Holding structure

How does a holding structure work?

In the basic model, the entrepreneur no longer holds the shares in the operating GmbH directly, but through a holding GmbH (or UG) which in turn holds 100 % of the operating company. Profits of the operating GmbH can be distributed to the holding as dividends – where § 8b (1) KStG applies: the distribution is 95 % tax-exempt, with only 5 % deemed non-deductible business expenses. Effectively, around 1.5 % tax remains on the dividend at holding level.

Important for dividends: the 95 % exemption requires a stake of at least 10 % at the start of the calendar year (§ 8b (4) KStG); for trade tax purposes, the participation privilege even requires 15 % at the start of the assessment period. Capital gains under § 8b (2) KStG, by contrast, have no minimum shareholding requirement – the exemption always applies.

The exit: the strongest argument

If a shareholder sells GmbH shares privately, the partial-income method applies: 60 % of the gain is taxed at the personal rate – around 27 % effective burden at the top rate. If instead the holding sells the shares in the subsidiary, 95 % of the gain is tax-exempt; corporate and trade tax apply only to the remaining 5 %. On a €5 million exit, that is the difference between roughly €1.35 million tax (private) and roughly €75,000 tax (holding).

When is a holding worth it?

• A sale of the business is conceivable in the medium term – even if not yet concretely planned.
• Profits are to be reinvested rather than consumed privately (participations, real estate, securities).
• Several companies or business units are to be bundled under one roof with risks separated.
• Operating risk is to be isolated from accumulated wealth (liability and asset protection).
• Not sensible: if profits are withdrawn privately almost in full anyway – then the second layer only costs money.

Costs and administrative burden

A holding is not a free tax-saving machine. Formation (notary, commercial register, advice) typically costs €2,000–5,000. On an ongoing basis, each company incurs bookkeeping, annual accounts, tax returns and disclosure – realistically an additional €2,000–5,000 per year, depending on complexity. And: the money initially sits inside the holding. Paying it out to the individual triggers withholding tax or the partial-income method – the structure's advantage therefore only materialises while the capital keeps working inside the structure.

Structure check

Is a holding worth it in your situation?

Exit probability, retention ratio, lock-up periods and running costs – we model the holding structure specifically for your business, and we will tell you honestly if it is not worth it.

Request a holding analysis

Typical mistakes in practice

• Setting up the holding only once the buyer is at the door – the seven-year lock-up destroys the benefit.
• Forgetting the annual proof obligation under § 22 (3) UmwStG – the consequence can be retroactive taxation of the entire contribution gain.
• A stake below 10 % or 15 % – then dividends are fully subject to corporate or trade tax.
• Service relationships between holding and subsidiary without clear contracts – opening the door to hidden profit distributions.