Tax aspects : chapter 14

• Pages: 207-210
• Published date: 01 January 2008
• Author: Christoph Jaehne
• Date: 01 January 2008
• DOI: 10.10520/EJC74081

207

CHAPTER 14

TAX ASPECTS

14.1 Introduction

A wide variety of factors must be taken into account regarding both

commercial intentions and taxation consid er ations. Investment ob-

jectives, expected prof‌it levels and distribution policies must be ex-

amined when deciding which organizational form is preferable from

a tax point of view. Due to the vast number of tax aspects, it is only

possible to give a brief outline in this con text.1

14.2 GmbH

Similar to the South African system, in Germany the tax status of a

business entity depends on whether or not it is incor po rated.

Corporations are treated as taxable entities and are sub ject to trade

tax2 and corporation income tax.3

However, while the government is seeking to f‌ind ways to counter the

current economic problems in Germany, i.a., the regu lations con-

cerning taxes for businesses are in a state of f‌lux. In a recent policy

statement in the German ‘Bundestag’ on 17 March 2005, the Chan-

cellor suggested, e.g., a reduction of the corporation tax from cur-

rently 25 to 19 per cent.4

Partnerships,5 on the other hand, are not taxable en tities for income

tax purposes. The income of the partner ship is de ter mined on the

level of the part ner ship-to-be, subse quently allocated to the individual

partners. Prof‌it allo cable to an individual par tner is subject to in come

tax at his individual income tax rate; prof‌it allocable to a cor porate

1 For further reading concer ning the GmbH, see Sudhoff (1992), 99 et

seqq. in particular 103; Beck GmbH-HB (1995), §1 note 2 et seqq.,

§11; Lutter-Hommelhoff, GmbHG introduction, note 31 et seqq.;

Scholz-Westermann, GmbHG introduction, note 76 et seq. Regarding

the close corpo ration, cf. Naudé, 1982, MB 5, 12; Close Corporations

Service, 9.01 et seqq.; Delport-Pretorius (1989), chapter 12. Regarding

the incorporate decision, see Close Corporations Service, 9.14 with

an exemplary calculation.

2 ‘Gewerbesteuer’, abbr. GewSt.

3 ‘Körperschaftssteuer’, abbr. KSt.

4 Policy Statement (‘Regierungserklärung’); see also Frankfurter Allge-

meine Zeitung (FAZ), 18 March 2005. However, the required consent of

the opposition party, which has the majority in the Upper House of Par-

liament, could not be reached. So reforms in this regard are postponed,

see Financial Times Deutschland (FTD), 18 and 23 June 2005.

5 As mentioned, the non-corporate entities, i.e., ‘Offene Handels gesellschaft’,

‘Kommanditgesellschaft’, ‘Gesellschaft bürger lichen Rechts’.