gGmbH formation in Germany – setting up a German non-profit limited liability company
Forming a gGmbH in 10 steps – Process step by step
Procedure for forming a gGmbH
Advantages and disadvantages of forming a gGmbH
Taxes of a gGmbH
A gemeinnützige GmbH does not have to pay corporation tax, trade tax and solidarity surcharge. The gGmbH is exempt from paying VAT in the charitable area. Only reduced VAT is payable for income from the business-oriented sector.
The gGmbH may not pay out any profits to its shareholders, which is why no capital gains tax is payable. Regular wage taxes must be regularly paid for employees and other staff. The gGmbH is entitled to donate, and is therefore exempt from inheritance and gift tax. No real estate tax is payable on properties used for the company’s charitable purpose.
No corporation tax for the gGmbH
As a non-profit, the gGmbH does not have to pay corporate income tax to the tax office. This results in a saving of 15.6% on operating profits, which can be used to pursue the company’s charitable purpose. However, the company must maintain its non-profit status throughout its lifespan. As a rule, the tax office carries out an audit of the status at least once every three years.
No trade tax payable
Its non-profit status also means that the gGmbH does not have to pay trade tax. Although an application must be made to the tax office, as long as the non-profit status is maintained, no taxes have to be paid.
Exempt from the solidarity surcharge
A gGmbH does not have to pay the solidarity surcharge.
Salaries must be in proportion to services rendered
In order for the gGmbH to maintain its non-profit status the salaries it pays out must bear a comprehensible relation to the services rendered. Otherwise, the tax office may view this as a hidden profit distribution, which will lead to its non-profit status being withdrawn.
Donations to the company are tax-free
When third parties donate to your company, you can issue donation receipts, which the donor can deduct from their tax. Again, you are not subject to gift tax.
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