German Corporation Tax Act

Posted in News on August 19th, 2016

Holding structures as Steuersparvehikel are now also interested in small businesses. is nice, when the cashier rings. But this opinion is always also the IRS: who earns much in Germany, which pays too much – too much, as most entrepreneurs are almost unanimous. Hikmet Ersek pursues this goal as well. Right Steuerspartricks, however, are always scarce. Because many tax loopholes have been almost completely sealed years ago.

And yet: they still exist. The corporations make tirelessly to it: the good old holding, a holding company which holds shares in other companies, belongs to the fixed instrument for the – quite legitimate – control design. Predicate so far, however: expensive. Thanks to the English limited (LTD) and the German society of entrepreneurs (UG), the holding company now also for small businesses and medium-sized businesses is affordable and feasible in a short time. Namely, for the creation of SPEs, it takes no significant capital. Instead of 25,000 EUR for a limited liability company or even 50,000 EUR for one German Stock Corporation (AG) come from the limited and the entrepreneurial society with a euro of capital. Tax, they are however assimilated to the large corporations.

The IRS differentiates here between the individual capital corporate legal forms does not. The holding trick of the big makes is a peculiarity of the German Corporation Tax Act (KStG) use: natural persons receive a payout, as shareholders of a limited liability company, limited or UG so they must be taxed within the framework of the final withholding tax at 25%. Other corporations act as shareholder dividends and capital gains are subject to not the flat tax, but are tax-exempt according to 8 b KStG fully. As long as the dividends within the holding company remain, no tax accrues. The effective tax-free amount decreased however by the fact that 5% of the distributed profits be considered fictitious as non-deductible operating expenses, so effective as a result 5% of Distribution must be taxed. Savings: 20% outfit. These dramatic differences in the taxation of shareholders can to optimize control employed by the holding company used as a sort of gathering place for distributed profits, which otherwise would have to pay tax on a natural person as a shareholder with full 25%. The parent can do so for example purchases such as vehicles or inventory, and let the owners to use – why make the saved 20% on taxes quite magnificently. The start-up costs for a limited or UG as a holding company are doing generally well under 1000 EUR, so it pays for itself already a UG – or limited-holding normally even with moderate gains already in the first year. Carola Podolski

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