“Profits from stock sales are almost tax-free for a GmbH!” — this is the argument in favor of a trading GmbH par excellence. But what about other asset classes, and what else needs to be considered apart from taxes?
We consider two aspects in particular when it comes to the question of which strategies and investments are suitable for a German trading GmbH:
- Is the strategy or asset class tax-efficient compared to a private investor?
- Is the strategy or asset class accounting-friendly?
- (Is the strategy profitable?)
We deliberately exclude point 3 here, because a discussion of which strategies, stocks or alternative investments are the most promising or profitable is definitely beyond the scope of this article and also misses the point. A passive investor might be perfectly happy with a buy-and-hold stock portfolio, while other investors might like to write options or do crypto-lending.
We will compare some assets and strategies here in terms of their tax-efficiency and accounting-friendliness from the perspective of a German GmbH (LLC). All of the strategies mentioned are examples and are not meant as recommendations.
In any case, our advice is to be sure to understand what tax and accounting costs are associated with a particular asset class before even opening the first position. Otherwise, the costs for the tax advisor can quickly exceed (hopefully) achieved profits …
GmbH vs. private investor: tax comparison of common investment strategies and instruments
All these strategies and investments are conceivable, but of course the list does not claim to be exhaustive:
- Stock ETFs (buy-and-hold, active exploitation of seasonality, etc.)
- Buy-and-hold stocks or a strategy with frequent turnover (e.g, pairs trading)
- Gold ETFs or commodity ETFs buy-and-hold
- Bond ETFs buy-and-hold
- Derivatives: CFD strategy with frequent turnover (e.g. FX seasonalities), options, futures
- Cryptocurrencies: Buy-and-hold, strategy with frequent turnover (momentum, for example) or crypto lending
- P2P lending
- DeFi Liquidity Mining / Yield Farming
In the case of the GmbH, we assume a flat effective tax rate of 31% as a combination of corporate income tax (Körperschaftsteuer) and trade tax (Gewerbesteuer). Due to the different municipal rates for trade tax, the exact effective tax rate depends on the local municipal rate.
As mentioned, this list does not claim to be complete, but is to be understood as a suggestion to consider taxation and accounting of one’s own investment strategies.
Equity ETFs
Conceivable would be buy-and-hold or, e.g., a strategy that buys or sells regularly based on seasonalities a few times per month.
| Taxes | Accounting | Other |
|---|---|---|
| ✅ Partial exemption: 12% eff. tax rate on capital gains. This is more favorable than eff. 18.5% for the private investor. | ✅ Accounting of trades not problematic, automatic solution conceivable. | |
| ⛔ Partial exemption requires that a share of the costs in connection with income from equity ETFs corresponding to the share of exempt gains cannot be offset (§ 21 InvStG). | ⛔ Possibly complex calculation of the exempt share of profits. |
Shares
Due to eff. 1.5% tax on capital gains vs. eff. 31% on dividends, the advantage of the GmbH compared to private investment is particularly clear for strategies with frequent turnover, such as short-term pairs trading, less so for dividend strategies.
| Taxes | Accounting | Other |
|---|---|---|
| ✅ Only 1.5% eff. tax rate on capital gains and 31% eff. tax rate on dividends | ✅ Accounting of sales not problematic, automatic solution conceivable |
Bond ETFs
Normally used as an admixture, but subject to higher taxes in the GmbH than in private assets, therefore not very attractive. At least judging from this perspective.
| Taxes | Accounting | Other |
|---|---|---|
| ⛔ 31% eff. tax rate | ✅ Accounting of sales unproblematic, automatic solution conceivable |
Derivatives (options, futures, CFDs)
Conceivable strategies here would be the writing of options, active use of seasonalities with CFDs, hedging or also “long-term” investment by means of futures with acceptance of rolling losses in order to use the freed-up capital elsewhere.
Many private investors who trade larger volumes were hit hard by the restriction to offset only a maximum of €20,000 in losses from their profits. Since 2021, a private investor may only claim €20,000 in gross losses from derivatives transactions for tax purposes, i.e. deduct them from gross profits. Consequently, in case of high profit and loss amounts, the tax payment may exceed the net gains. This loss offset limitation does not apply to corporations!
| Taxes | Accounting | Other |
|---|---|---|
| ✅ No loss offset limitation of €20,000 ⛔ 31% eff. tax rate | ⚪ Accounting of transactions more or less challenging depending on asset class, e.g. for CFDs an automatic solution is easily conceivable. Crypto futures more difficult due to frequent settlements. | ⚪ Accounting, e.g., as pending transaction, should be discussed with the tax advisor |
Cryptocurrencies
We only refer to “CEX crypto” here, i.e., transactions with cryptocurrencies on centralized marketplaces such as Kraken, FTX or Cake DeFi.
| Taxes | Accounting | Other |
|---|---|---|
| ✅ Gains / losses can be offset against gains / losses from other asset classes, unlike private investments ⛔ No tax exemption of gains after holding period of 12 months as in private investments ⚪ 31% eff. tax rate possibly lower than personal tax rate ⚪ As in private investments: calculation of gains in fiat currency; accounting of staking or lending income in fiat at the time of inflow | ⚪ For simple buying / selling, automatic solution conceivable if the exchange supports data export or by means of a coin tracker service ⛔ Accounting always in fiat currency: e.g. exchange of BTC into ETH generates additional booking records due to the “accounting detour via fiat” |
DeFi, yield farming, liquidity mining, etc.
In short, due to tax uncertainties, we currently advise against DeFi (i.e., completely decentralized, without KYC and bank statements or receipts) in a GmbH.
| Taxes | Accounting | Other |
|---|---|---|
| ⚪ 31% eff. tax rate possibly lower than personal tax rate ⚪ As in private investments: calculation of gains in fiat currency; accounting of staking or lending income in fiat at the time of inflow | ⚪ For simple buying / selling, automatic solution conceivable if the exchange supports data export or by means of a coin tracker service ⛔ Accounting always in fiat currency: e.g. exchange of BTC into ETH generates additional booking records due to the “accounting detour via fiat” . | ⛔ Most wallets, such as Metamask, used in DeFi do not require or support KYC (user identification). Therefore, and due to the lack of official supporting documents such as bank statements, difficulties with accounting or with the tax office are likely. |
P2P credits
| Taxes | Accounting | Other |
|---|---|---|
| ⛔ 31% eff. tax rate higher than flat rate withholding tax (Abgeltungsteuer) | ⚪ Automated solution possibly conceivable, however, e.g., for Mintos all transactions would have to be booked correctly and separately, i.e., interest income, payment default, loan purchase, loan sale, loan repurchase by the issuer, … |
