The taxation of undrawn profits under § 34a EStG is a favourable regime for partnerships in order to bring them closer to the tax rate of corporations (about 30 % tax rate). In the case of the deposit, the profits of the company are not immediately taken by the shareholders and instead remain in the company for the time being. The non-extracted profits are taxed at a tax rate of 28.25 %. In addition, at the time of withdrawal of the profits, a retaxation of 25% takes place. The accumulation of undisclosed profits is intended to tax partnerships and ensure that you have more profit after taxes to reinvest these profits.

Companies such as the GmbH can reinvest their earned profits very well and continue to use them with a favorable tax rate of about 30 % (15 % corporate tax, about 15 % business tax). However, partnerships such as GmbH & Co. KG are excluded from the application of this favorable tax rate. Because of the transparency principle, the profit of a GmbH & Co. KG is taxed at the level of the shareholders (co-entrepreneur), which usually leads to a taxation with the top tax rate of 42 %.

Now the legislature wants to counteract this tax inequality by the thesaurisation of undrawn profits according to § 34a EStG and establish a legal form neutrality. From a tax point of view, it should make no difference which legal form is used. For this reason, the accumulation of non-extracted profits according to § 34a EStG is only applicable to partnerships (OHG, KG, GmbH & Co. KG).

2 Requirements for theauration of profits

The recovery of non-extracted profits can only be claimed by partnerships or sole proprietors who receive income from business operations (§ 15 EStG), income from self-employment (§ 18 EStG) or income from agriculture and forestry (§ 13 EStG). This generally affects operating partnerships, which excludes asset-management partnerships from the reorganization. In addition, the operating partnership must determine its profit by accounting instead of not by the income surplus account. The blank must be corrected for removals and inserts. If the prerequisites are met, you have to apply for the deposit within the framework of the assessment at the tax office if you want to use it.

As a result of the requested taxation, the profits from the operations (i.e. the profits from the business) are now taxed in whole or in part at a tax rate of 28,25 %. In addition to the reduced income tax rate of 28.25%, there is also a solidarity surcharge. Consequently, this now means that a lower tax rate applies to the profit achieved and thus more profit after tax is left, which can be reinvested.

In addition, in the request for thesauration, one can request theauration for the whole profit or even for only part of the profit of the year. Profits that you want to exclude from the deposit are subject to the personal tax rate in the income tax (up to 42 percent).

After the remaining profits in the company have been redeemed, the balance (remaining profits in the company less the restitution tax 28,25 %) is to be deferred. The remaining amount is also subjected again to a so-called re-taxation with 25% plus solidarity surcharge, but only as soon as the profits are taken into the private assets of the shareholder.

The re-taxation runs until the profits are withdrawn or there is a forced re-taxation due to a restructuring or conversion. This period between the acidification and re-taxation is not necessarily a whole year, but can also span several marketing years.

3.1. Example of the accumulation of undrawn profits before re-taxation

An accounting entrepreneur has generated a profit of EUR 200,000 and has not yet taken it. It also requests the recovery of the undisclosed profits of EUR 200,000.

EUR 200,000 x 28.25% (ESt) = EUR 56,500

EUR 56,500 x 5,5 % (solZ) = EUR 3.107,50

Tax burden: EUR 59.607.50

A tax burden of EUR 59.607.50 results from the thesaurisation. This leaves EUR 140.392.50, which can be reinvested in the company. As a result, the overall tax burden is approximately 29,80 % of EUR 200,000 and is thus similar to the corporate tax rate.

3.2. Post-taxation of the accumulated undrawn profits

The undrawn profits have so far been used for reinvestment. But since an entrepreneur prefers to have his profit in private assets, he must inevitably take the profits definitively. Therefore, the retaxation takes place at this time.

EUR 140.392,50 x 25 % (ESt) = EUR 35.098,13

EUR 35.098.13 x 5,5 % (solZ) = EUR 1.930.40

Tax burden: EUR 37.028,53

3.3. Conclusion from the theauration of undrawn profits

A total tax burden of EUR 96.636.03 results from the first thesaurisation and from the subsequent taxation on the withdrawal of the profits. This corresponds to a tax rate of 48.31 % in relation to the profit of EUR 200,000.00. Unfortunately, we can hardly talk about real tax savings here. However, the profits could be used tax-deferred for the investment until the retaxation in the company.

In practice, however, it is usually the case that the entrepreneur has to pay taxes despite the acidification and these are to be considered as withdrawals in the context of the calculation. In any case, an entrepreneur usually takes the tax of 28.25 % incurred for the acidification. This withdrawal must then already be deducted beforehand from the profit not withdrawn.

Based on our example, the profit of EUR 200,000 would already be the profit after the tax withdrawal. The original profit before the withdrawal was thus EUR 259.607.50.

5th Conversions and Restructurings During Thesauration

While the accumulated profits have not yet been taken, it may happen that the company is restructured or converted. The removal or transfer of assets from the operating assets to another operating assets of the taxable person can trigger re-taxation. However, this only applies to two holdings. Should they instead transfer an asset from an establishment to a permanent establishment, no subsequent taxation would be considered, since the asset remains in the assets of the same establishment.

For such withdrawals and transfers, the inevitable re-taxation also depends on the profit achieved and the other withdrawals made.

Furthermore, there are harmful restructurings, which always trigger a compulsory re-taxation, in the case of a business sale or business abandonment within the meaning of § 16 EStG. In addition, the same applies to the abandonment of a share of the company. Also harmful is the transfer of companies and co-entrepreneur shares into a corporation (for example GmbH) or the change of form into a GmbH.

Therefore, in these cases the advantage of the thesaurierung is lost according to § 34a EStG. Consequently, the remaining amount subject to post-taxation must also be post-taxed.