The GmbH & Co. KG as a real estate holding offers significant tax advantages. We explain the structure, the tax mechanisms, and who stands to benefit from this model.
Why a Holding Structure for Real Estate?
Real estate investors with multiple properties should be aware of the tax advantages a holding structure offers. The GmbH & Co. KG is one of the most flexible and tax-efficient models available.
Basic Structure
The basic structure consists of a GmbH as the general partner (Komplementärin) and the investors as limited partners (Kommanditisten). The properties are held at the level of the KG.
Asset-Managing versus Commercial KG
An asset-managing KG generates income from letting and leasing pursuant to § 21 EStG. A commercially structured GmbH & Co. KG generates commercial income (§ 15 Abs. 3 Nr. 2 EStG) and is additionally subject to trade tax.
Tax Advantages of the Asset-Managing KG
No Trade Tax
Rental income is taxed exclusively at the personal income tax rate of the limited partners.
Tax-Free Capital Gains after Ten Years
Real estate disposals are tax-free after the ten-year speculation period pursuant to § 23 EStG. This advantage is preserved in the asset-managing KG.
Loss Offsetting
Initial losses can be offset against other income of the limited partners, limited to the amount of their capital contribution (§ 15a EStG).
Tax Advantages of the Commercially Structured KG
Extended Trade Tax Reduction
Where the sole activity is the management of own real property, the extended trade tax reduction pursuant to § 9 Nr. 1 Satz 2 GewStG applies. Trade tax effectively falls to zero.
The Two-Tier Structure
A holding KG holds interests in several property companies. Each property is held in a separate KG. This provides maximum flexibility and clear liability segregation.
Disadvantages and Risks
Administrative Burden
Separate bookkeeping and tax returns for each entity increase ongoing costs.
Risk of Commercial Taint
Even minor commercial activities by the asset-managing KG can render all income commercial in nature.
Conclusion
The GmbH & Co. KG is a proven vehicle for real estate investors. At compleneo, we advise real estate investors comprehensively – from optimal structuring to ongoing tax compliance.
