What is a holding company in Germany
A holding is a company whose main asset is shareholdings in other companies, not a direct commercial activity. In Germany it is normally incorporated as a GmbH, the limited liability company equivalent to the Spanish SL.
Its function is twofold: to group ownership of the subsidiaries and to capture dividend and capital gain flows with privileged tax treatment. From Germany you can coordinate shareholdings throughout the DACH region and the rest of the European Union.
The GmbH as a holding vehicle
The GmbH requires share capital of €25,000, of which only €12,500 must be paid up at the time of incorporation. It is the standard legal form for holdings in Germany and conveys solvency to banks, investors and local partners.
The shareholder can be a Spanish individual or legal entity. Management falls to a Geschäftsführer (managing director), who does not have to reside in Germany, although it is advisable to have a registered office and local representation to operate normally.
Key points
- Share capital: €25,000 (€12,500 paid up initially)
- Managing director (Geschäftsführer) with no residency requirement
- Liability limited to the capital contributed
95% dividend exemption: the Schachtelprivileg
The Schachtelprivileg is the participation exemption that makes the German holding attractive. Dividends that a GmbH receives from its subsidiaries are 95% exempt from corporate tax (Körperschaftsteuer). Only the remaining 5% is considered non-deductible expense and is taxed.
In practice, that 5% at an effective rate of between 30% and 33% represents a real burden of close to 1.5% on the dividend received. It is one of the most favourable participation regimes in the European Union.
For the municipal trade tax (Gewerbesteuer), the 95% exemption requires a shareholding of at least 15% at the start of the financial year. For corporate tax, since 2013 no minimum percentage is required.
Tax-exempt capital gains on the sale of shareholdings
The exemption extends to capital gains: if the holding sells its stake in a subsidiary, 95% of the gain is exempt and only 5% is taxed. This minimises the tax cost of divesting from a company.
Make the GmbH an effective vehicle to buy, hold and sell shareholdings without capital gains eroding the return. In practical terms, the sale of a subsidiary bears around 1.5% on the gain.
Since the 2013 reform, the rule applies to holdings in capital companies regardless of the percentage, except for anti-abuse rules. Each transaction should be validated with local advice.
Requirements and steps to incorporate the GmbH
A holding GmbH is set up with a notarised deed, registration in the Handelsregister and a minimum capital of 25,000 euros, of which 12,500 are paid in up front. The full process usually takes 6-14 weeks.
Key points
- Deed of incorporation before a German notary
- Registration in the Handelsregister
- Registration with the tax office and application for the VAT number (USt-IdNr.)
- Opening a bank account and paying in the share capital
