If you want to save taxes, you don't have to fly to a tax haven in the Caribbean.

The latest revelations from the Pandora Papers may seem like that.

But it works without such windy tax avoidance constructions.

Quite legally.

And in Germany.

Dyrk Scherff

Editor in the "Money & More" section of the Frankfurter Allgemeine Sonntagszeitung.

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The most common tool for saving taxes in this country is the vermögensverwaltende GmbH. This is not a mailbox company like the prominent tax cheats of the Pandora Papers used. But a company whose owners are officially known. It has only one purpose: It manages the financial investments of its owners and saves taxes through the corporate shell. It has no employees and no head office, it only exists on paper. It is also not allowed to have any operative business, otherwise the tax advantages are gone. This is by no means only attractive for super-rich millionaires. Anyone who has a fortune in the six-figure sum benefits from it. Depending on the initial situation, 100,000 to 500,000 euros are enough to make a GmbH worthwhile; its costs are lower than many think.

A GmbH pays less taxes than a private person

The idea is simple. A private person brings their investments, including real estate, into the GmbH. They then belong to the company, and the private person becomes the owner of a GmbH. As a company, it is only charged with corporation tax and solos totaling 15.8 percent and, in the best case, not with trade tax. The tax rates are lower than the income tax that applies to private individuals. Some income is even tax-free. If the private person takes capital from the GmbH or if the company is dissolved, the profits must be post-taxed. So society only defers taxes for a long period of time, it does not waive them. Nevertheless, it is lucrative - especially if the investments remain in the GmbH for a long time. The tax savings then accumulate and can be invested again,which increases the yield.

Of course, this is only worthwhile if the additional income exceeds the costs of the GmbH. Of course there are. Eventually a small company is founded. There are expenses for the notary, a statute and a founding agreement, and 25,000 euros of share capital must be paid in, but this can also be the securities and real estate that are to be brought into the GmbH. In addition, there are running costs for a tax advisor who has to prepare annual financial statements and a corporation and trade tax return. You can often do the accounting yourself. The one-off costs are at least 2500 euros, the ongoing expenses for simple company structures are 2000 to 3000 euros per year. The benefits of the tax deferral should therefore at least recoup these amounts.

Ideal for stocks with a long holding period

This works particularly well with large sums, a long holding period of the investments in the GmbH, a high personal tax rate in the income tax and the right assets that are brought into the company.

Because not every transfer is worthwhile.

The most interesting thing is to bring in low-dividend stocks and equity funds, rented real estate and larger company holdings.

However, the GmbH is not worthwhile for houses, gold bars or art you use yourself.