Drawings and Capital Contributions in the EUER: Explanation and Tips

The term private drawing (Privatentnahme) covers all assets and services that you transfer from your business assets to your private assets, or use for personal purposes. There are four variants:

• Cash drawing: You withdraw funds.
• Asset-in-kind drawing: You transfer physical business assets to your private sphere.
• Service drawing: You use business services for private purposes.
• Usage drawing: For example, you use a company car for private purposes.

Private capital contributions work in the opposite direction in every case. For example, you transfer 10,000 euros from your personal bank account to your business account and use the money for business purposes.

Private drawings and private capital contributions arise in a wide variety of business structures: this applies to sole traders and to the various forms of partnership. In the case of a company limited by shares, such as a GmbH, drawings and contributions are not possible. Here there is a strict separation between private and business assets, based on limited liability.

In lines 125 and 126 of the EUER, the tax office requires detailed information about your drawings and capital contributions. Experience shows that many self-employed individuals find these two fields challenging.

It is important to note that the general definition of drawings and contributions is not identical to this disclosure obligation. As a freelance sole trader without an obligation to prepare a balance sheet, you constantly withdraw money from your business assets: technically these are drawings, but you do not need to report them in the EUER.

These transactions are irrelevant under tax law because they have no effect on your profit and therefore on the tax calculation. However, you must disclose instances where you use private vehicles for business purposes — these constitute a capital contribution.

In other cases, you will need to make more extensive entries in these two fields. This applies in particular where private drawings lead to an increased need for business credit. The tax office assumes an excess drawing (Überentnahme) as soon as the drawings exceed the sum of profit and contributions. The consequence is that you can only deduct business loan interest as business expenses to a limited extent.

In many cases, private drawings and contributions have no tax implications. There are, however, some exceptions: we have mentioned the examples of private vehicle use and business loan interest. In addition, sole traders and partnerships that prepare a balance sheet have the option of having profits that have not been drawn taxed at a lower rate. You leave money within the business assets rather than withdrawing it. Accordingly, you only need to report amounts in the EUER once you actually withdraw them — at which point a requirement to pay supplementary tax arises.

As you engage with business tax law, you will quickly notice: it is complex. This applies to drawings and capital contributions too. If you have any uncertainties or problems, please contact your Guhr Steuerberatung.

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