Profit distributions – Favorable examination – Continuing education – Further education – Tax consultants – Hagen – Holzwickede – Kamen – Lünen

Profit distributions of a GmbH in the case of a favorable tax assessment. In principle, the tax liability of income from capital assets is satisfied by the capital gains tax deduction; these must be
therefore no longer have to be reported in the income tax return (so-called final withholding tax procedure). However, if the personal tax rate is lower than the 25% capital gains tax, the capital gains can be included in the tax return and the so-called favorable review can be applied for.

Irrespective of this, it is possible to apply for profit distributions from a corporation to be included in the income tax assessment and offset against the personal
tax rate; under this partial income method, 40% of the income remains tax-free and 60% of the related income-related expenses can be deducted. Whether this procedure is more favorable than the settlement of the tax liability must be examined individually. The partial income procedure is
however, only permissible if

– the shareholding in the corporation is at least 25% or
– at least 1 % and, in addition, an activity with significant entrepreneurial influence
is given for the company
(cf. in this respect Sec. 32d (2) No. 3 EStG).

If the favorable test for the entire investment income is advantageous compared to the final withholding tax, the above-mentioned application for profit distributions from a corporation is generally also recommended, because then only 60% of the income is taxable. However, as the Federal Fiscal Court has ruled, this application is not imputed. It cannot be made up for in the appeal procedure against an income tax assessment, but must already be submitted with the income tax return. Provided that the requirements for this are met, it should therefore always be checked in the case of profit distributions whether the application for the partial income procedure is made in the income tax return, in particular if the so-called favorable tax treatment test is also applied for.

(Further comments & information on this can be found in our information letter 03/2018 under item 1.)