Fix and flip are real estate deals that involve the development of land, the value of which is increased. Either you acquire a detached property, or one in which an already existing building is demolished in order to build a new building on top of it. This can then be sold profitably. Or you buy a property that you refurbish and then sell with profit. Since this is done in a commercial context, there are usually about 50% taxes in Germany. But with a foreign company you can at least save the trade tax. And with a Dubai LLC, fix and flip are even more worthwhile, because then only 15% taxes are incurred in total.

1. Operating with Dubai LLC Fix and Flip in Germany – Introduction

Fix and flip businesses generate pretty profits in Germany thanks to ever-increasing real estate prices. Of course, this also has tax implications. As a rule, a total tax of around 50% is to be expected. With a Immobilien-GmbH, the tax can initially be limited to the company, whereby about 30 % is incurred. This offers the advantage that you can reinvest a higher share of the profit than if you tax it at about 50% on a private level. But at some point, GmbH shareholders might want to make a profit distribution. And then the dividend pays capital gains tax, so that the taxes as a whole also rise to a level of 50%.

It is therefore understandable that people who operate fix and flip businesses inquire about tax optimization. And that is exactly what we want to offer in this article.

2. Fix and flip with German GmbH from Dubai

So let’s say someone emigrates to Dubai and from there founds a GmbH in Germany. Then the GmbH will continue to pay about 30% corporate and business tax in Germany. But what is the taxation of profit distribution? Germany also levies 25 % capital gains tax (plus any church tax and solidarity surcharge). However, the United Arab Emirates (UAE) does not impose income tax on dividends. In countries with which Germany has concluded a double taxation agreement, this would result in a reduction to the global minimum taxation level of 15%. Overall, this reduces the tax to around 35%, which is an improvement, but you also have to take into account the local income tax. In the UAE, however, as already mentioned, there is no income tax. But there is no such agreement with the UAE. So how can moving to Dubai at a German fix and flip business be useful?

3. Fix and Flip with a Dubai LLC

The combination of a German GmbH with shareholders in Dubai is therefore of little use. Let’s try a real estate company that is founded in Dubai. For this purpose, the legal form of Limited Liability Compnay, LLC for short, is mainly used. A Dubai LLC largely corresponds to a German GmbH, because its essential feature is the limitation of liability on the company's capital.

Now we can operate with the Dubai LLC in Germany Fix and Flip. As long as Dubai LLC does not operate an establishment or branch in Germany and does not interpose a German subsidiary, it treats the German financial administration as a capital company based abroad. This means that Dubai LLC pays corporate tax for its fix and flip in Germany. The flat-rate tax rate is 15 %. In this, it resembles a German GmbH in its taxation. The business tax is different. Because the LLC does not operate a commercial branch in Germany, any connection to the German trade tax is eliminated. So we have already saved this approximately 15% business tax.

The optimization of the profit distribution remains. Since Dubai LLC is a company in the UAE, there is no income tax on the payment of dividends. In this case, Germany has no right to levy taxes on it, because it is neither a company with headquarters and management in Germany (both are located in the UAE) nor a distribution of a German company abroad. With the Dubai LLC, the profits from Fix and Flip in Germany in the UAE have therefore been taxed in full at only 15 %.

4. Fix and Flip with Dubai LLC in Germany – Conclusion

Let us summarise this briefly. Fix and flip can be easily optimized for control. For this purpose, you first emigrate to Dubai and ideally avoid the exit tax or any other form of tax easing in Germany. After that, you set up a Dubai LLC and carry out the fix and flip business in Germany. Germany taxed the profits of Dubai LLC with 15 % corporation tax. Furthermore, there is no trade tax in Germany. In addition, there is also no right for Germany to levy taxes on the profit distribution of Dubai LLC. And there is no further tax in the UAE either. This remains the case with a total tax of 15%. In the end, shareholders in Dubai can therefore look forward to 85% net profit.