Are you a shareholder, or will you soon become one, in a German GmbH? Then you'll encounter rules that differ from Dutch practice. Not only legally, but also fiscally. Think of profit distributions, capital obligations, liability, and withholding tax. In this blog post, we'll summarize the most important considerations for you.
Establishing a GmbH is relatively simple and can be accomplished in just a few steps. To establish a GmbH, you must go to a German notary. You will need several documents: a decree of incorporation, articles of association (in German: Gesellschaftsvertrag), and a register of shareholders. The GmbH must be registered in the German Commercial Register (Handelsregister). A minimum initial capital (Stammkapital) of €25,000 is required for incorporation, at least half of which must be paid up before incorporation.
You can read more about it in the blog ' Setting up a GmbH in 5 steps '.
A GmbH has at least two main bodies:
In larger companies, a supervisory board may also be required to oversee the management. In smaller companies, the managing director is often the sole shareholder of the GmbH.
Also read: ' Director of a GmbH? 6 legal and 6 tax considerations '
Unlike in the Netherlands, establishing a GmbH still requires initial capital. This amounts to €25,000, at least half of which must be deposited before incorporation. At the request of the management, shareholders must deposit the remainder. The company may use the initial capital to a certain extent for business operations. The management must inform the GmbH's shareholders once half of this amount has been used.
Shares in a GmbH are not freely tradable. The transfer of shares must take place, as in the Netherlands, through a notarial deed. You can include additional restrictions in the articles of association, such as approval of the other shareholders for a share transfer. This protects the company from unwanted shareholders. You can also include in the articles of association that the other shareholders have a pre-emptive right if one of the shareholders wishes to sell their shares.
As a shareholder of a GmbH, one of your most important responsibilities is to contribute the agreed-upon amount of capital. You also play a key role in the general meeting of shareholders, where you help decide on strategic decisions, such as investments or amendments to the articles of association. You also have the right to audit financial reports and company operations. If you are not also a managing director (Geschäftsführer), you have no further responsibilities unless explicitly stipulated.
A major advantage of a GmbH is its limited liability. As a shareholder, you are generally not personally liable for the company's debts. However, you must have met your capital obligations. However, this protection may lapse in the event of fraud or non-compliance with legal regulations.
Entering the German market or becoming a shareholder in a GmbH entails various tax obligations and opportunities. It's especially important for Dutch entrepreneurs or international investors to fully understand the GmbH tax rules in Germany. Topics such as capital gains tax, profit distributions, shareholder loans, real estate, and cash pools can significantly impact your taxable income. Sound tax planning prevents double taxation and ensures an efficient structure between the Netherlands and Germany.
In principle, capital gains tax (Kapitalertragsteuer) must be withheld from profit distributions by a German GmbH. An exemption declaration can provide partial or full relief from this tax, particularly for foreign shareholders or parent companies within the EU.
You can read more about this in the article ' Withholding tax in Germany: reclaim or avoid '.
Germany distinguishes between open profit distributions (regular dividends) and disguised profit distributions (disguised dividends). A disguised profit distribution can occur if a shareholder receives private benefits outside the normal profit distribution, for example, through an excessive salary or an interest-free loan. To avoid this, all agreements between the GmbH and shareholders must be businesslike and well-documented. Think of contracts, proof of payment, and minutes. This ensures tax transparency and prevents corrections by the German tax authorities.
A capital increase in a GmbH is tax-neutral, but important for future distributions. When repaying shareholders, the tax order must be strictly followed: first profit distribution, then capital return (according to Section 27 KStG). If you ignore this order, a capital return can be considered a taxable dividend. Correct registration in the taxable account is therefore essential for a tax-efficient GmbH structure.
A shareholder loan to a GmbH must always be in line with market conditions and recorded in writing. If the loan is not repaid later, for example, in the event of bankruptcy, the loss may, under certain conditions, be considered an additional acquisition cost for the shareholding. This is particularly relevant for a subsequent sale of GmbH shares: the loss can then be included in the tax calculation. Clear agreements and business terms are crucial to ensure tax recognition.
If you, as a shareholder, lease real estate to your GmbH, it may seem like a simple business transaction. However, a close tax relationship (Betriebsaufspaltung) can arise. In that case, you and the GmbH are considered a single economic unit, meaning the real estate is considered business assets. This can result in tax on capital gains upon sale. Therefore, always have the structure assessed for tax purposes in advance to avoid unpleasant surprises.
Within international groups, cash pools are often used to centrally manage liquidity. These structures offer interest rate advantages but require strict tax compliance. Internal interest rates and settlements must be in line with market conditions ( fremdüblich ).
If this is not the case, the German tax authorities may consider it a disguised profit distribution or unauthorized profit shifting. Regular monitoring and written documentation of cash pooling agreements are therefore essential.
The sale of shares in a German GmbH by a Dutch shareholder is usually subject to Dutch taxation under the German-Dutch Tax Treaty (DBA). However, there is one important exception: if the GmbH primarily owns German real estate, Germany has the right to levy tax. Before a sale, it is therefore crucial to analyze the GmbH's balance sheet composition and assess the tax implications in each country. This prevents double taxation.
Successful entry into the German market begins with tax structure planning. Consider utilizing loss offsets, developing a smart asset depreciation strategy, utilizing investment tax credits or subsidy programs, and choosing the right legal structure (such as a GmbH or holding company).
In addition, proper coordination of dividend flows and financing between Germany and the Netherlands is crucial for achieving tax efficiency. With a well-thought-out structure, you benefit from a lower tax burden and greater legal certainty.
Do you need help setting up a GmbH? Heisterborg International is happy to help. You can call us for advice, but we're also happy to assist you with the incorporation process and all the practical matters involved. We can also take care of your accounting and tax advice and, if necessary, assist you with your HR issues.
Contact us today and discover how we can support you.
Please feel free to inquire about what we can do for you.
