For many people, the acquisition of one or more properties for rental purposes serves to secure retirement provision. The question arises as to the legal form in which the property should be acquired and further used. Frequently, the property is acquired as a physical person, so that it is usually allocated to private assets.
The advantage is obvious: If the property is held for at least 10 years, it can be sold exempt from income tax, as the speculation period of § 23 EStG for real estate has been exceeded. The current profits from renting and leasing are subject to the individual tax rate of the taxpayer. At its peak, the tax rate can be up to 45%. If one would like to reinvest the profits generated in the context of rental, the tax office is initially interposed with a significant share, depending on the tax rate.
Therefore, the asset-managing GmbH (also: “Vermietungs-“ (“rental-“) GmbH) should be considered as an alternative legal form. An asset-managing GmbH is a GmbH whose corporate purpose is to hold and manage exclusively its own real and capital assets.
Generally, GmbHs are subject to corporate income tax and trade tax. However, a special tax regulation applies to asset-managing GmbHs, so that the company is subject to the so-called extended trade tax reduction.
As a consequence, only the corporate income tax of 15% on profits generated has to be paid to the tax office. If one compares this tax burden with the individual tax burden on private assets, it quickly becomes evident that at the end of the year there may be significantly more assets available after tax that can be used for further investments. This essentially depends on how high one's own individual tax rate on private assets would be comparatively.
However, one noteworthy disadvantage of the asset-managing GmbH is that the possibility of a tax-free sale of the real estate is completely eliminated after a 10-year holding period. If a property is sold at a profit, this is taxable regardless of whether the property was held for five, ten or thirty years. In any case, this should be included in the calculation before acquiring 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 property acquisition at the level of the GmbH or as a physical person can be recommended.
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 additionally subject to capital gains tax and the solidarity surcharge.
The asset-managing limited liability company makes perfect sense if profits from rental and leasing are to be reinvested as efficiently as possible. If the property is to be acquired in the GmbH, the focus should not be on the speculative profit from increases in value, but on the long-term return expectation from steady inflows. We would be happy to advise you further on this topic.