If you own a holding company with a successful operating subsidiary and want to invest in real estate, there is a favorable design to deduct a long-term profit carry forward from the holding company tax-free. It is best to start an OHG or KG with another person of your trust, while being as involved in society as possible. In addition, an operating split must be avoided. OHG then buys real estate, with which it then generates rental income. On the one hand, this can be done by renting to third parties. On the other hand, the properties can also be rented to the operating subsidiary. The subsidiary can deduct the rental payments as operating expenses. After at least ten years, you will then sell a maximum of 89% of your shares in OHG to your holding company. This way you avoid the real estate transfer tax. Your holding company disputes your purchase price claim from the profit carried forward, which thus flows tax-free into your private account.

Suppose you have a holding company, which in turn is involved in a successful subsidiary. The subsidiary thus distributes annual profits to the holding company. As a rule, only 1.5% of taxes are incurred. But if you now want to distribute the profit carried forward in the holding company, then you incur the capital gains tax of 25%. Therefore, many of our clients, who are also in this situation, ask us how to optimize the profit distribution for tax purposes at this point.

One of our design models for this runs on an OHG with real estate. In the context of this article, we would like to show you how you can manage to get a multi-year profit carry-forward on the construction of OHG with real estate without a tax from the holding company. At the same time, our design model is also an excellent way to combine the aforementioned purpose with a tax-optimized investment in real estate.

So let’s start with the foundation of OHG, with which we want to buy the real estate. In addition to an OHG, a limited partnership can also be considered as a partnership. A GbR, on the other hand, is less suitable for our purposes. However, we only provide the reason for this at the end of our contribution.

In order to establish OHG for the purchase of the real estate, you should join forces with another shareholder of your trust. The shares of your co-partner can basically be very small. A quota of 99% is therefore quite realistic for you. But your share should be best 90% or more.

It is also important that you establish OHG as an asset management partnership. In fact, this is quite possible according to § 105 paragraph 2 HGB. So you have to exclude that OHG starts commercial activities. It is therefore limited to the asset management of the real estate to be acquired.

But if you buy real estate next with your OHG, this may trigger a division of operations. Although this is hardly associated with tax implications for your OHG at the time of purchase of the property. However, a lease of the property by OHG to the subsidiary of your holding company may very well have considerable tax consequences. In order to avoid such a split of operations, regardless of the actual shareholding in OHG, they should grant their co-shareholders the same voting rights as you do. In this way, you break through the characteristic of a controlling partner, which triggers a division of operations.

Of course you can also let your properties to third parties with your OHG. However, the rental of the properties to their own operating company has the advantage that they can deduct the rent for the property tax as operating expense. In this way, the operating subsidiary saves taxes (corporate tax and business tax).

With this structure, you can now operate for many years. On the one hand, you earn income from your property management OHG. Of course, you also have to tax them regularly. In the case of taxation at the top tax rate, this may seem at first glance to be of little advantage. However, we would like to remind you that the OHG with real estate is only a tax-shaping vehicle with which we want to save taxes on a completely different level. Therefore, the albeit highly taxed profit from the rental should only act as a small bonus.

On the other hand, the operating subsidiary also makes profits year after year. The subsidiary then also returns these profits to its holding company. The profit carried forward there should first remain in the holding company and continue to grow. However, once the ten-year speculative period in connection with the acquired properties for OHG has expired, we can take action.

Because now you can sell up to 89% of your shares in OHG to your holding company. Logically, a purchase price demand arises. The purchase price demand should correspond approximately to the profit carried forward accumulated in the holding company over the years. And your holding company is now paying for the purchase of the shares in OHG with a large part of the real estate.

Of course, you can vary how many shares in OHG you sell to your holding company. In this way, you can ensure that the amount of the purchase price remains reasonable.

However, you should pay attention to the maximum limit of 89%, because this share deal otherwise leads to a real estate acquisition tax. However, if you intend to extract profits from your holding through the sale of shares in OHG in the future, you should also take this into account when determining the amount of OHG shares to be sold and the purchase price to be used for this purpose.

If you adhere to the specifications for our design model of OHG with real estate, the sale of the shares in OHG by way of a share deal remains tax-free. However, this now allows you additional tax advantages. As OHG operates only in asset management, the assets in its real estate are transferred directly to the holding company when they are sold to the holding company. This is due to the principle of transparency, which applies to the mere asset management of a partnership. Because of the principle of transparency, the taxation of rental income also permeates the level of the OHG and thus arises at the level of its shareholders. This is done in practice because the real estate could be allocated directly to the shareholders (according to their shares in OHG).

As a result, the holding company, as a new shareholder in OHG, can also consider the proportional real estate as a new acquisition. However, this also makes it possible to write off their shares in the real estate again. In fact, this is done by recognizing the acquisition costs it pays for OHG shares.

The second tax advantage in connection with OHG’s real estate is the increased depreciation rate of 3 %. Since the real estate is now regarded as operating assets of the holding company thanks to the principle of transparency, it can avail itself of the more advantageous depreciation rate according to § 7 (4) sentence 1 no. 1 EStG.

In connection with the re-depreciation by proportional allocation of the real estate to the holding company, the holding company, as a new shareholder of OHG, must first prepare an additional invoice for the shares it has acquired. This serves to record exactly what amounts the new capital account, which is now assigned to the holding company, is equipped with. Thus, in our example, the amount of the valuations of the real estate, of which the depreciation, which is attributable to the holding company, is now also included in this supplementary invoice. But this issue is again a matter of its own.

In this way, you draw the profit carried forward in the holding company tax-free from the holding company. More specifically, there is still a profit carry forward of the same amount in the holding company. You can use it at a later date. But the real balance of money accumulated there over the years after payment of the purchase price claim has now been transferred to your private account. And that was exactly our primary goal in this design. In addition, we can also record the re-depreciation of the properties in connection with the OHG and a higher depreciation rate as plus points. In addition, there is the rental income of OHG, which it continues to generate with its real estate.

Regardless of all these advantages, you can convert the OHG into a GmbH tax-neutrally by changing your form. With a GbR, however, this would be excluded. That is why we have given preference to OHG with real estate in our design model.