Are you thinking about setting up a holding company but aren't sure if it's worth it? As well as tax advantages, a holding company structure offers greater flexibility and protection for your assets. Find out everything you need to know to take the first step towards a financially independent future.
A holding structure is often misunderstood and mistaken for a separate legal form, when in fact it is an organisational form. In a classic holding structure, there are at least two companies: the parent company and one or more subsidiaries. The specific functions and advantages of this structure are explained below.
The holding company can have different legal forms, such as a GmbH, UG (haftungsbeschränkt) or even a stock corporation. The parent company - also known as the holding company - owns shares in its subsidiaries. The same legal forms are usually used at both levels, but this is not mandatory.
To establish a holding structure, the parent company must own at least 10% of the shares in the subsidiary and also hold the majority of voting rights. This enables the parent company to exercise significant influence over the decisions of the subsidiary.
Here is an overview of the most important information:
When you set up a holding company, you bring several companies under one roof - and this structure offers some exciting advantages:
As the challenges of a holding structure usually require expert legal and tax knowledge, it is advisable to have support at your side. Our experienced lawyers and tax advisors are at your side to help you navigate all the important steps for a smooth and successful holding structure.
Being tax smart with a holding structure can make a big difference. Thanks to Section 8b of the German Corporation Tax Act (KStG), your company enjoys tax benefits on profits from shareholdings. A full 95 per cent of these profits remain tax-free - even if they come from the sale of company shares.
Only 5 per cent of the profit is taxed at the company's normal tax rate, which is around 30 per cent. This means that your holding company effectively pays only about 1.54% tax on the income of its subsidiaries - a significant advantage.
The holding company must hold at least 15 per cent of the shares in the subsidiary for you to benefit from the full tax advantages under Section 8b KStG.
This rule is also particularly attractive for equity investments. Profits from the sale of shares via the holding company also benefit from the reduced tax rate of 1.54%. In contrast, you would have to pay the full capital gains tax of 26.38% privately. This allows you to keep more of your gains over the long term and achieve your capital goals more quickly.
The two-tier holding company is a complex organisational form characterised by several hierarchical levels, with each company performing a specific function. This structure creates a clear separation between the operating business and the administration, allowing targeted use of tax advantages and flexible structuring of business activities. Typically, a two-tier holding company consists of the following elements
The two-tier holding company has a number of strategic and tax advantages:
In summary, the two-tier holding company offers an intelligent and flexible structure for tax optimisation, asset protection and better management of business units. It is particularly suitable for entrepreneurs who wish to reduce their tax burden and strategically develop their corporate structure.
A property holding company is a legal structure that focuses on the management and acquisition of property. This can include residential or office buildings, but also shopping centres or land. The main objectives of the property holding company are to sell, add value to and dispose of properties. The parent company owns at least 15% of the subsidiary and can secure long-term assets.
Here are the three cases in which a property holding company can be useful:
This checklist will help you analyse the benefits and requirements of a holding structure and make an informed decision.
1. Understand the benefits and functions
Understand the tax advantages: Through the holding structure, 95% of the profits flowing from the subsidiary to the parent company remain tax free. The remaining 5% is taxed at a corporate tax rate of approximately 30%, resulting in an effective tax burden of approximately 1.54%.
Asset protection: The holding company provides protection against liability and insolvency by separating the parent company from the subsidiary. Valuable assets remain in the parent company and are protected.
Rent as an operating expense: The holding structure allows the parent company and subsidiary to have different names, which can provide strategic anonymity.
2. consider legal forms and shares
Choose the right legal structure: Consider whether you want to use a GmbH, UG or AG as your parent company. Each has its advantages and disadvantages.
Check the shareholding requirements: To create a holding structure, the parent company must hold at least 10% of the shares in the subsidiary and have the majority of voting rights.
3. assess the administrative requirements
Additional administrative work: Remember that you will need separate accounts and financial statements for the holding company.
Duplicate financial statements: The additional contracts and tax obligations will add to the administrative burden.
4. other tax considerations
Offsetting profits and losses: The holding GmbH & Co. KG can offer tax advantages by offsetting profits and losses across different levels.
Consider exit taxation: A two-tier holding company can help to avoid tax disadvantages in the event of a planned move abroad.
5. review property investments
Take advantage of tax benefits for property investments: A property holding company can reduce the tax burden on the sale of property and is a good way of securing long-term assets.
If the operating GmbH rents its own premises, the rental payments can be claimed in full for tax purposes.
6. estimate the financial outlay
Plan for the cost of tax and legal advice: A holding structure requires specialist knowledge, so professional advice is necessary.
Consider human resources: An increased administrative burden means that sufficient staff will be required to manage the holding structure.
A holding structure offers many benefits, from tax relief to asset protection and strategic flexibility. If you are looking to optimise your business structure and achieve long-term financial goals, a holding company could be the right choice for you.
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