Transfer of shares in a holding company
March 19, 2012 | 30,00 EUR | answered by Oliver Burchardt
My partner and I operate a hotel, which I bought alone in 1998. He only joined the company in 2002. The hotel is operated as a property and an operating KG. I own 51%, being 75 years old, and he owns 49%, being 45 years old.
Our bank would lend my partner money to buy me out. However, in the current situation, this would not make sense, as the amount to be paid out (possibly up to 1.5 million euros) would be taxed at almost 50%, including solidarity surcharge and church tax. With only 750,000 euros left after taxes, it would not be enough, assuming I still have another 12 years of life left. Since my state pension is only around 270 euros per month, it might not be sufficient in the end. I could also fall ill.
Therefore, I am looking for another solution and I am asking if the following scenario would be correct: The existing GmbH & Co. KGs will be converted into GmbHs. I will bring my shares from this into a new investment GmbH. As far as I know, profits transferred from one GmbH to another (investment) GmbH do not have to be taxed again. And profits from the investment GmbH are only subject to a flat tax rate of 25% when distributed. Is that correct?
After my shares have been transferred to the investment GmbH founded by me, these shares could now also be sold to my partner, with only 25% flat tax applying. What would need to be considered in terms of timing? Please advise me on another way if my considerations are wrong. Thank you in advance.
Dear inquirer,
Thank you for your inquiry, which I will gladly answer as part of an initial consultation.
Please note that the tax assessment is based on the information provided. Adding, changing, or omitting information can alter the result, possibly significantly.
Unfortunately, the solution you are considering is not feasible. Converting a limited partnership (KG) into a GmbH results in so-called contribution-borne shares, which have a holding period of 7 years. If the shares are sold within this period, the tax is calculated as if the shares in the KG had been sold. Although the taxable amount decreases by 1/7 each year, this is not a solution for you as you intend to sell the shares today. In this case, the same tax consequences arise as in the case of selling shares in a KG.
Providing specific tax advice in this forum, given your desire to find an alternative solution, is almost impossible. It depends on your specific situation.
Considerations for estate planning could be worthwhile, in which case you may be promised benefits (such as an annuity). This way, you can preserve your partner's liquidity, while only needing to pay taxes on the annuities upon payout, potentially receiving lower progressive tax rates.
The same could apply to a sale against an annuity. However, this also depends on the specific situation.
Your assumption that the amount will be taxed at 50% is not correct. The sale of the partner's interest is subject to the fifth-rule of § 34 EStG, resulting in a lower tax burden.
Considering the complexity of your inquiry, you should seek advice from a local colleague and calculate the two alternative options.
I hope to have provided you with an initial overview of the situation and potential solutions within the scope of your query.
Best regards,
Oliver Burchardt
Tax consultant
