Capital Gains

Capital Gains from the Sale of GmbH Shares: Tax Optimization through the Partial Income Procedure

The sale of shares in a GmbH generally results in a capital gain for the shareholder. This gain arises from the difference between the sale price and the acquisition costs of the shares. The tax treatment of this gain depends on whether the shareholder holds the shares as private assets or as business assets. For private individuals, the so-called partial income procedure applies, which provides for a partial tax exemption of capital gains.

Partial Income Procedure for Shares Held as Private Assets

If a shareholder holds GmbH shares as private assets, a capital gain is subject to the partial income procedure according to § 3 No. 40 letters a and c in conjunction with § 3c para. 2 of the German Income Tax Act (EStG). This means: 40% of the capital gain is tax-free, while 60% must be taxed at the shareholder’s personal income tax rate.

Example: A shareholder purchased GmbH shares for €500,000 (acquisition costs). They now sell them for €1,500,000. This results in a capital gain of €1,000,000. Of this, 40% (€400,000) is tax-free, and 60% (€600,000) is subject to personal income tax.

However, the partial income procedure only applies if the shareholder held at least a 1% stake in the company within the last five years. If the shareholding is below this threshold, the entire capital gain is taxable as a speculative gain under § 23 EStG.

It is also important to note that under the partial income procedure, only 60% of the sale-related expenses (e.g., notary fees, advisory costs) are tax-deductible. This logically corresponds to the fact that only 60% of the gain is taxable.

Utilizing Allowances and Tax Benefits

To further reduce the tax burden on capital gains, shareholders can, under certain conditions, claim allowances and tax benefits.

1. Allowance under § 16 EStG: The allowance of €45,000 (one-time, lifetime) can also be applied to capital gains from the sale of GmbH shares if the shareholder holds a so-called "substantial interest." This is the case if they held at least a 1% stake in the company within the last five years. The allowance reduces the taxable portion of the capital gain.

Example: For the capital gain of €1,000,000 mentioned above, 60% (€600,000) is taxable. The shareholder can deduct the €45,000 allowance from this amount, so only €555,000 is subject to tax.

2. Reduced Tax Rate under § 34 EStG: Under certain conditions, the reduced tax rate under § 34 para. 1 or 3 EStG can be applied to the capital gain. This is particularly the case if the shareholder has reached the age of 55 or is permanently disabled and has ceased their professional activity. The reduced tax rate amounts to 56% of the average tax rate, but at least 14%.

3. Tax Deferral Model under § 6b EStG: If the proceeds from the sale are reinvested within specified timeframes into new business assets, taxation of the gain can, upon application, be deferred under § 6b EStG by transferring it to the acquisition or production costs of the new asset. This results in a tax deferral, as the capital gain is only taxed when the new asset is sold or removed from the business assets.

Shares Held as Business Assets: Special Considerations

If a shareholder holds GmbH shares as business assets (e.g., as a sole proprietor), there are some special considerations. In this case, the entire capital gain is subject to income tax; the partial income procedure does not apply.

However, the shareholder can still claim the allowance under § 16 EStG and the reduced tax rate under § 34 EStG regardless of the shareholding percentage or holding period. The tax deferral model under § 6b EStG is also applicable.

It should be noted, however, that the sale of shares held as business assets may also trigger trade tax. This applies if the capital gain qualifies as ordinary income from the trade business (e.g., when shares are sold by a commercially active partnership).

Capital Gains and Withholding Tax

Generally, gains from the sale of capital assets (e.g., stocks, GmbH shares) are subject to a flat withholding tax of 25%, plus solidarity surcharge and, if applicable, church tax. However, this does not apply to gains from the sale of GmbH shares that fall under the partial income procedure.

Nevertheless, the shareholder can request that their capital gain be taxed at their personal income tax rate if it is lower than the withholding tax rate (so-called favorable assessment under § 32d para. 6 EStG). This can be particularly advantageous for low-income individuals or in years with significant losses from other income sources.

Guidance on Structuring and Documentation

To optimally leverage the tax advantages of the partial income procedure and allowances, shareholders should observe the following points:

1. Document Acquisition Costs: To correctly calculate the capital gain, comprehensive documentation of the acquisition costs of the shares is essential. This includes not only the original purchase price but also all subsequent acquisition costs (e.g., contributions, additional payments).

2. Prove Shareholding Percentage: To apply the partial income procedure and the allowance under § 16 EStG, the shareholder must prove that they held at least a 1% stake in the GmbH within the last five years. Relevant shareholder registers and contracts should be carefully preserved.

3. Record Sale-Related Expenses: Sale-related expenses (e.g., notary fees, advisory costs) should also be accurately recorded, as they reduce the tax base. However, under the partial income procedure, only 60% of these costs are deductible.

4. Observe Deadlines: There are often strict deadlines for claiming allowances and tax benefits. For example, the application for the reduced tax rate under § 34 EStG must be submitted by the end of the assessment period in which the capital gain arose.

5. Evaluate Structuring Options: Depending on the individual situation, it may be advisable to optimize the sale of shares for tax purposes. This could involve spreading the sale over multiple years (keyword: progression clause), utilizing loss carryforwards, or strategically distributing profits before the sale. Individual advice from a specialized tax consultant is recommended.

Conclusion

The tax treatment of capital gains from the sale of GmbH shares is complex and depends on many factors. The partial income procedure offers the opportunity to reduce the tax burden by exempting 40% of the gain from taxation. Additional structuring options arise from the use of allowances, tax benefits, and careful planning of the sale.

To maximize tax advantages and avoid pitfalls, thorough documentation and planning are indispensable. Shareholders should seek expert advice early to develop tailored solutions and minimize tax risks. One thing is clear: the better the preparation, the higher the net proceeds after tax.