What role does the corporate structure play in double taxation?
October 10, 2023 | 120,00 EUR | answered by Guido Hoffmann
Dear tax advisor,
My name is Theodor Knorr and I am currently facing a complex tax situation involving double taxation. I run a business and have realized that my company structure may play a role in the double taxation.
Currently, I have a sole proprietorship that generates profits taxed at both the business and personal level. This results in double taxation of my income and significant tax burdens.
I am concerned that my current business structure is not optimal and that I may need to take measures to avoid double taxation. I wonder if it would make sense to choose a different business structure that reduces the tax burden and minimizes double taxation.
Can you explain to me the role of the company structure in double taxation and what possible solutions exist to address this issue? I rely on your expertise and would like to learn more about the tax aspects of my business structure.
Thank you in advance for your help and support.
Sincerely,
Theodor Knorr
Dear Mr. Knorr,
Thank you for your inquiry regarding double taxation in relation to your corporate structure. It is understandable that you are concerned about possible tax burdens and are looking for solutions to minimize them.
Double taxation occurs when income is taxed at both the corporate level and the personal level. This can be particularly the case for sole proprietorships, as the profits of the business are directly attributed to the owner and therefore taxed at the personal level as well.
One possible solution to minimize double taxation could be restructuring your business. There are various options to consider depending on your individual situation and goals. One option could be converting your sole proprietorship into a corporation such as a GmbH or AG.
By establishing a corporation, the profits of the business are no longer directly attributed to the owner, but to the company itself. This can result in more favorable taxation of profits at the corporate level, as corporations generally have lower tax rates. Additionally, profits in a corporation can be retained and reinvested without immediate personal taxation.
Another option for reducing double taxation could be forming a tax group, where multiple companies are treated as a single entity for tax purposes, leading to tax advantages.
It is important that you seek advice from an experienced tax advisor to find the optimal solution for you. Together, we can analyze your current corporate structure and develop suitable measures to minimize double taxation and optimize your tax situation.
I hope this information is helpful to you and I am happy to assist you with any further questions. Thank you for your trust and I look forward to helping you address your tax challenges.
Best regards,
Guido Hoffmann
