Invest through your GmbH or privately? The honest tax comparison

Anyone who runs a GmbH and does not withdraw all profits knows the situation: capital accumulates in the company account and is meant to be invested, in a securities portfolio, a property or an entrepreneurial participation. Immediately the structural question arises: should the GmbH invest itself, or should profits be distributed and invested privately? The answer moves the tax burden by double-digit percentage points, and it differs depending on the starting position. This article works through both routes, with a particular focus on the §7g direct investment, where the difference is largest.

Why does the question “GmbH or private” arise at all?

Because a tax barrier sits between the capital in the GmbH and your private wealth: the distribution. A profit distribution triggers 26.375 % withholding tax including the solidarity surcharge, plus church tax where applicable. Retained profits are therefore “trapped capital” in a precise sense: inside the company they can work at full value, but on the way into private hands they first lose a good quarter. Anyone who wants to invest privately while the money sits in the GmbH pays for the detour before the investment has even begun.

The other ways out of the company are not free either. Salary and bonuses are deductible expenses for the GmbH, but for you they are subject to the full income tax scale of up to 47.5 % including the solidarity surcharge, usually plus social contributions. There is no tax-free tunnel from the GmbH into private wealth; there is only the choice of when tax is paid and at what rate. That is exactly why it pays to look closely at which level an investment achieves the most for tax purposes.

How are profits taxed inside the GmbH?

As long as profits stay in the GmbH, they are taxed at roughly 30 %: 15 % corporate income tax, 5.5 % solidarity surcharge on top of that, plus trade tax of around 14 % at a multiplier of 400 %. Together that comes to about 29.8 %. Only the distribution triggers the second layer: the remaining amount is subject to 26.375 % withholding tax, so of 100,000 € of pre-tax profit roughly 51,700 € arrive privately, a total burden of just over 48 %. For comparison: anyone earning the same profit directly as a sole proprietor or through a partnership pays at most 47.5 % on it, and usually less thanks to the trade tax credit. Looking ahead, the picture shifts slightly in favour of the GmbH: under legislation already enacted, the corporate income tax rate falls from 15 % to 10 % in five annual steps starting in 2028, bringing the retention burden down to just under 25 % by 2032.

What changes when the GmbH invests itself?

The central effect: the gross capital keeps working. Of 100,000 € of retained profit, the GmbH can invest roughly 70,200 €; privately, only about 51,700 € would arrive after the distribution. The company therefore puts almost 36 % more capital to work from the same profit, and that head start compounds over the holding period. To be honest about it: this is not a tax saving but a tax deferral. The distribution tax is not waived, it is simply not yet due. Anyone who does need the capital privately in ten or twenty years pays it then. The deferral is still valuable, because until then the untaxed portion keeps working, and whether, when and at what rate a distribution happens later remains open to planning.

Can my GmbH subscribe to a §7g investment?

Yes. A GmbH can acquire an installation just as directly as a private individual can; it buys the installation, capitalises it in its fixed assets and forms the investment deduction (IAB) in its own profit determination. But that also means the decisive constraint applies at its own level: the 200,000 € profit threshold of §7g EStG is measured against the profit of the GmbH itself (the requirements are covered in detail in Investitionsabzugsbetrag: all §7g EStG requirements, and who can use it). A well-earning GmbH whose profit sits above the threshold therefore cannot form an IAB, and with a direct acquisition there is no way around that. So anyone planning the investment through a GmbH checks the profit threshold first, not last. The same per-business principle, conversely, opens the door for freelancers with a well-earning practice: the practice may sit above the threshold, while a separate investment business starts with a ceiling of its own; Saving tax as a physician or dentist: the §7g lever alongside the practice shows this for physicians and dentists.

The honest counterpoint: the tax lever is smaller at GmbH level. An IAB deduction works against a tax burden of roughly 30 % there, but against a marginal rate of up to 47.5 % privately. The same deduction of 50,000 € saves the GmbH roughly 15,000 € in tax, but a top earner up to 23,750 € privately. In addition, the trade tax credit under §35 EStG is available to natural persons only, and with the enacted reduction of corporate income tax from 2028 the GmbH lever shrinks further. Measured by tax effect per euro invested, the private route almost always wins; measured by available capital, the GmbH often does. That tension is exactly what the decision resolves.

When is the private route better?

• Your taxable income sits reliably in the top tax bracket: then the IAB and special depreciation work against your other income at up to 47.5 %; how strongly that reduces the effective equity outlay is calculated in How much equity is actually required?.
• The capital is already private, for instance from salary, bonuses, earlier distributions or a severance payment: then the expensive detour via a distribution is avoided entirely.
• You want to build private wealth that is not permanently tied up in a corporate structure: income and any later sale proceeds arrive directly with you.
• Trade tax should remain largely neutral: the credit under §35 EStG exists only in the private assessment; the mechanics behind it are shown in Trade tax on PV and storage direct investments: how much of it actually sticks.

When is the GmbH or holding route better?

• The capital sits retained in the GmbH or holding and will not be needed privately for the foreseeable future: distributing it just to make an investment would be the most expensive first step.
• After a company or share sale through a holding, the proceeds sit there roughly 95 % tax-free under §8b KStG; taking them private means paying the distribution tax first (the sale scenario is covered in Selling a practice or business: optimising the tax and reinvesting the proceeds sensibly).
• You think in generations or structures: participations held in a company can later be transferred and bundled differently from private assets.
• Your personal marginal tax rate is low anyway, for instance in years without high private income: then the private IAB lever loses its edge.

Between the two routes there are combinations, for example a distribution timed for the very year in which a large IAB is formed privately: via the favourable-treatment test (Günstigerprüfung), investment income can then be taxed at that year's low scale rate instead of the flat 25 %. Such arrangements depend on details and deadlines and belong firmly in the hands of your tax advisor. Where the holding structure sits in the overall picture of legal tax levers is set out in Legally reducing your tax: the most effective strategies.

What does the worked example show?

Suppose your GmbH has 100,000 € of pre-tax profit available that is meant to flow into a §7g direct investment. The comparison shows why there is no one-size-fits-all answer:

What should you watch when deciding?

• Locate the profit threshold correctly: for the IAB, what counts is the profit of the business that acquires the installation. If the GmbH buys, that is its own profit; if your sole proprietorship buys, it is that business's profit, not your total income.
• Buyer and borrower have to match: whoever capitalises the installation also has to finance it. A privately taken loan for an installation held in the GmbH's assets leads to hidden contributions and questions about who is using the asset. How the financing is set up at buyer level is shown in Financing a direct investment: bank loan, KfW 270 and the pitfalls.
• Plan for the deadlines: the §7g investment window is three years, followed by use and retention requirements; the investment ties up capital for years.
• Keep the levels cleanly separated: if the GmbH buys, the purchase agreement, resolutions and payment flows belong entirely at company level.
• Have the full picture calculated: whether 30 % on more capital or 47.5 % on less capital comes out ahead is decided by the specific constellation, not by a rule of thumb.

In short: the private route maximises the tax lever, the GmbH route maximises the capital at work. The §7g lever for business owners and managing directors as a whole, from the profit cap to the worked example, is shown in Saving tax as a business owner or managing director: the §7g lever alongside your company. Which structure is viable for a direct investment and how it differs from fund models is shown in Direct investment or closed-end fund? The structural comparison. In a no-obligation initial consultation we work through both routes with your actual numbers, together with your tax advisor; we do not make promises of returns.