The establishment of a holding company to take up an operative GmbH can be tax-neutral by contribution. The prerequisite is that this takes the form of an exchange of shares, with the holding company receiving at least 51 % of the shares in the operating company. This is easiest if only one shareholder is involved in both the holding company and the operating company. But often several shareholders are involved in a GmbH. If at least one of them wants to set up a holding company, then it could be that his holding company is less than 51 % in operative GmbH after the transfer. In this case, however, a share exchange leads to a taxation of the company value, which one would rather avoid.

Nevertheless, a tax-neutral transfer to a holding company is also possible. Because with the creation of a co-entrepreneur share in operative GmbH, you can also bring this tax neutral into the holding company. This is the case with an atypical silent participation of the GmbH shareholder in the GmbH before the establishment of the holding company.

A holding company is a company with which, for example, the investments in a corporation can be held and managed. Both the holding company and the operating company in which it participates are GmbH. When a holding company is founded, the next step is the integration of operative GmbH into the holding company. For this, one often chooses the contribution of the shares of the GmbH shareholder in operative GmbH to the holding company. This can be done in different ways, some without, but some with taxation. The contribution of GmbH shares is tax-neutral if the shares are recognised at book value, the amount of the shareholding being at least 51 % on the part of the acquiring holding company.

1.2. Transfer of GmbH shares into a holding company: tax neutral or taxable?

1.2.1. Transfer to a holding company with only one GmbH shareholder

If a GmbH shareholder who holds a 100 % stake in his GmbH wants to set up a holding company, then this is quite simply also possible without taxation, because the GmbH shareholder with his shareholding meets the required minimum shareholding of 51 %. He only needs to submit an application to the financial administration. This introduction is then also called a share exchange.

1.2.2. Transfer to a holding company with several GmbH shareholders

But often two or more shareholders are involved in a GmbH. If they want to contribute their shares to a holding company, this is only tax-neutral for all shareholders if they decide to establish a joint holding company, which thus receives the entire 100 % of the GmbH shares. However, this holding company also holds and manages the participation of all shareholders. The purpose of a holding company is different. Because the holding company can also be regarded as a personal savings box of a shareholder. So you also want to make all decisions regarding your own assets independently of the other shareholders themselves. But this is then associated with taxes, because the own participation of at least one of the shareholders must of course be less than 51%, so that this contribution is then taxable.

1.3. Focus: tax-neutral transfer to a holding company

In our contribution, we would now like to show you how, in this, otherwise taxable case, a tax-neutral transfer of shareholdings into a holding company can take place. But first of all we want to focus briefly on the legal bases that are relevant here.

2nd Transfer to Holding Company: Legal Framework

2.1. Tax reference of the contribution

A contribution, which also includes the exchange of shares, is legally a conversion process. On the one hand, civil law and on the other hand, a tax law component must be observed. The civil aspects are governed by the conversion law, but the tax law is governed by the conversion tax law, which is therefore also relevant for our considerations.

2.2 Main points of reference in the conversion tax law

2.2.1. § 21 UmwStG regulates the exchange of shares in shareholdings

In the conversion tax law § 21 UmwStG describes under which tax aspects a transfer of shares in a limited company to another limited company in the form of a share exchange is to be considered. Because this can lead to very different valuation methods for the acquiring corporation, which in our case should be a holding company. This also sets the framework within which any taxation is accompanied by the contribution. Among other things, this paragraph is responsible for the fact that a tax-neutral contribution can only be made if an application is made to the tax administration and the receiving company's participation in the transferred company is at least 51%. In addition, we also refer to the observance of a blocking period of seven years, which is also relevant here.

2.2.2. § 20 UmwStG regulates the contribution of co-entrepreneurships and companies

As we want to demonstrate in a moment, it is worthwhile to look back a few pages in the legal code to take a look at paragraph 20 of the UmwStG. Here, too, it is primarily a question of transferring assets to a limited company and valuing the assets. But the focus is a little broader. While § 21 UmwStG only deals with the contribution of shares of a corporation, the preceding paragraph includes the contribution of companies, subsidiaries or co-entrepreneur shares. And we now want to take advantage of this in order to make a taxable contribution tax-neutral according to § 21 UmwStG.

As can be seen, an exchange of shares in the transfer of shares in holding companies according to § 21 UmwStG leads to at least one taxation if there is more than one GmbH shareholder. At the same time, there is also the tax-neutral option in § 20 UmwStG. It is therefore obvious that, if you would be taxable in the exchange of shares, you are looking for a possibility of converting the shares in operative GmbH either into a business or into a co-entrepreneur share in order to transfer the share in the GmbH to the holding company in a tax-neutral manner in accordance with the guidelines of § 20 UmwStG.

3.1. Establishment of an atypically silent society

Our solution is that you create a silent partnership with the GmbH, in which you hold less than 51% and whose shareholders you wish to transfer to the holding company you have founded. A silent partnership is a participation relationship in which a silent partner uses capital in return for obtaining profit participation rights from the company, such as a share in profits. Two different variants can be distinguished. On the one hand, there is the typical silent partner, who, as just described, only provides capital and is entitled to a profit share. On the other hand, it can be agreed in the formulation of the social contract that the silent partner receives further rights. For example, this is the case if he receives a right to participate in the capital gains in the event that the company is sold. Even a say in business decisions can be awarded to him in the social contract. This is called an atypically silent society.

The point here, however, is that the aspects that make up an atypically silent society also represent a co-entrepreneurship of the atypically silent partner. Care must be taken to ensure that the criteria characterising a co-entrepreneurship of an atypical silent partner are met. In terms of tax law, these criteria can be found in detail in § 15 paragraph 2 EStG. In addition, it should be noted that a co-entrepreneurship includes both the aspect of the atypical silent partnership and the participation that one holds as a GmbH shareholder. So these two actually quite different aspects form a unit, namely the co-entrepreneur share. In the jargon of tax experts, this is also known under the term Sonderbetriebsvermögen II.

3.2. Transfer of a share of the co-entrepreneur to the holding company

But this is exactly what our project aims to do in establishing an atypically silent society. Because the property as a co-entrepreneur can now be used to transfer it together with the shares in the GmbH into its own holding company. Because now no lower limit in terms of the shareholding amount has to be observed. After all, we do not bring a stake in the GmbH purely based on shares into the holding company, but a share of the company. And precisely this type of contribution can also be carried out at book value and thus tax-neutral according to § 20 UmwStG.

Atypical silent participation of the holding in the GmbH

The contribution of the share of the co-entrepreneur, which is partly based on the atypically silent company with the GmbH, has a strange side effect. Because of the transfer, the former GmbH and atypical silent partner transfers his atypical silent participation to the acquiring holding company in addition to his GmbH shares. As a result, the holding company is involved in the GmbH both as a parent company and as an atypical silent partner.

4th contribution to holding company – Final remarks

The model presented here therefore depends on the fact that a co-entrepreneurship over an atypically silent society is also to be evaluated as part of a co-entrepreneur share. The secret here is that the entirety of co-entrepreneurship and GmbH shares represents a so-called functionally essential operating basis. In fact, several judgments have already been made in the past which confirm this assessment.

Nevertheless, we would like to point out that you should avoid anything that would make the atypically silent society with the GmbH only a means to an end. Because this could understand the financial administration in turn as a design abuse. Therefore, we recommend our clients to maintain the atypically silent company of their holding company for a while even after the tax-neutral contribution. Later, the atypically silent society can also be dissolved tax-neutrally.

Finally, we would like to give you a firmly binding blocking period for the dissolution of the atypically silent company, but there is no regulation in German tax law. However, if you would like to benefit from our experience in handling such a contribution to your holding, then simply contact us by e-mail or telephone. We also help you bring your GmbH shares into your holding company – tax neutral!