Paying Money Out of a Holding Company Privately: Routes, Tax Withholding, Documents

Why is money in the holding account not yet your private money?

At company level, investment income arises, for example dividends from the subsidiaries. At the holding, such income is in principle left out of account when determining income under § 8b(1) KStG. However, under § 8b(5) KStG, 5 percent of this income is deemed to be expenses that may not be deducted as business expenses. An exception applies to portfolio holdings: if the direct shareholding amounted to less than 10 percent of the share capital (Grund- oder Stammkapital) at the beginning of the calendar year, the income is taken into account (§ 8b(4) sentence 1 KStG). For this purpose, the acquisition of a shareholding of at least 10 percent is deemed to have taken place at the beginning of the calendar year (§ 8b(4) sentence 6 KStG).

This money initially stays in the company. Only when the company pays you does a separate tax treatment arise at your private level, depending on the specific reason for payment. We therefore deliberately do not give a combined tax burden figure for both levels.

Three routes by which money reaches the shareholder

1. Open profit distribution

The basis is the shareholders' claim to the net profit for the year or the balance sheet profit, together with the resolution on the appropriation of profits under § 29 GmbHG. Capital maintenance must be observed: under § 30(1) GmbHG, the assets required to maintain the share capital may not be paid out to the shareholders.

On your side, the distribution belongs to income from capital assets under § 20(1) no. 1 EStG. For a shareholder who holds the shares privately, the separate tax rate of 25 percent under § 32d(1) EStG (flat tax, Abgeltungsteuer) generally applies. The withholding tax on capital income is levied at source at 25 percent (§ 43(1) sentence 1 no. 1 in conjunction with § 43a(1) sentence 1 no. 1 EStG). It is reduced where church tax is payable (§ 43a(1) sentence 2 EStG). The full capital income, without any deduction, is subject to withholding (§ 43a(2) sentence 1 EStG). If a non-assessment certificate (Nichtveranlagungs-Bescheinigung) has been presented because it can be assumed that no tax arises even under a more-favourable-treatment test, no tax is to be withheld (§ 44a(1) sentence 4 and (2) sentence 1 no. 2 EStG).

A common misconception concerns the partial-income method (Teileinkünfteverfahren), with a 40 percent tax-free portion (§ 3 no. 40 EStG) and the corresponding deduction of only 60 percent of expenses (§ 3c(2) EStG). It is not the standard rule for distributions from a privately held shareholding. § 3 no. 40 sentence 2 EStG ties the exemption for dividend income to § 20(8) EStG. That means cases in which the income counts as income from agriculture and forestry, business operations, self-employment, or letting and leasing.

For distributions, the partial-income method is available to you only upon application under § 32d(2) no. 3 EStG, which covers capital income under § 20(1) nos. 1 and 2 EStG:

• Thresholds: In the assessment period for which the application is first made, you hold, directly or indirectly, either at least 25 percent, or at least 1 percent and are able, through a professional activity for the company, to exert significant entrepreneurial influence on its business activities.
• Deadline: The application must be made no later than together with the income tax return for the relevant assessment period.
• Validity: Unless revoked, it also applies to the following four assessment periods without the conditions having to be evidenced again.
• Revocation: After a revocation, no new application is permitted for this shareholding.
• Consequence: To that extent, the saver's lump-sum allowance (Sparer-Pauschbetrag, § 20(9) EStG) and the loss rules of § 20(6) EStG do not apply.

A hidden profit distribution (verdeckte Gewinnausschüttung) must also be examined. It does not reduce the company's income (§ 8(3) sentence 2 KStG). On your side, it counts as other income (sonstige Bezüge) under § 20(1) no. 1 sentence 2 EStG.

2. Repayment of a shareholder loan

If you have granted the company a loan, its repayment to you is a separate transaction. Under § 488(1) sentence 2 BGB, the borrower is obliged to pay the interest owed and to repay the loan when it falls due.

For tax purposes, the repayment is deemed a disposal of the receivable (§ 20(2) sentence 1 no. 7 and sentence 2 EStG). Under § 20(4) sentence 1 EStG, a gain arises only to the extent that the proceeds, after deducting the directly related expenses, exceed the acquisition costs of the receivable. Interest belongs to income from capital assets under § 20(1) no. 7 EStG.

If you hold at least 10 percent of the company, the 25 percent rate does not apply to this interest or to any such gain, and the saver's lump-sum allowance is not available. Under § 32d(2) no. 1(b) EStG, however, this applies only on two conditions. The corresponding expenses must, at the company, be business expenses or income-related expenses (Werbungskosten) in connection with income subject to domestic taxation. And § 20(9) sentence 1 second half-sentence EStG must not apply. For a holding whose investment income is largely left out of account, it must be examined in each case whether this condition is met.

No tax trick in the other direction. A loan from the company to you is not a permanent tax-free withdrawal, because you owe the repayment (§ 488(1) sentence 2 BGB). Under company law, sentence 2 of § 30(1) GmbHG exempts certain payments from the payout prohibition in sentence 1. These include payments covered by a full-value claim for consideration or repayment against the shareholder. The statutory wording analysed here does not answer when such a loan is to be treated as a hidden profit distribution for tax purposes, and case law has not been analysed. This point remains open in each individual case.

3. Repayment of contributions (Einlagenrückgewähr)

A repayment of contributions concerns amounts that were not paid into the nominal capital and are recorded in the tax contribution account (steuerliches Einlagekonto) under § 27 KStG. It is not automatically tax-free.

• Order: Under § 27(1) sentence 3 KStG, payments reduce the tax contribution account only to the extent that they exceed the distributable profit determined as at the end of the preceding financial year.
• Effect for you: To the extent that amounts from the contribution account are deemed used, the payment does not count as income from capital assets for you (§ 20(1) no. 1 sentence 3 EStG). The tax consequence for the remaining part must be examined separately.
• Note § 17 EStG: If you held at least 1 percent at any time within the last five years, the distribution or repayment of amounts from the tax contribution account is deemed a disposal (§ 17(1) sentence 1 and (4) sentence 1 EStG). The fair market value (gemeiner Wert) of the repaid assets is deemed the disposal price (§ 17(4) sentence 2 EStG). Whether a gain arises and how it is taxed depends on your acquisition costs, among other factors, and remains open in each individual case.
• Determination and certificate: The balance of the contribution account is determined separately (§ 27(2) KStG), and the company must certify the repayment of contributions (§ 27(3) KStG).
• Strict consequences regarding the certificate: If the reduction of the contribution account was certified too low, the certified use stands unchanged (§ 27(5) sentence 1 KStG). If no tax certificate has been issued by the time the first determination as at the end of the financial year of the payment is announced, the repayment of contributions is deemed certified at 0 euros (sentence 2). In both cases, the certificate may not be corrected or issued for the first time later (sentence 3).

Comparison of the payment routes

What remains net: a calculation in two steps

This example only illustrates the method of calculation. It does not promise any net amount.

Assumptions: domestic holding GmbH, natural person resident in Germany, share held as private assets, open profit distribution of 100,000 euros, no church tax liability, no non-assessment certificate, no application for the partial-income method, saver's lump-sum allowance of 1,000 euros (§ 20(9) sentence 1 EStG) not used elsewhere.

Step 1: Withholding on payment

• Capital income: 100,000 euros
• Withholding tax on capital income of 25 percent on the full amount (§ 43a(1) and (2) EStG): 25,000 euros
• Amount after withholding tax, before solidarity surcharge: 75,000 euros

An exemption order (Freistellungsauftrag) does not help here. For such distributions, § 44a(1) sentence 1 EStG allows tax not to be withheld only for profit participation rights (Genussrechte) and certain employee shares, not for ordinary GmbH shares.

Step 2: Assessment upon application

With your income tax return, you can apply for a tax assessment, in particular if the saver's lump-sum allowance has not been fully used (§ 32d(4) EStG). The calculation then gives 25 percent of 99,000 euros, i.e. 24,750 euros before solidarity surcharge. The difference of 250 euros compared with the amount withheld only takes effect through this assessment.

The more-favourable-treatment test (Günstigerprüfung) remains open. Upon application under § 32d(6) EStG, the capital income is taxed at the regular income tax rates instead, but only if this results in a lower income tax including surcharge taxes (Zuschlagsteuern). The application can only be made uniformly for all capital income. For spouses assessed jointly, it can only be made for the capital income of both. The test can therefore only improve the result; whether it does depends on your personal circumstances.

Not included: the solidarity surcharge and, where church tax is payable, church tax, because their rates are not documented here from an official primary source. An application for the partial-income method and effects at company level are not included either. The amounts are not a guaranteed net amount.

Provision first, then gifting: the succession connection

Before you transfer shares or make private gifts, it is worth writing down your own ongoing provision, your reserves and the gifts you plan. The payment to you as a shareholder and a later gift to your children are two separate transactions.

Any gratuitous transfer between living persons counts as a gift to the extent that it enriches the recipient at the expense of the giver (§ 7(1) no. 1 ErbStG). In cases of unlimited tax liability, § 16(1) ErbStG sets out the following allowances, among others: 500,000 euros for spouses and registered partners (no. 1), 400,000 euros for children within the meaning of tax class I no. 2 and for children of deceased children (no. 2), and 200,000 euros for children of children (no. 3). In cases of limited tax liability, the allowance is reduced (§ 16(2) ErbStG). Several pecuniary advantages received from the same person within ten years are added together under § 14(1) ErbStG. This does not make a gift automatically tax-free, and a cash distribution is not always more favourable than other routes.

Full succession planning or relief planning is outside the scope of this article. Shareholdings already transferred with tax relief and still subject to retention requirements must be examined separately. You will find the basics of how a handover works in the articles Company succession and Start succession planning early.

Which documents should you check before a payout?

1. Articles of association and rules on the appropriation of profits (§ 29 GmbHG).
2. Annual financial statements showing the net profit for the year or the balance sheet profit (§ 29(1) GmbHG) and the current share capital, so that capital maintenance can be checked (§ 30(1) GmbHG).
3. Tax balance sheet and balance of the tax contribution account, because the distributable profit is deemed to be the equity shown in the tax balance sheet, reduced by the subscribed capital and less the balance of the contribution account (§ 27(1) sentence 5 KStG).
4. Resolution on the appropriation of profits or on the distribution, with a specified payment date.
5. For a repayment of contributions: determination notice and tax certificate, whose amount should be checked before the certificate is issued (§ 27(2), (3) and (5) KStG), plus evidence of your acquisition costs for the shares (§ 17 EStG).
6. For a loan: the loan agreement, recommended in writing as evidence with an interest and repayment schedule, plus payment records.
7. For an application for the partial-income method: size of the shareholding in the first year and the deadline (§ 32d(2) no. 3 EStG).
8. Overview of gifts already made in the last ten years, if a gift is planned (§ 14 ErbStG).

Frequently asked questions

Is tax withheld immediately on a distribution from the holding?

In principle, yes: 25 percent withholding tax on capital income on the full amount (§ 43(1) sentence 1 no. 1, § 43a(1) and (2) EStG), reduced where church tax is payable. This also applies if you have applied for the partial-income method (§ 43(1) sentence 3 EStG), but then the withholding does not settle the tax finally (§ 43(5) sentence 2 EStG). An exception applies if a non-assessment certificate has been presented (§ 44a(1) sentence 4 and (2) sentence 1 no. 2 EStG).

Is the repayment of my loan to the holding tax-free?

Not as a general rule. The repayment is deemed a disposal of the receivable, but a gain arises only above the acquisition costs (§ 20(2) and (4) EStG). Interest is capital income. From a 10 percent shareholding, the 25 percent rate does not apply, subject to the condition in § 32d(2) no. 1(b) EStG.

Is a repayment of contributions always tax-free?

No. The contribution account is only deemed used once the distributable profit has been exceeded. Without a timely certificate, the repayment of contributions is deemed certified at 0 euros, and a certificate that is too low remains decisive (§ 27(1) and (5) KStG). With a shareholding of at least 1 percent in the last five years, it is also deemed a disposal under § 17(4) EStG.

Limits of this article and individual advice

This article assesses the legal position on the basis of the statutory wording and does not replace individual tax or legal advice. Questions that remain open include: a possible hidden profit distribution where the company lends to you, the condition in § 32d(2) no. 1(b) EStG in the holding case, whether a more-favourable-treatment test helps, and taxation under § 17 EStG. The right route and the actual net amount can only be determined after reviewing your documents.

If you would like to plan your provision and a later transfer of assets calmly and in an orderly way, we are happy to go through it with you. You can reach us via Contact or via the appointment booking.

Sources and assumptions

The key statements are based on the official statutory texts (retrieval date: 20 October 2026):

• § 8b KStG, § 8 KStG, § 27 KStG
• § 3 EStG, § 3c EStG, § 17 EStG, § 20 EStG, § 32d EStG, § 43 EStG, § 43a EStG, § 44a EStG
• § 29 GmbHG, § 30 GmbHG
• § 488 BGB
• § 7 ErbStG, § 14 ErbStG, § 16 ErbStG

The case described at the outset is assumed throughout. Case law has not been analysed. Rates for the solidarity surcharge and church tax, as well as any relief under the Inheritance and Gift Tax Act (ErbStG), are not documented and are therefore not included in the figures.