The Handelsblatt published an article on the tax models of the rich in Germany in September 2021. In his research, he also referred to articles we published on this topic in the past. This includes the use of holding companies in combination with the salvage of profits and a tax-advantaging general manager salary. Furthermore, the inheritance tax sooner or later in Germany is a big topic of wealthy families in Germany. That is why moving abroad, where you do not pay inheritance or gift tax in Austria, for example, is an often used way out. It also deals with the reduction of business tax by locating participating companies in municipalities with low lifting rates. And finally, the design of a family office with a Volksbank license is one of the most interesting tax models of the particularly rich families in Germany. Because there is also no inheritance tax for a generation change.

Basically bathing in money is a popular metaphor for wealth. Another analogy may even more impressively illustrate the extent of wealth that individual riches possess. Because those people who are among the five wealthiest in Germany basically own more than half of all assets in this country. Even medieval kings had to settle for a smaller share of wealth, because nobility and clergy were also very wealthy.

Wealth is also a burden, because its preservation is not a matter of course. Although asset management is a very effective asset increase, both the profits made and the transfer of assets in the context of inheritance or gift are subject to taxation. Although the last calculation of wealth tax in Germany dates back several decades, its revival is the subject of recurring political discussions. But sooner or later a taxation of assets takes place anyway. Because at the latest in the case of an inheritance, the transferred property is subject to taxation. It is a rather small and thus hardly perceived consolation that this is a one-off taxation instead of a current one.

Despite any justified criticism of the taxation of rich people in Germany, one should also consider the extent of such taxation that would arise if one did not consider tax models. To give an example, the hereditary transfer of EUR 1,000,000,000 to a child leaves roughly 70%. Anyone who now criticizes the use of avoidance strategies should first credibly represent the waiver of EUR 300,000,000. Of course, this is a major cut. And of course you want to prevent your own children from having to wear it one day.

In this context, the renowned Handelsblatt recently reported on tax models of particularly rich families in Germany. The authors also rely on research based on our articles. For example, they quote statements in which we refer to holding companies as savings banks.

We take this opportunity to report in this article about the five tax models of the rich, which the Handelsblatt also cites in its article. In doing so, we shall briefly touch upon a few points on which we consider one or the other explanation or addition to be appropriate. Of course, it should be clear that these are only examples of successful asset management strategies. Finally, in this context, it always depends on the very individual circumstances that an experienced tax consultant or asset manager with tailor-made designs should address.

On the holding as one of the tax models of the rich we have already published a whole series of articles and videos. Basically, these are several models with which wealthy people can both save taxes and invest in new return objects. But a holding company can also offer many other advantages.

On the one hand, it is about the importance of the holding company as a savings box for the profits of the operating subsidiaries in which it participates. Because if a shareholder without an intermediate holding company were to receive the profits of the operating companies, then each time a capital gains tax of 25 % would be incurred. If you want to avoid this, you run the risk that the accumulated profits will remain in the operating companies. There you could lose them in an emergency by legitimate claims of third parties. That is why the holding company is the ideal savings box to avert this danger. But this is only a nice side effect, because it means no tax advantage.

At the same time, however, the profit accrued in the holding company can flow into new investment objects. If the dividends were initially taxed by capital gains tax, only about 50 % of the original profit would remain for this project. A holding GmbH, on the other hand, usually pays only about 1,5 % in taxes on the profit distribution. Thus, approximately 70 % of the initial profit is available to the holding company for reinvestment. And this is the real engine that allows the holding company to increase the already existing assets with reduced tax.

The question now is how to get the assets of the holding without a good part of the profit distribution as tax. For this purpose, the number 2 of the tax models of the rich is used by means of a holding company. As a legal entity, Holding-GmbH is dependent on a managing director to manage its fortunes. Since this is a completely normal employee activity, which can also be carried out by the shareholder of the holding company, he is also entitled to a managing director salary. You can tax the managing director salary relatively cheap and at the same time deduct at the level of the holding company as operating expenses, which helps them save taxes.

Generating even more wealth with wealth is one thing. Transferring it by gift or inheritance to other people, such as their own children, tax-free is in turn a challenge of its own. Finally, in the two cases mentioned, the property to be transferred is subject to gift and inheritance tax. Often about 30% is lost. But there are other countries in the world where you do not levy on gifts or inheritances. One such country is Austria, for example. If you emigrate to Austria, for example, as a wealthy person, then you can transfer any large part of your assets to other people tax-free.

However, here too, the framework conditions must always be clear and be given full consideration. Because in the case of international inheritance tax it can come to unpleasant surprises, if you first take insufficient account of the tax factors prevailing in different countries. Thus, multiple taxation in several countries is in certain cases a quite realistic scenario.

Also in terms of trade tax, there are basically several tax models of the rich, which can be summarized under this category. On the one hand, you can reduce the trade tax of an operating company by locating it in a municipality with a low lifting rate.

Basically, this is an analogue to international IP Box regimes at the federal level, but here no special distinction of revenues from license fees is required to achieve the tax privileges.

Our last example of the tax models of the particularly rich families in Germany is the combination of a family office with a Volksbank license. The family office is a wealth-managing service company for family members of rich families. It coordinates the private use of assets held by individual family members within society. Whether you diversify your assets further by the employed investment advisors to generate further returns, or whether you delegate other private tasks and work to the employees also working in the family office, for example to organize a trip or use the family-owned yacht or private jet or organize a celebration, makes no difference.

However, the assets in the family office, which usually consist of securities such as shares and funds, usually represent private assets. If, for example, a transfer of assets occurs in the context of a gift or inheritance, this naturally triggers inheritance and gift tax. The special trick here is that you manage to get the Family Office a Volksbank license. Because of this, the managed private assets become the operating assets of a bank. And this is then not subject to further taxation in the case of a transfer, because a 100% tax exemption applies to the transfer of operating assets.