Managing partner - salary as operating expense
July 1, 2012 | 50,00 EUR | answered by Wirtschaftsprüfer André Hintz
I am the managing sole shareholder of a GmbH, previously the GmbH was a sole proprietorship that was transferred into the GmbH. I have a gross salary of 4,000 euros, unchanged since the founding of the GmbH in 01/2008. Net profit in 2008 was 48,212 euros, in 2009 it was 298,112 euros, and in 2010 it was 280,948 euros. I have no employees, and a large part of the income comes from a 50% stake of my GmbH in a GbR. I work 100% in the GmbH and 50% in the GbR.
In 2008, I received a bonus of 10,446 euros; in 2009, it was 30,000 euros; and in 2010, it was 15,000 euros.
My tax advisor suggested these amounts to me, which I did not question, and now I fear that during an upcoming tax audit, my entire salary + bonus may not be recognized as a deductible business expense. The salary payments were also not correct in the first year according to the managing director contract. Should I be concerned or is there no risk of sanctions due to the overall relatively low total remuneration?
Dear inquirer,
I would like to answer your question within the scope of an initial consultation and considering your fee commitment, in accordance with the rules of the online portal. My response is based on the facts presented by you.
The question at hand is whether there is a hidden profit distribution or hidden contribution in your case.
In the case of a controlling shareholder - managing director of a GmbH, the focus of a tax audit regularly lies on the contractual relationships between the company and the shareholder.
Especially in the case of salary payments to the shareholder managing director, everything must be regulated in advance. Salary payments, bonus payments, Christmas bonuses, and royalties cannot be decided retroactively. Since the shareholders' meeting is regularly responsible for the managing director, it must be properly documented (date and signature should not be missing).
Regarding royalties, it must be clearly defined in advance how these bonus payments are calculated, e.g. 10% of the annual pre-tax profit. Changes may only take effect for the future.
A gross monthly salary of 4000 euros should be quite appropriate for a managing director. The tax office conducts internal comparative statistics and will certainly verify this. You should calculate what you earned in your sole proprietorship, as this should be a good benchmark for you. If both are at the same level, there should be no difficulties in the tax audit.
What are the consequences of a hidden profit distribution?
If you have paid yourself more salary than contractually agreed, a hidden profit distribution exists. However, the hidden profit distribution is not a punishment, but rather serves to correct incorrect taxation.
In the case of the GmbH, business expenses are reduced by the overpaid amount. Due to the increase in profits, there will certainly be a repayment of corporation tax, solidarity surcharge, and trade tax, as well as late payment interest.
At the same time, the hidden profit distribution will result in a reduction of income from employment on your personal tax return. But you will have income from capital assets in the same amount, which are subject to a flat tax rate of 25% plus solidarity surcharge. Since your personal tax rate is likely to be higher than the flat tax rate, you may even receive a tax refund. However, this must be examined on a case-by-case basis.
What are the consequences of a hidden contribution?
If you have paid yourself less salary than contractually agreed, there may be a hidden contribution. The hidden contribution is also not a punishment and serves to correct incorrect taxation.
If you have waived salary after it has legally arisen, there is a hidden contribution. The GmbH would have had to balance a liability to you in the amount of the salary underpayment. If this liability was not balanced, a hidden contribution arises in the same amount. This leads to a reduction in liabilities on the GmbH's balance sheet and thus an income. This income will be deducted again in the tax calculation. For the GmbH, the result is neutral. On your personal level, this leads to an increase in your acquisition costs for the GmbH shares.
For the future, you should seek advice on how to optimize your income from the GmbH for tax purposes. I am available to answer any questions you may have.
I hope my explanations have been helpful to you and remain
Yours sincerely,
André Hintz
Tax Advisor
Steuerberatung@andrehintz.de
