Business

Profit before tax | 100,000 | EUR

Corporate Tax | – | 15,000 | EUR

Business tax | – | 15,000 | EUR

Profit distribution | = | 70,000 | EUR

Capital gains tax | – | 17.500 | EUR

Profit paid after tax | = | 52,500 | EUR

Business

Profit before tax | 100,000 | EUR

Corporate Tax | – | 15,000 | EUR

Business tax | – | 15,000 | EUR

Profit distribution | = | 70,000 | EUR

Corporate tax of Holding-GmbH | – | 1.050 | EUR

Profit of the holding after tax | = | 68.950 | EUR

With a holding company you can combine a Immobilien-GmbH and a gewerbliche GmbH and take advantage of tax advantages. We show you an example of how the extended land reduction in trade tax and the taxation of the holding company contribute to this. You can then reinvest these tax savings in Immobilien-GmbH. In addition, we explain what tax advantages the holding company offers when selling a property (indirectly). We also explain how you can convert existing structures to the advantageous tax model shown here. Restructuring is very easy to implement.

In order to describe the tax advantages of combining a real estate GmbH and an operational business operation under the umbrella of a holding company, we would first like to set out the framework of the example to be presented.

Assuming a fictitious entrepreneur, in addition to his current business operations, also leases real estate through a Immobilien-GmbH specially founded for this purpose. He already uses the extended land reduction in the business tax, so that he has to pay only 15 % of corporate tax. § 9 No. 1 sentence 2 GewStG is the legal basis for this. In addition, the profit from the operating business is to be used to finance acquisitions of Immobilien-GmbH. Until now, the entrepreneur had to initially fully tax the profit of his business. Let us assume that this business is also a GmbH. So before the profit distribution both corporation tax and business tax accrues. Both taxes are on average 15% each. At the private level, capital gains tax is added to income tax when assessed; 25 % of the profit paid out.

Optimization of tax reduction by setting up a holding company

Our tax saving model now looks like this: We establish a holding company in the form of a GmbH. The entrepreneur contributes both his business operations and his real estate GmbH as subsidiaries. Consequently, operative GmbH, after deduction of corporation tax and trade tax, then pays the profit to the holding company. Subsequently, the holding company makes the profit, in whole or in part, available to Immobilien-GmbH as a loan for its own investment projects. Any profits from Immobilien-GmbH are returned to the holding company as interest or repayment for the loan. At least the repayment is tax-free, because it does not represent a profit in the tax sense. The remaining profit can then go to further investment projects.

So now we look at the tax advantages of the holding company model compared to the original model. For this purpose, we assume an annual profit before tax of EUR 100,000 at gewerblichen GmbH. On the basis of these assumptions and the previously mentioned assumptions, we now develop the calculation in our two examples.

3.1. Tax burden without holding company

In this way, the calculation of the tax burden of the entrepreneur without using a holding company is as follows:

As a result, the entrepreneur receives only EUR 52,500 out of the EUR 100,000 that his company generates. For this reason, this amount is now available to him for investment in his Immobilien-GmbH.

3.2. Tax advantage with holding company

Thus, the calculation of the profit paid, including a holding company, shall be carried out as follows:

As is easy to see here, the major tax advantage of the holding company compared to the traditional model is that the profit distribution is taxed with a corporation tax of only 1,5 % instead of a capital gains tax of 25 %. This is due to a tax relief for corporations that hold at least 10% of shares in another company. Here, profits from these investments are 100 % tax-free. However, 5 % of this amount must be regarded as a flat-rate operating expense in connection with these holdings and thus taxed. In other words, 5% of the profit must be paid to the Treasury with 15% corporation tax and business tax each, which means 1.5% of the profit.

3.3. Taxation of profits at Immobilien-GmbH

Finally, we also briefly discuss Immobilien-GmbH. After all, the profit made from the commercial activity should be invested in this land company. Of course, she will have more capital available if you use the structure with the holding company.

On this occasion, however, we also want to discuss the profit that Immobilien-GmbH has to tax. Here, the previously mentioned extended land reduction is applied to the trade tax. Incidentally, this is only granted on request. It means that the profit is ideally free of trade tax. But even without the extended land reduction, only about 15 % of business taxes are incurred, so that 85 % of the profit remains.

Advantages of reinvestment by Immobilien-GmbH

Now Immobilien-GmbH can reinvest this profit in the purchase of new properties. If it does this within four years, then this subsequently reduces the profit. This gives you the advantage of investing capital in new real estate on the one hand and saving taxes at the same time. However, this is subject to certain conditions, of which the four-year period is only one of several that § 6b EStG requires. In addition, this tax advantage is of course only possible as long as the profit is reinvested. In the end, there will eventually be a distribution of profits subject to taxation.

selling real estate almost tax-free by a holding company

In fact, tax advantages can also be considered when selling land by a Immobilien-GmbH. However, one does not simply sell a property, but the company holding it itself. An advantage here is that this avoids the otherwise incurred property acquisition tax. Finally, the property remains in the same Immobilien-GmbH. And the second advantage is even greater. The taxation of the profit on the sale of a shareholding in a subsidiary GmbH by the holding company is 95 % tax-free. Only 5 % of the profit is then subjected to corporate tax and business tax at a 15 % rate each, so that the tax is ultimately only 1,5 % of the capital gain.

However, this only applies provided that the seller and buyer agree on the share deal described here. Even if an asset deal is usually the cheaper option when buying a company on the part of the acquirer, this is different in connection with a real estate GmbH. Because this variant triggers the buyer of a property a taxation by real estate acquisition tax. On the other hand, in the share deal recommended here, a change takes place at the owner of the company. This results in a universal succession in which the ownership of the property does not undergo any change. In this way, the share deal bypasses the real estate acquisition tax. However, this also means for the buyer the waiver of depreciation in the acquisition costs of Immobilien-GmbH.

6. Restructuring to a holding company

Regardless of whether you already own a commercial enterprise and a real estate GmbH, or whether you are merely considering establishing it, the development of the holding structure is in principle quite simple. First of all, you found a GmbH, which acts as a holding company. Then you bring both the Immobilien-GmbH and the business operations as subsidiaries into the holding company. It is important here that the holding company’s shareholding is at least 15 %, because this is the condition for the tax exemption. If, however, none of the subsidiaries exist yet, the holding company sets them up itself. In fact, the way as described in the previous section is even better. Then you simply buy an already existing real estate GmbH. So you save in this way already at the beginning of the enterprise a considerable tax amount by avoiding the real estate acquisition tax.