Important note: This article provides a general overview and Does not replace tax advice. A tax advisor should always be consulted in individual cases.
Introduction: What is taxed when selling a GmbH?
When selling a GmbH (corporation), there are significant differences in the tax burden, depending on the form of sale and the type of seller. In principle, the sale can be structured either as a share deal (sale of the GmbH shares) or as an asset deal (sale of individual assets or the operation of the GmbH). In addition, it plays a central role who acts as a seller — a natural person (private person) or a legal entity (e.g. a holding GmbH). In this article, we look at the most important constellations in the “universe of GmbH” and explain which taxes may apply in each case. This is an overview of possible scenarios and design options, not individual tax advice.
Sale of GmbH shares by a private person (natural person)
If a private shareholder sells his GmbH shares, taxation depends largely on whether the shares are private or business assets of that person and how large the participation rate is. Here is an overview of the most important cases:
Significant participation (at least 1%) in private assets: If the private individual holds at least 1% of the GmbH shares (a significant participation in accordance with §17 EStG), the so-called partial income procedure applies. This means that 60% of the capital gain is taxed at the personal income tax rate, 40% of the profit remains tax-free. This procedure takes into account that hidden reserves, often accumulated over years, should only be subject to taxation in part. If the seller's personal tax rate is 42% at its peak, for example, the partial income procedure results in an effective tax burden of around 25% of the profit (0.60 × 42% ≈ 25.2% plus solidarity surcharge and, if applicable, church tax). With lower personal tax rates, the process can be even more beneficial.
Micro-participation (< 1%) in private assets: If the private individual's participation in the GmbH is below 1%, it is not the partial income procedure that applies, but the flat rate withholding tax. The capital gains tax (plus solidarity surcharge and, if applicable, church tax) is then taxed at a lump sum of 25%. This lump sum flat rate withholding tax applies to private free float shares acquired after 2009. Exception: If the shares were acquired before 2009 and held since then, such micro-investments can even be sold tax-free, as an old inventory right still applies here (speculation period before the introduction of the flat rate withholding tax). In practice, however, such old cases are rare.
Shares in the private person's business assets: If the GmbH shares are in the business assets of a natural person (such as a sole proprietorship or a partnership holds the shares), only 60% of a capital gain is also subject to income tax. The partial income procedure also applies here. The remaining 40% remain tax-free. Important: In this scenario, the profit is also subject to trade tax on a pro rata basis, as this is income from commercial enterprises. If, for example, sales are made through a partnership (co-entrepreneurship), the 60/40 rule also applies, but business tax may apply at the level of the partnership, which is not always fully deductible. A partnership is therefore treated for tax purposes roughly as if the natural person were selling directly.
Tax allowances and benefits: There are some special benefits for private individuals when selling companies, but these are not always applicable to GmbH shares. Example: The one-time sale allowance of 45,000€ in accordance with Section 16 Paragraph 4 EStG (applicable from 55 years of age or in case of permanent occupational disability) is only valid for the sale of an entire company or co-entrepreneur share, but not for the sale of shares in corporations such as a GmbH. Instead, the partial exemption effect explained above (§17 EStG) applies to significant GmbH investments. However, §17 paragraph 3 EStG provides for a small allowance of around 9,060€, which is granted for sales of significant investments in private assets. However, this allowance is gradually reduced from a capital gain of €36,100 and is in fact irrelevant in the event of larger sales gains. Furthermore, although a reduced tax rate (§34 paragraph 3 EStG, formerly known as “half tax rate”) may apply to extraordinary income for people over 55 years of age — this also does not apply to GmbH shares held in business assets. In practice, this means that the tax relief for selling shares consists primarily of 60/40 taxation, while additional relief (such as allowances or reduced rate) is usually only available for sales of sole proprietorships or partnerships.
In summary, private individuals must expect a tax burden of roughly 25— 30% of the profit when selling a GmbH share (depending on participation rate, personal tax rate and church tax liability). In any case, it should be planned at an early stage whether and how any benefits can be used — as part of this, always in consultation with a tax advisor, as mistakes here can be costly.
Sale of GmbH shares by a corporation (holding company or other GmbH)
The situation is different if the seller of the GmbH shares is a corporation itself — for example a holding GmbH (or holding UG) that sells shares in a subsidiary GmbH, or even a participating GmbH under a third-party or the same shareholder structure. In such cases, a generous tax exemption under the Corporation Tax Act applies:
95% tax-free capital gains: If a GmbH (corporation) sells shares in another corporation, 95% of the capital gain generally remains tax-free. The profit from the sale of shares is legally exempted from tax (in accordance with Section 8b KStG), and in return, a lump sum of 5% of the profit is treated as a non-deductible operating expense. From an economic point of view, this means that only 5% of the sales profit is subject to corporate income tax and business tax — in fact, only 5% of the profit is taxed at around 30% (KSt + GewSt). This results in an effective tax burden of only around 1.5% of the capital gain at the level of the selling company. In other words, 95% of profits are tax-free, which makes this provision extremely attractive as a holding privilege.
Requirements: This advantage applies to all corporations as sellers, regardless of the amount of participation. In contrast to dividends (profit distributions), which require a participation of at least 10% in order to benefit from tax exemptions (keyword “free float dividends” fully taxable), there is no minimum participation rate for capital gains. Even the sale of a smaller holding by a GmbH is therefore in principle 95% tax-free. It is only important that the shares belong to the operating assets of the selling corporation (which is the case with a GmbH anyway).
Business tax treatment: This scheme is also used for business tax purposes — only 5% of the capital gain is included in the assessment base of business tax, 95% remains free of business tax. In many cases, this even means that there is no business tax at all at the level of the corporation, if certain effects occur as a result of loss carryforwards or the lifting rate, for example. As a rule, however, only a very small proportion is subject to business tax.
Example: If a holding GmbH sells its 100% interest in a subsidiary GmbH with a profit of €10 million, €9.5 million of this is tax-free. 5% = 500,000€ are subject to tax. On this, the holding company pays regular corporate income tax (15% + 5.5% solos ≈ 15.825%) and business tax (e.g. approx. 15%, depending on the rate). In total, around 30% tax = 150,000€ would be due on the 500,000€. This corresponds to just 1.5% of the total profit — 98.5% of the profit was actually collected tax-free. This drastically different result shows why many entrepreneurs think about setting up a holding company before selling.
Distribution to end shareholders: It should be noted that the almost tax-free profit initially remains at the level of the selling corporation. Should this profit subsequently be distributed by the GmbH to its natural shareholders (e.g. to the entrepreneur who owns the holding company), the distribution will in turn be subject to flat rate withholding tax (25% on dividends) or, alternatively, the partial income procedure (60% to be taxed), depending on the shareholder's situation. In other words, tax exemption only applies to the corporate level. At the private level of the ultimate owner, tax is due as soon as money is withdrawn from the corporation. After a share sale, it can therefore make strategic sense to leave the funds in Holding-GmbH for the time being and reinvest them there instead of paying them out in full immediately. In this way, the date of taxation can be controlled and, if necessary, spread over several years.
Interim conclusion: For corporations as sellers (e.g. holding structures), the legal situation offers significant tax advantages. There is only a minimal tax at company level (~ 1.5% of profit) as long as the proceeds remain in the company. Only the transfer to private shareholders triggers the usual taxes on capital income. This model is often used to optimize company sales for tax purposes.
Asset deal vs. share deal: differences in taxation
In addition to differentiating between the person of the seller (private person vs. corporation), the structure of the sale is also important. In simple terms, this is referred to as an asset deal versus a share deal:
Share deal (share purchase): Here, the owner sells his shares in the GmbH. For tax purposes, the seller of the shares therefore becomes a taxpayer. As shown above, either the private individual pays capital gains tax or income tax on the profit, or the selling corporation collects the profit almost tax-free (95% rule). The GmbH itself does not pay any tax on the purchase price in a share deal, as the money does not flow directly to them, but to their former shareholders. For the buyer, share deals are often less attractive in terms of depreciation: He takes over shares and generally cannot write off the purchase price paid, as the carrying amounts in the GmbH remain unchanged. In return, the buyer often avoids real estate transfer tax (as long as less than 90% of the shares are transferred to him) and saves himself from discovering hidden reserves in the company.
Asset deal (sale of assets/company): Here, the GmbH itself sells its company or significant parts of it to the buyer. The buyer's payment therefore flows first to the GmbH (the seller is the company). For tax purposes, the sales proceeds are treated as the GmbH's profit and are subject to full corporation tax (15% + solos) and business tax at the GmbH. When selling its business, a GmbH does not enjoy partial exemption like a private individual — the profit is taxed in the same way as current profit. In effect, this usually results in a tax burden of around 30% at GmbH level. The entrepreneur then typically wants to withdraw the money from the GmbH, which takes place as a distribution of profits. This distribution to the shareholder in turn triggers taxes at shareholder level, e.g. in partial income proceedings (60% taxable) or flat rate withholding tax. The bottom line is that an asset deal is therefore taxed twice: first at company level and then (when distributed) at shareholder level. For a privately selling entrepreneur, this means a significantly higher overall burden than with a share deal. However, one advantage of the asset deal lies with the buyer: The buyer can rebalance and depreciate the individual assets acquired, which gives him tax advantages (he can deduct the purchase price from tax over the years). In addition, in an asset deal, the buyer does not assume any historical risks from the company, which is often a motive from the buyer's point of view.
Seller preference: From the seller's point of view — particularly when it comes to an individual entrepreneur — the share deal is usually more tax-advantageous, as taxation only takes place once and in the person of the seller. Asset deals result in a higher overall tax burden (corporation tax/business tax + distribution tax). Accordingly, sellers often try to enforce a share deal in M&A negotiations, while buyers would like to agree on asset deals due to other considerations (e.g. liability, depreciation). As a result, a balance must be found here, e.g. via the purchase price or special contract clauses, in order to make the different tax effects fair.
Holding structures and other design options
In view of the different levels of taxation of private individuals and corporations, many medium-sized entrepreneurs ask themselves: Should I move into a holding company before selling to save taxes? In fact, there are design options which — implemented in good time — can optimize the tax burden when selling a GmbH. Here are a few key considerations:
Sale via a holding GmbH: As described above, selling via a holding structure can initially drastically reduce tax. If the entrepreneur is currently a direct shareholder of his operative GmbH, he could consider transferring his shares to a holding GmbH in a tax-neutral manner (e.g. under §21 UmWStG). The holding company then becomes a shareholder of the operative GmbH. If Holding-GmbH later sells this subsidiary, the profit is only taxed by 5% (95% tax-free). Important: This strategy requires predictive planning. If a holding company is set up shortly before the sale, it should be noted that certain blocking periods apply. One example is the qualified share exchange: If the entrepreneur exchanges his shares for shares in a holding company and wants to resell the new holding company within 7 years, there may be a risk of additional taxes. The tax authorities want to prevent misuse and are setting conditions so that the tax benefits are not used in the event of short-term resale. Therefore, a holding solution should ideally be implemented long before a planned exit — or at least the 7-year period must be factored in before selling.
Accumulation and reinvestment vs. distribution: A holding structure is particularly worthwhile if the sales proceeds are not immediately needed privately, but remain in the company (holding company) and are to be reinvested. In this case, the money can be hoarded in the holding company almost tax-free or used for new investments (e.g. acquisition of other companies, securities, real estate). Any direct payout from the holding company to the private individual would — as mentioned — trigger capst/partial income proceedings again and thus offset a large part of the original tax advantage. This is also referred to as the cascade effect: across several levels of society, taxes add up to the “last link in the chain” (the natural person) again into a heavy burden. Therefore, a holding company makes particular sense if either the focus is on exit revenue, which is to flow into new projects, or if dividends from ongoing business are to be collected on a permanent basis with tax relief (then the participation rate should be ≥ 15% in order to receive 95% tax-free dividends into the holding company). If, on the other hand, it is foreseeable that the seller will want to withdraw the profit promptly for private purposes, the advantage of the holding structure is put into perspective — here, a direct sale (share deal as a private individual) using the partial income process could be sufficient overall. A decision for or against a holding company should therefore take into account future plans for the sale proceeds.
Other constellations: There are still a few special cases within the GmbH universe. For example, some family businesses use a GmbH & Co. KG as their holding company, which holds the shares in the operative GmbH. In such a case, a sales profit first accrues to the partnership (KG) and is then distributed among the shareholders. The tax treatment for each shareholder is then based on their legal form: If a limited partner is a natural person, the partial income procedure (60% taxable) applies again for his share of the profit; if another limited partner is a corporation, the 95% exemption applies to his share of the profit. The partnership itself pays business tax, but may be able to use allowances or offsetting. Such structures are complex and require individual advice. — Another aspect: Sales tax is generally not due when selling GmbH shares (tax-free turnover in accordance with §4 No. 8 UStG). In the case of an asset deal, the transfer of an entire business may fall under the regulation of the sale of the business in its entirety and may therefore also be exempt from sales tax. Real estate transfer tax is relevant if real estate is in the GmbH: In the case of an asset deal, these are transferred directly (GRest to the purchase price of the real estate). With a share deal, GRest is usually avoided as long as 90% or more of the shares in the landowning company are not transferred to new acquirers within 10 years (current state of real estate transfer tax law). These secondary aspects should be included in structural considerations, but are somewhat outside the core issue of income tax on sales.
Conclusion
Depending on the constellation, the sale of a GmbH can be taxed very differently. While a private entrepreneur typically transfers around 25-30% of his profit to the tax authorities when selling shares via income tax (partial income proceedings or flat rate withholding tax), a sale via a holding GmbH can at first glance be almost tax-free (only around 1.5% tax burden at company level). However, a holding company only postpones taxation to a later date — i.e. when the profits are distributed to the owners. Asset deals, in turn, weigh on profits first at company level and then again on owners, which can lead to a significantly higher total tax, but in return benefits the buyer.
In view of this complexity, early tax planning for every company sale is essential. Entrepreneurs should know and evaluate the various design options — from the holding model to the choice of deal structure to the use of personal allowances. It is always important to take individual circumstances into account (age of the seller, amount of profit, future plans with the money, investment structure, etc.).
Finally, it should be emphasized once again: This article provides a basic overview of the taxation of a GmbH sale and possible constellations. It does not constitute tax advice. For specific projects, it is essential to seek expert advice (tax advisor, M&A advisor) in order to find the optimal solution and avoid pitfalls. The tax landscape is constantly changing, and professional support ensures that you make use of all options in good time and make your GmbH sale as tax-efficient and legally secure as possible.
GmbH verkauft Anteile an GmbH -GmbH-verkaufen24
Besteuerung des Verkaufs und Kaufs einer GmbH
Die Holding-GmbH und Ihre Steuervorteile: Mitder Holding Steuern sparen
Die 55-Jahr Altersgrenze: Halber Steuersatz beim Unternehmensverkauf – DUV
Veräußerungsfreibetrag: Verschiedene Veräußerungsobjekte | Steuern | Haufe
