The German asset management company
What is a Vermögensverwaltende GmbH and should you consider it?
Vermögensverwaltende GmbH, or an asset managing company, is a type of legal form of a company that is responsible for managing assets. This type of company is suitable for those who want to keep their assets in one company and operate with their active business in another. The Vermögensverwaltende GmbH can be advantageous for taxes as there are certain tax benefits. However, it is important to note that the Vermögensverwaltende GmbH is not a tax-free entity and the owner of the Vermögensverwaltende GmbH still has to pay taxes on the income from the Vermögensverwaltende GmbH.
At a glance
- Vermögensverwaltende GmbH is a great way to keep more of your profits because the asset management company avoids double taxation
- The most popular form is when the Vermögensverwaltende GmbH consists of one parent and at least one subsidiary
- The companies exist legally independent of each other; however, the Vermögensverwaltende GmbH has controlling power over the board of directors for the subsidiary companies
The two different variants of a Vermögensverwaltende GmbH
Vermögensverwaltende GmbH, also known as an asset management company, is a form of German business entity that can take on two different forms. The first is the transfer of assets to the company, which can be in the type of ETFs, stocks, bonds or even real estate. The second instance is the formation of a parent company, in which direct interests in capital companies (Kapitalgesellschaft), such as stock companies or other businesses, are combined. Vermögensverwaltende GmbH provides many benefits for businesses, including asset protection and wealth management. In addition, Vermögensverwaltende GmbH can help to reduce taxes and increase transparency. As a result, Vermögensverwaltende GmbH is a popular choice for businesses in Germany.
They are often used by taxpayers to take advantage of certain tax benefits. Vermögensverwaltende GmbHs are sometimes referred to as ‘coin box GmbHs’ because they are used to store assets for tax purposes. It can be useful for entrepreneurs who make significant profits or for the management of larger assets. If you are considering using a Vermögensverwaltende GmbH for your asset management needs, it is important to speak with a qualified accountant or tax advisor who ensure their clients that they are taking advantage of all available benefits. Vermögensverwaltende GmbHs can be an effective way to manage assets and reduce your tax liability. However, it is important to seek professional advice to ensure that you are using them in the most advantageous way possible.
Shareholders of a Vermögensverwaltende GmbH, or asset managing company, can help to minimize the tax burden for shareholders who convert the company’s profit distribution into reinvestments. By doing so without a Vermögensverwaltende GmbH, they are subject to a 15-per-cent corporate income tax, which includes an additional 25% of withholding tax, the solidarity surcharge & further the trade tax. So in total they would be charged with a tax burden of more than 40 per-cent, which is very high indeed.
Vermögensverwaltende GmbHs are treated as special purpose vehicles under German tax law and thus enjoy a number of benefits, such as a lower capital gains tax. If the asset management company owns at least 10-per-cent of another active business company, it is possible to distribute the profits nearly free of tax (read here if you want to find out more about the optimal profit distribution of a GmbH). In addition, the Vermögensverwaltende GmbH can deduct its expenses from its taxable profits, resulting in an even lower effective tax rate. As a result, shareholders who use a Vermögensverwaltende GmbH can significantly reduce their overall tax burden.
However, Vermögensverwaltende GmbH can help to avoid the withholding tax by transferring the assets into an existing limited liability company or on the other hand by founding a limited liability company only for purposes of the management of assets. As a result, shareholders can keep more of their investment earnings and have more money to reinvest in the business. Vermögensverwaltende GmbH can be a useful tool for shareholders who want to minimize their tax burden, optimize their financial planning and maximize their investment earnings.
Contribution of assets with a Vermögensverwaltende GmbH
The Vermögensverwaltende GmbH, or asset managing company, is a tool that allows shareholders to apply tax benefits to their assets. By transferring assets to a Vermögensverwaltende GmbH, shareholders can avoid high taxes on their investments.
Vermögensverwaltende GmbHs are also known as “coin box” companies because they are often used to hold, manage and buy investments. One of the main advantages of setting up an asset managing company is that it allows shareholders to defer paying taxes on their investments until such time as they are sold or disposed of. Additionally, when the time comes to pay taxes on the investment, the shareholder will only be subject to a 15 per cent corporate income tax plus 5.5 per cent solidarity tax, rather than the higher rate that would apply if the investment was held directly by the shareholder. Trade tax can be avoided in many cases.
One way to avoid the withholding tax is to transfer your assets into a limited liability company, that is already existing. The other one is by establishing an limited liability company for the purpose of management of your assets. Vermögensverwaltende GmbHs offer many advantages for shareholders, including the ability to minimize their tax liability. In addition, Vermögensverwaltende GmbHs can also be used to legally protect assets from creditors. As a result, asset managing companies can be an extremely useful tool for shareholders looking to minimize their tax liability.
Avoiding the capital gains tax with a holding company like a Vermögensverwaltende GmbH
Vermögensverwaltende GmbH is a great way to keep more of your profits because the asset management company avoids double taxation. This is also advantageous from an estate planning perspective. Vermögensverwaltende GmbH can take various forms however the most popular form is when the Vermögensverwaltende GmbH consists of one parent and at least one subsidiary. The companies exist legally independent of each other; however, the Vermögensverwaltende GmbH has controlling power over the board of directors for the subsidiary companies. Vermögensverwaltende GmbHs are extremely flexible which offers great opportunities for tax optimization. Vermögensverwaltende GmbHs are becoming increasingly popular because they offer many benefits such as avoiding double taxation, greater flexibility, and estate planning advantages.
- A financial holding company is a type of asset holding company in which the parent company holds interests in the subsidiaries. Financial holding companies are often used to manage the assets of a group of companies. Financial holding companies typically have little influence on the subsidiaries, and act only as asset managing companies without any further corporate characteristics. Financial holding companies may be incorporated in any jurisdiction, and are typically regulated by Financial Holding Company Acts or similar legislation. Financial holding companies typically have limited liability, and are often exempt from taxation. Financial holding companies may also be known as investment holding companies or simply holding companies.
- Operational holding companies, are the most common form of Vermögensverwaltende GmbHs. In this type of structure, the parent company is involved in the market in an actively way and the respectively subsidiaries are depending on it strategically, structurally and for the personnel areas. Vermögensverwaltende GmbH often contain a mix of businesses in different stages of development, allowing the parent to share resources and knowledge across the group. This type of holding company provides greater control and flexibility than other structures, but can also be more complex and expensive to maintain. Operational holdings are typically large, multinational corporations with a diverse range of businesses.
- Organizational holding companies are commonly used to manage the internal structure of a company. This type of holding company can help to organize individual areas, and ensure that each department is run smoothly. Organizational holding companies can also help to monitor and control the activities of each department, ensuring that they are all working towards the same goals. In addition, organizational holding companies can provide a central point of contact for all departments, making it easier for employees to communicate with each other. As a result, organizational holding companies can play an essential role in ensuring that a company runs smoothly and efficiently.
- A Management Holding is a holding company that is responsible for the strategic planning and management of its subsidiaries. The company is not active in the market itself, but provides support and guidance to its subsidiaries. The company’s mission is to create value for its shareholders through the successful operation of its subsidiaries.
Avoiding trade tax with the asset managing GmbH
Avoiding the trade tax with an asset managing GmbH can be a difficult task. The business purpose of your asset managing GmbH has to be formulated correctly and submitted to the responsible tax office (Finanzamt) in order to guarantee the exemption from the trade tax (Gewerbesteuer). Failure to do so may result in the income from asset management being subject to trade tax.
Vermögensverwaltende GmbHs have become increasingly popular in recent years, as they offer a number of benefits for asset managers. However, it is important to note that sometimes the magistrates require that there is an clear indication of pure way of asset management in addition to your company name of the GmbH. You need to clarify all of the subtleties already in advance to avoid any issues with your application for exemption from trade tax. Ultimately, the responsibility for approving your application rests with the tax office (Finanzamt), but following these guidelines will give you the best chance for success. Vermögensverwaltende GmbHs are an attractive option for many asset managers, and by following these guidelines, you can increase your chances of obtaining approval for an exemption from trade tax.
To avoid paying trade tax, the activity carried out by the asset managing GmbH must not be commercial. If the assets are only used to manage finances, then no trade tax is due. However, if the aim is to generate profits from the assets, then a commercial activity has been carried out and trade tax must be paid. In order to determine whether or not an activity is commercial, the intention of the person carrying out the activity is key. If it can be shown that the only purpose of the activity was to make a profit, then it will be classed as commercial and trade tax will be payable. The asset management company that exclusively manage and use their own real estate or, in addition, manage and use their own capital assets no trade tax would be paid.
For whom is the Vermögensverwaltende GmbH suitable?
The asset managing GmbH is a great way for taxable persons with large capital and real estate assets to take advantage of tax benefits. The particular feature that makes this company so attractive, in addition towards its permanent reinvestment policy on investment income which keeps profits earned by the business intact instead distributing them as dividends or interest payments outwards from your organization – these will be used either directly back into investments themselves through spending programs such has procurement services. They might also help finance other activities within an enterprise like purchasing machinery etc. But most importantly you’ll never have requirements around how much money should go where when it comes down.
The submission of your private assets into a Vermögensverwaltende GmbH or asset managing GmbH is very useful together with the planning of different transfers of long-term asset. These asset transfers are easier than gradual transfers of real estate or other securities like stocks. This transfer type is commonly used by families, who are planning to transfer assets to their children or offsprings. In this way, it is possible to avoid trade tax on the sale of shares, for example.
The advantages of a Vermögensverwaltende GmbH
The Vermögensverwaltende GmbH, or asset managing GmbH, is a type of company in Germany that offers a number of benefits for those who contribute their private assets to the company. Firstly, if done correctly, this can offer a significant tax advantage for the individual. Secondly, it can provide protection for the assets in question, and thirdly, it can be a more efficient way to transfer assets to children or grandchildren than other methods. The Vermögensverwaltende GmbH therefore provides a number of advantages for those looking to protect and grow their assets in Germany.
One of the biggest advantages of the asset managing GmbH is the avoidance of trade tax.
The disadvantages of a Vermögensverwaltende GmbH
The disadvantages of a Vermögensverwaltende GmbH can be significant. Private assets contributed into a GmbH are profitable only above a 6 figure amount. The reason for this is that the GmbH has to cover all the basic costs just like annual accounts, tax consultation, etc.
From the legal view, all of the contributed assets and capital no longer belongs to you. Instead it becomes integrated into the assets of the business. As a result of that you have act towards the Vermögensverwaltende GmbH just like a person, that is uninvolved. Otherwise there may be a suspicion of hidden profit distribution & contribution.
In the case you have founded a Vermögensverwaltende GmbH, your consideration as a private person is no longer provided. The entrepreneurial conditions must be adhered and the corresponding contributions musts be deducted to the IHK (Chamber of Industry and Commerce). You can no longer avail yourself of private pension plans. If the business fails despite all precautionary measures, then not only is your investment lost but in some cases also your private assets, which was contributed to the asset management company. The advantages of a Vermögensverwaltende GmbH should be carefully considered before making any decisions.
Fully qualified tax accountant under German law and specialist advisor for international tax law. More than 15 years of professional tax experience.