from the wording itself. Sister companies are generally understood to mean two or more partnerships or corporations that are located side by side in the corporate structure. This in turn is the case if they are positioned under a common shareholder – for example a holding company.
Example: The entrepreneur Max has so far operated a sole proprietorship, but would like to invest in real estate and rent it in the future. For this purpose, he first establishes a holding GmbH and pays in the necessary share capital. Subsequently, on behalf of the holding company, he founds two subsidiaries, an operative GmbH and a vermögensverwaltende GmbH. They now stand side by side in the structure, as Max ́ Holding holds a 100% stake in both.
Notwithstanding the present “related relationship” both companies are legally independent. They can therefore conclude transactions and contracts with each other in accordance with the arm's length principle. The same applies to agreements between the investees and the holding company as well as the private person as a shareholder or shareholder.
Use Extended Reduction at Sister Companies
Through the concept of the so-called rental company, entrepreneurs can achieve tax advantages within their corporate structure. Under the joint holding company, a real estate company is positioned for this purpose. This leases the real estate required for the operational business to the sister company, regularly at a contractually agreed and externally customary sales rent.
Since the rental company operates exclusively in asset management, it benefits from the extended reduction pursuant to § 9 no. 1 sentence 2 of the GewStG. At company level, therefore, only 15 % corporation tax (plus solidarity surcharge) is incurred.
At the level of the operating company, the rental payments flow out and lead to a tax saving of 30%. The lower taxation at the real estate company level, where the payments arrive, creates a tax advantage of 15 % of the profit of the operating part of the company.
Attention, pitfall: no extended cut is possible here!
With § 9 no. 1 sentence 5 EStG, the legislature has excluded certain cases from the extended reduction, although the standard does not directly include sister companies. Nevertheless, the following events lead to the exclusion of the reduction according to § 9 no. 1 sentence 2 GewStG:
This article does not replace tax or legal advice in an individual case. Facts, current law, jurisdiction, documentation and implementation remain decisive.