Reduction of the value of a GmbH through a pension promise
June 2, 2011 | 50,00 EUR | answered by Oliver Burchardt
My wife and I are the sole shareholders of a GmbH that manages our small fortune. The GmbH holds some capital investments (real estate, stakes in other companies, and securities). We will soon need regular distributions from the GmbH to secure our livelihood. However, we would like to transfer our shares in the GmbH and the management of the company. Before the sale or possibly even the donation of the shares, we would like to secure a lifelong pension for ourselves from the assets of the GmbH. To fulfill this obligation, a provision should be created in the GmbH. With the promise of a pension in place, the value of the GmbH would drastically decrease.
With this structure, we aim to ensure that no or only minimal capital gains are generated. Taxes would only be incurred with the payments of the royalties. Is this structure feasible?
Dear inquirer,
Thank you for your inquiry, which I would like to answer as part of an initial consultation.
Please note that there are limits to the advice that can be provided in your case within the scope of such an online forum. Specific advice can only be given with access to the relevant documents, so I must limit myself to general explanations here.
First of all, the sale proceeds are not dependent on the liabilities reported in the balance sheet, but on the purchase price negotiated with potential buyers. Of course, the value of the GmbH for the buyer will decrease with a high pension liability. However, in your case, several questions arise that make it doubtful, in my opinion, that the structure is tax advantageous or even permissible.
Firstly, when granting pensions to shareholders, the arm's length principle must be adhered to. The GmbH can only grant you a pension for tax purposes to the extent that it would do so for a third party. If the pension commitment does not pass this arm's length test, the resulting expenses for the GmbH are not tax deductible, but must be taxed as a hidden profit distribution for you. Considering the scenario you described, I assume that a tax-effective pension commitment is only possible to a very limited extent (the civil law effectiveness of such a commitment is of course unaffected by the tax assessment!).
Secondly, if you secure a pension for yourself in the context of selling the GmbH, it must be tax treated as part of the purchase price, resulting in a higher capital gain that must be taxed. This gain is subject to a withholding tax of 25% according to § 20 para. 2 no. 1 EStG.
For a gift, inheritance tax regulations regarding valuation apply. It is also important to consider the form in which the pension is promised.
I recommend that you seek comprehensive tax and legal advice before making a decision. The tax implications of the model you are considering must be determined within the context of scenario calculations based on your personal situation, in order to achieve a tax-optimized structure that is also in line with your other goals.
I am available for such advice, deducting the amount paid here.
Best regards
Oliver Burchardt
Tax Advisor
