It is actually quite straightforward to be commercially successful in Germany and the EU, benefit from excellent infrastructure, and pay low taxes — when done correctly.
A holding company (e.g. GmbH or UG as parent) holds shares in operating subsidiaries. Dividends are up to 95% tax-free, share sale gains are largely reinvestable tax-free, and isolating business areas in separate subsidiaries limits risk. New projects, investments, property, classic cars, or precious metals can be integrated into the holding structure — and a family holding simplifies transfers and provides higher security and control.
But don’t trust every influencer, coach, or self-proclaimed ‘expert’ — trust experienced German tax advisors and lawyers who analyse your situation first and give you a legally binding answer.
A management holding company offers various tax, financial and strategic advantages compared to, for example, an asset management holding, as a management holding actively provides administrative and taxable services for its subsidiaries.
The holding company focuses entirely on the overarching direction and strategic goals of the entire corporate group. New business divisions or investments can be easily integrated into the existing structure as new subsidiaries.
In addition, pension provisions for the owner can be built up in the holding company through protected pension commitments. These are protected within the holding company from the operational risks and insolvency of subsidiaries.
• Full VAT deduction: The holding company provides VAT-liable management services to its subsidiaries and may deduct the input tax (19%) on all its own operating expenses (such as IT, tax advisors, vehicle leasing)
• Tax-free dividends: Profit distributions from the operating subsidiary to the holding remain 95% tax-free (effective tax burden of approx. 1.5%).
• Nearly tax-free disposal: When selling subsidiary shares, only around 1.5% tax is due on the disposal gain.
• Loss offsetting: Through a tax group (fiscal unity), losses of one subsidiary can be directly offset against the profits of another.
This type of holding company primarily serves to manage company shares. It also takes on strategic decisions of the subsidiaries and offers additional flexibility for entrepreneurs planning long-term business succession.
This type of holding is excellent for small and medium-sized enterprises with diverse business divisions and a high tax burden. Affordable to form and simple to operate, management holdings are a great tool for entrepreneurs with annual revenues exceeding €500,000.
The operating holding combines the strategic management and asset administration of a parent company with its own operational business activities. This type of holding benefits from significant tax reliefs on profit distributions and company sales, clearer risk diversification, and simpler access to liquidity.
The operating holding thus combines many advantages and differs from a pure financial or management holding in that it can also carry out its own operational activities alongside managing subsidiaries.
• Easier credit access: Holdings with their own operational business and tangible assets often have better creditworthiness with banks than a purely passive management company.
• Internal financing: Profits from operating subsidiaries can be transferred to the holding company with minimal tax burden and reinvested individually as loans into new projects or other subsidiaries.
• Favourable profit distribution: Dividends paid from subsidiaries to the holding flow up to 95% tax-free into the holding, provided a minimum participation of 15% exists.
• Tax-privileged company sale: If the holding sells shares in a subsidiary, 95% of the gain is exempt from corporate and trade tax.
• Loss offsetting: Via a profit transfer agreement (tax group), losses of a subsidiary can be directly offset against the operating profits of the holding or other subsidiaries.
• Cost-efficient infrastructure: An operationally active holding has existing administration, accounting, IT and other commercial infrastructure that can be cost-efficiently shared by subsidiaries.
An operating holding (also known as a parent company group) combines the best of a holding company and an operationally active firm.
Unlike other models, the operating holding not only holds shares in subsidiaries, but is itself actively operating in the market and runs its own core business.
The operational business of the holding parent company is often in the foreground, while the subsidiaries are frequently smaller and typically take on complementary or outsourced functions.
The organisational holding is a pure structural form serving the internal organisation of large corporate groups, used to outsource complex business divisions, segments or regions into legally independent subsidiaries.
The parent company primarily takes on administrative and management tasks. This type of holding is also referred to as a "structural holding" and is typically an instrument of larger companies.
Risk minimisation & liability separation: As subsidiaries are independent legal entities, the operational risk of one subsidiary does not affect the losses or liabilities of another. The holding company's share capital and the assets of other subsidiaries remain protected.
Strategic flexibility: New, high-risk business divisions can be spun off as new subsidiaries. Individual business divisions can also be more easily sold or closed without jeopardising the entire group.
Tax optimisation: Profits from operating subsidiaries can often be distributed to the holding nearly tax-free and pooled there for reinvestment. In addition, losses of individual companies can be offset against the profits of the group for tax purposes.
Central management & synergies: Cross-sectional functions (such as HR, IT, financial accounting or marketing) can be pooled and delivered more efficiently for all subsidiaries.
An organisational holding (also known as a structural holding) is an excellent structure for corporate groups — including across national borders. Such a holding primarily serves to hierarchically organise a complex company into various subsidiaries.
The focus is on internal organisation, risk minimisation and clear management, without the parent company itself being active in the market.
This holding structure is an excellent choice for large and cross-border companies!
Germany enjoys an excellent international reputation, has a very stable banking system and a lucrative real estate market.
It is not a classic tax haven and has high taxes for employees, but offers very attractive and legal tax-saving models for the self-employed, entrepreneurs, foundations and holding companies.
High legal certainty, a particularly protected foundation law and maximum discretion characterise German foundation law!
