Moving Abroad Is Out. Tax Planning Isn't.

Germany stays. The use of profit is still a decision.

The location is fixed. The use of profit is not.

You may be angry with Berlin and still have to make a business decision tomorrow. An order, the next investment, a private payment: none of those dates moves because relief has been announced.

If your children live here, customers and staff rely on you here, or a parent needs you nearby, moving may be no serious option. That is not a failure of nerve. It is the life you have built here.

What tax-planning options remain for owners who stay in Germany? Genuine business expenses and investments; the Section 7g deduction and depreciation; relief for retained profits; a suitable legal form; and, for a GmbH, the right payout or holding-company route. These are not discounts you can add together. They change different dates and different pools of cash.

The question is which euro must reach you privately, when—and which must keep working in the business.

The ifo Institute's 2025 annual monitor evaluated 1,705 company responses. Its finding, translated from German: “Around 70% of companies perceive trade tax in particular as a heavy or very heavy burden.” That measures perceived burden, not a common effective tax rate. It also does not establish that a new structure would improve those companies' position. That requires a comparison of the owner's actual cash flows.

There is nothing suspect about using the choices tax law permits. In a specific case involving a transfer and sale of property, Germany's Federal Fiscal Court put the principle this way (our translation):

“A taxpayer is not prevented from arranging legal relationships so that a lower tax burden results.”

The judgment is not a blank check for an artificial arrangement. Section 42 of the Fiscal Code and each instrument's statutory conditions still apply. But the direction is clear: you may use the law. Do not trust a label before you have seen what it changes in the route of your money.

No Borders Founder puts private cash needs, company liquidity, investment, and a possible sale on one timeline. Qualified tax and legal advisers determine what works on the individual facts. The result should be more than another folder of documents: you should know which decision comes next.

“If you are staying in Germany, you do not need a lecture on the courage to leave. You need a calculation that lets you make a promise to your family and still give the business its next chance. That is where tax planning starts for me.”

The political starting point is in the preceding analysis:Read the Merz assessment

First find out who is taxed on the profit

A GmbH is a separate taxpayer. The calculation must reach private cash.

In a sole proprietorship or qualifying liberal profession, profit is generally taxed to the individual. Taking money from the business for private use does not normally create a second layer of income tax.

Our consultant cannot lower the income tax on €180,000 of profit simply by leaving cash in her business account. She cannot call family spending a business expense, either. Her activity, assuming it qualifies as a liberal profession under German tax law, is generally outside trade tax. (Sections 18 EStG and 2 GewStG)

A commercial sole proprietor faces trade tax. The €24,500 allowance and limited credit against individual income tax belong in that calculation. Two people can be self-employed in Germany and still start with materially different tax positions.

A GmbH is a separate taxpayer. Profit may remain in the company, but its owner needs a legally valid route to use that money privately. The often quoted 15% corporation tax rate for 2026 is therefore the first line of a calculation, not the answer. A GmbH is also subject to trade tax by virtue of its legal form. (Section 23 KStG; Section 2(2) GewStG)

Here is a deliberately simple illustration. Assume €100,000 of taxable GmbH profit and the same trade-tax base, a municipal multiplier of 400%, no special adjustments, and ordinary withholding tax on a full private dividend, without church tax.

The legal basis is Section 23 KStG, Section 11 GewStG and Section 16 GewStG, the Solidarity Surcharge Act, and Section 32d EStG. The model also assumes an amount that may lawfully be distributed, a valid profit-appropriation resolution, and sufficient liquidity. It excludes the partial-income method, personal allowances, executive compensation, social insurance, and other individual factors. €51,666.34 is not a benchmark for the consultant's own tax bill. The point is simpler: €70,175 inside a GmbH is not €70,175 at home.

Look at the two figures in bold: €70,175 inside the GmbH, €51,666.34 at home after an ordinary full dividend. In this model, €18,508.66 separates them. Plan a private payment around the first figure and you are counting money that will not arrive through that route. This is where the slide-deck calculation ends. The consultant must work out what her family needs net; the workshop owner must finance his machine first.

For the profitable SME investments it modeled, a 2025 ZEW study reached this conclusion (our translation):

“From a tax perspective, there is no general advantage of a particular legal form for profitable investments in Germany.”

That does not judge every company. It does expose the flaw in a universal “Once your profit reaches X, form a GmbH” rule. Stop sign for the consultant: if she needs much of the profit privately each year and has no concrete reason to keep capital in a company for the long term, the comparison cannot end at the GmbH's apparently lower first-stage rate.

A machine is an investment decision, not a tax voucher

The business purpose must come before the accelerated deduction.

Our machine-shop owner also earns €180,000 in profit. He intends to acquire a machine next year at an anticipated tax-relevant cost of €100,000. It has a production purpose, a delivery date, and a financing plan. Those facts make the timing of deductions worth examining.

Under Section 7g EStG, a business with profit of no more than €200,000 in the deduction year may, subject to other conditions, claim an advance investment deduction for qualifying depreciable movable assets. Up to 50% of the anticipated acquisition cost may be deducted before purchase.

At €100,000 of qualifying machine cost, that is a maximum €50,000 deduction brought forward. In this simple model, taxable profit for the year falls from €180,000 to €130,000. Personal tax does not fall by €50,000; the actual tax effect depends on other income and the applicable rates.

The relief can also be relevant to a liberal-profession practice that genuinely plans to buy and use a qualifying business asset. Being a professional rather than a commercial trader is not, by itself, a disqualification.

The €50,000 is not a grant. In the investment year, the advance deduction is generally added back, while the tax basis for depreciation may be reduced. A possible special depreciation allowance of up to 40% under Section 7g then applies to the relevant acquisition cost, after any reduction of that basis. For certain movable fixed assets acquired after June 30, 2025 and before January 1, 2028, declining-balance depreciation may also apply, capped at three times the straight-line rate and 30% annually. The combination and its later reversal belong in one depreciation schedule.

Bringing the deduction forward can give the business breathing room. The supplier's invoice is still due. So before discussing a tax advantage, I ask: Would you buy this machine if the deduction did not exist? If the machine is needed and financed, the timing of tax can help. It cannot turn a bad investment into a good one.

Acquisition or production must generally take place no later than the end of the third financial year following the deduction year; otherwise the original investment deduction is reversed. Until at least the end of the financial year following acquisition or production, the asset must be rented out or used exclusively or almost exclusively for business in a German permanent establishment. (Section 7g(1), (3), and (4) EStG)

Stop sign for the machine-shop owner: profit above the €200,000 threshold, no qualifying asset, or a machine that does not make commercial sense defeats this as a strategy. A €100,000 expense does not become wise because it reduces taxable profit.

Retained profit: calculate the later withdrawal

Retained profit in an unincorporated business still needs a withdrawal model.

Not every business needs a new legal form. An owner who prepares full accounts and retains profit in the business for years can examine the preferential treatment of non-withdrawn profits under Section 34a EStG. On application, it can cover qualifying retained profits of sole proprietors and partners; liberal professionals using full accounts may qualify too. A simplified cash-basis income-and-expense statement (Einnahmenüberschussrechnung, or EÜR) is not sufficient.

For 2026, the special individual income tax rate is 28.25%, plus any applicable solidarity surcharge. That preferential income tax is due for the year in which the profit is retained; only the additional subsequent tax depends on later access.

I never want to see 28.25% on a page by itself. Next to it, write down when you will need the money for a home, your family, or retirement. The favorable first-year rate tells you nothing about the calculation after private access.

If previously favored profit becomes available privately through excess withdrawals, subsequent tax at 25% plus solidarity surcharge may follow. Closing the business or certain tax-law changes of form can also bring existing amounts into account. If you need private access in two years, that second date belongs in today's calculation. The individual triggers and exceptions are governed by Section 34a(4)–(7) EStG.

The corporate-tax election under Section 1a KStG is a larger step for certain partnerships; a sole proprietor cannot elect it. The election's tax-law change of form can trigger subsequent taxation of older Section 34a balances. It calls for a multiyear model when capital is intended to stay in the business for the long term.

Technical checkpoint: a partner needs a share of profits of more than €10,000 or more than 10% to use Section 34a. Section 1a can cover, among others, commercial partnerships, professional partnerships, and registered civil-law partnerships. Stop sign: simplified cash-basis accounting without a planned change, substantial near-term private cash needs, or an unmodeled transition do not support a decision based on one attractive annual rate.

In a GmbH, the way money leaves matters

The payout route connects corporate law, tax, and available cash.

A GmbH owner who regularly reinvests starts elsewhere. After company-level tax, profits retained in the GmbH can fund staff, equipment, and new markets.

If she needs money personally, two principal routes are a reasonable executive salary agreed in advance and a dividend the company is legally able to pay. Salary is generally a company expense and employment income to its recipient. A dividend comes from profit remaining after company taxes and is taxed privately. (Section 8(3) KStG, Section 19 EStG, and Sections 29 and 30 GmbHG)

A controlling shareholder cannot relabel a strong year's profit as salary after the fact. The corporation-tax guidance requires clear prior agreements; otherwise the payment can be treated as a disguised profit distribution. A dividend requires distributable profit, a resolution, compliance with capital-maintenance rules, and enough cash to pay it. Legally possible and payable when due are separate tests.

The brief for the tax adviser is therefore more useful than “Salary or dividend?” Ask: Which mix delivers the required private net income, preserves the company's operating reserve, and still works across contracts, social insurance, and tax over several years?

“When someone pitches me a holding company with a 95% figure, I first ask where the sale proceeds must go. If the family needs that cash, the attractive number is not an answer.”

A holding company funds the next move. Not today's bills.

After a sale, the proceeds face a fork in the road: will they fund the next business, or your life and family? Decide where the money needs to go first. Then test whether a holding company fits.

If the owner plans to buy another company or later sell company shares and reinvest the proceeds, a holding company may be useful. Section 8b KStG largely exempts certain participation income and gains when a corporation sells shares in another corporation; in general, 5% of qualifying amounts is treated as non-deductible business expenditure. A sale of individual assets by the operating GmbH is a different tax case.

Dividends have ownership thresholds and reference dates: for corporation tax, generally 10% at the start of the calendar year, with a statutory deemed-acquisition rule in some cases; for the domestic trade-tax deduction, generally 15% at the start of the assessment period. (Section 9 GewStG)

The frequently advertised “95% advantage” therefore belongs to a corporation, not automatically to its founder at home. If the founder sells shares personally, Section 17 EStG, among other rules, needs to be examined. Inserting a holding company shortly before sale may involve a share exchange and, in particular, the seven-year rule in Section 22 UmwStG, which can produce retroactive tax consequences. Money later paid from the holding company to the individual faces its own tax stage.

A holding company can hold capital for the next acquisition. It does not put the sale proceeds in your household account. Confuse those two accounts and the exit plan fails at the point that matters to you.

Stop sign: no real plan to reinvest or hold participations, an imminent binding sale agreement, or a substantial need to take the proceeds privately. The second company's accounting, administration, and governance costs must be justified by the remaining benefit across the intended holding period.

Three owners. Three first decisions.

Three starting positions call for three different first tests.

These are illustrative profiles, not personal tax calculations. Each points to the first question that should be answered before changing a structure.

The matrix leads to the next step: advisers need the same five inputs for the current form, better use of it, and a justified change. Only then can annual tax, company cash, and private net cash be compared fairly.

Do not model those five years at a frozen 2026 tax rate. Under current law, the corporation-tax rate is 15% through 2027, then 14% in 2028, 13% in 2029, and 12% in 2030. The rate for qualifying retained profits under Section 34a EStG is 28.25% through 2027, 27% in 2028 and 2029, and 26% in 2030. These are enacted steps under current law, not a promise about future legislation; later private-level tax still belongs in the model.

If wealth is already held personally, or shares are intended for the next generation, the assignment expands. Ownership, control, and liquidity for possible inheritance or gift tax have to fit together. Our analysis of German inheritance tax and business succession examines that separate decision.

Once the German baseline is calculated, the vague wish to leave becomes a location decision: stay, build a real foreign market, or move personally? Our five-year comparison of those three routes takes that question forward. Exit planning comes next only if a personal move survives the comparison.

No Borders Founder brings private cash needs, company liquidity, investment, and the exit date into one decision brief and coordinates qualified tax and legal advisers across the options. For one deduction or one tax return, start directly with a tax adviser. If several layers must be decided together, assess whether an NBF engagement fits this Germany-based case.

Germany remains home. Your next decision will not wait for Berlin. The consultant needs private net income, the workshop owner a financed machine, and the GmbH owner a route for the sale proceeds. You will sign the next contract. First, decide how much must reach your family, how much must keep working in the business, and when the proceeds need to become available. The profit figure was the same €180,000 for both owners. Their next decisions are different.