The asset-managing GmbH – tax-saving model?

For many people, the purchase of one or more properties for rental purposes serves to secure their retirement provision. This raises the question of the legal form in which the property should be acquired and further used. The property is often acquired as a natural person, so that it is generally assigned to private assets.

The property as a private asset

The advantage is obvious: if the property is held for at least 10 years, it can be sold free of income tax, as the speculation period for real estate under Section 23 EStG has been exceeded. Current profits from letting and leasing are subject to the taxpayer’s individual tax rate. The tax rate can peak at up to 45%. If you wish to reinvest the profits generated from the rental, the tax office will initially intervene with a significant share, depending on the tax rate.

Tax advantage through the GmbH

Therefore, the asset-managing GmbH (also: rental GmbH) should be considered as an alternative legal form. An asset-managing GmbH is a GmbH whose corporate purpose is to exclusively hold and manage its own real estate and capital assets.

In principle, GmbHs are subject to corporation tax and trade tax. However, a special tax regulation applies to asset-managing GmbHs, meaning that the company is subject to the so-called extended trade tax reduction.

The consequence of this is that only corporation tax of 15% on profits made has to be paid to the tax office. If you compare this tax burden with the individual tax burden on private assets, it quickly becomes clear that there may be significantly more assets available after tax at the end of the year that can be used for further investments. This essentially depends on how high your own individual tax rate on private assets would be in comparison.

No tax exemption for sales

However, one disadvantage of the asset-managing GmbH that should be noted is that the possibility of a tax-free sale of the real estate after the expiry of a 10-year holding period is completely eliminated. If a property is sold at a profit, this is taxable regardless of whether the property has been held for five, ten or thirty years. This should always be included in the calculation before purchasing the property. Factors such as value development, rental yield and potential holding period of the building can therefore have a decisive influence on whether a real estate acquisition can be recommended at the level of the GmbH or as a natural person.

If the shareholder wishes to dispose of the profits of his GmbH, these must first be distributed to the shareholder as part of the profit distribution. The profit distribution is also subject to capital gains tax and the solidarity surcharge.