How to take advantage of the holding structure

Here is an overview of the most important information:

• The holding company is not a legal entity in its own right. 
• To set up a holding company, you need to incorporate a company, which can be a limited liability company (GmbH), a private limited company (UG (haftungsbeschränkt)) or a public limited company (Aktiengesellschaft). 
• The holding company is the 'parent company' and holds shares in one or more other companies, the 'subsidiaries'.
• The parent company must hold at least 10% of the shares in the subsidiary. 
• The parent company must hold the majority of the voting rights in the subsidiary.

A holding structure gives you the opportunity to organise your business in the best possible way and offers various tax advantages. It sounds complicated: A holding structure involves more work than setting up a simple GmbH or UG. To understand the advantages of a holding structure and how you can use it for your business, take a closer look at the following topics: 

• What is a holding structure and how does it work? 
• What are the benefits of a holding structure? 
• What is a two-tier holding structure? 
• How do I set up a holding structure?

As described above, a holding structure usually consists of a parent company and one or more subsidiaries. These companies may or may not have the same legal form. In its function, the holding structure is the parent company (usually a limited company) that owns shares in the holding structure (minimum 10% and maximum 100%). The holding structure also has significant voting rights in the subsidiaries and therefore has an influence on business decisions. 

You can form a holding structure either with two existing companies or with two newly formed companies.

When you choose a holding structure, you are combining two or more new or existing companies. This can involve considerable organisational effort. The advantages of a holding structure show why it can still make sense: 

• You can save taxes: 95% of the subsidiary's profits can be sold to the parent company tax-free. The remaining 5% is taxed at a rate of around 30%. The bottom line is that you can save taxes and reinvest the money. 
• No liability: The parent company is not liable for the subsidiary in the event of insolvency. 
• Securing of property: The parent company can lend property (equipment, technology, etc.) to the subsidiary. In the event of the subsidiary's insolvency, the assets are secured by the parent company. 
• Anonymity: Sometimes it can be strategically wise for the parent company and subsidiaries not to be associated with each other. This is possible with the holding structure, as the owner and the company name do not have to be the same. 

The holding structure sounds promising and can be very useful - but as with any form of business organisation, there are disadvantages. Our team would like to show you all the pros and cons so that you have all the facts to help you decide whether a holding structure makes sense for you and your business: 

• High running costs: A holding company is a complex form of organisation and involves a lot of administration. The holding company represents another company that needs to be managed and operated independently: Contractual formalities, tax issues multiply with several companies. It is therefore important to ensure that you have the financial and human resources to handle this additional workload.
• Extensive administrative work: In addition to the work involved in setting up another company, you should also be aware that the administrative workload will increase: You will have to keep double-entry books, keep the two companies strictly separate and prepare more than one set of annual accounts.
• Dependence on the parent: Because the parent company has a great deal of influence over the holding company, if the parent company suffers financially or becomes insolvent, the subsidiary's existence may also be threatened. 

You are not an expert in all matters and should have the right partners at your side to support you in legal and tax matters. Our team provides you with expert advice from our lawyers and tax advisors: Together we will take all the necessary steps for your successful holding structure. 

A two-tier holding company is a special corporate structure that links several companies at different levels. In this structure, each company performs different functions. There are four main levels in a two-tier holding structure: 

• the operating company 
• The holding company 
• the holding GmbH & Co. KG 
• Holding shareholders

The tax advantages of a holding structure are impressive, particularly thanks to the provisions of Section 8b of the German Corporation Tax Act (KStG). This section allows your GmbH to exempt 95 per cent of profits from investments in other companies from tax liability. This also applies to profits from the sale of these shareholdings.

Only the remaining 5 per cent is subject to the regular tax rate for GmbHs, which is made up of corporation tax, solidarity surcharge and trade tax and totals around 30 per cent. This means that your holding company effectively pays only 1.54% tax on the profits or dividends of its subsidiaries.

To take full advantage of the tax relief under Section 8b KStG, you should ensure that your holding company holds at least 15 per cent of the shares in the subsidiary.

Another interesting point is that the reduced tax rate of 1.54% also applies to gains from the sale of shares. By investing through the holding company rather than personally, you can significantly increase your return as you won't have to pay the full 26.38% capital gains tax. This means you can get more out of your money in the long term and achieve your financial goals more quickly.

Choosing a holding company structure can be a strategic advantage for entrepreneurs, with far-reaching positive effects on business planning. The ability to benefit from tax advantages while minimising liability risks opens up a new dimension in financial structuring. The holding company not only enables the efficient management of profits, but also offers asset protection and greater management flexibility.

The challenges involved, such as the increased administrative burden, should not be underestimated, but can be well managed with the right planning and professional support. In a dynamic business world where innovation and adaptability are crucial, the holding structure offers a clear way to optimise the use of company resources and remain fit for the future.

Take advantage of the opportunities that a holding structure offers to take your business to the next level and grow sustainably!