Steuerberatung und Wirtschaftsprüfung für den Mittelstand +49-69-25622760

Steuerberatung und Wirtschaftsprüfung für den Mittelstand +49-69-25622760

The holding company as a tax-saving model?

Holding companies hold investments in other companies. The bookkeeping and annual financial statements are generally very straightforward due to the low level of business activity. According to Section 8b of the German Corporation Tax Act, profit distributions from other corporations to the holding company are tax-free if the holding amounts to at least 10% of the share capital or nominal capital and if the flat-rate prohibition on deducting business expenses of 5% of dividends is disregarded. Taxation only occurs when the profit is distributed to a natural person. As a rule, the final withholding tax of 25% + solidarity surcharge then applies. However, the partial income method or the lower individual tax rate of the natural person may also apply. This makes the holding company suitable for distributing profits from profitable operating companies and legally shifting the high tax burden that would normally be incurred to the future.

Is the holding company entitled to deduct input tax?

Whether a holding company is entitled to deduct input tax depends on the tasks it performs. A purely financial holding company, whose purpose is the acquisition and holding of investments, does not carry out any economic activity of its own and is therefore not entitled to deduct input VAT. A pure management holding company, on the other hand, which intervenes in the management of subsidiaries in return for payment, carries out its own economic activity and is therefore entitled to deduct input tax. The situation is more difficult for a mixed holding company, which provides services to some subsidiaries in return for payment and concentrates on merely holding investments in others. A limited input tax deduction is possible here. This also applies if the holding company makes partially tax-free transactions.