Genussrechte: Profit Participation Rights in Austria and Germany

A Genussrecht (a profit participation right under German and Austrian practice) is a purely contractual claim on a company''s profit — no voting rights, and no statutory definition anywhere. Whether it is taxed like equity or like debt is decided by § 8 Abs 3 S 2 KStG in Germany and § 8 Abs 3 Z 1 KStG in Austria: participation in profit AND in liquidation proceeds must be present cumulatively. Employee schemes follow an asymmetry — a EUR 2,000 allowance under § 3 Nr 39 EStG covers uncertificated Nominalgenussrechte in Germany, whereas Austria grants relief only for Substanzgenussrechte.

How a structured, discreet search works in practice is described under finding an investor.

The Genussrecht is the freest instrument in the mezzanine family and, at the same time, the one carrying the most hidden traps. Because no legislator has defined it, its entire content arises from the contract.

That freedom is precisely what creates the problem. Tax law, accounting law and the law governing employee-participation relief examine the same deed against three different sets of criteria — and regularly reach three different answers.

This article sorts out the design choices, sets the Austrian and German treatment side by side, and shows where Genussrechte work as employee participation and where they miss the target.

An instrument with no statutory definition

There is no statutory definition of the Genussrecht. Bauer states this expressly at p. 21 in the Linde Verlag edition, and the finding holds equally in both jurisdictions.

§ 221 Abs 3 AktG in Germany and § 174 Abs 3 AktG in Austria (the respective stock corporation acts) govern only the issuing procedure for a public limited company. They say nothing about what a Genussrecht substantively is.

One point is routinely skipped in practitioner accounts: § 174 Abs 4 AktG gives Austrian shareholders a subscription right over Genussrechte. Anyone planning to issue Genussrechte to third parties in an AG has to deal with that subscription right.

Substantively, according to Gabler, the Genussrecht creates a purely contractual claim, not a membership right. The holder has "neither voting rights nor any other membership rights". He does not sit in the shareholders'' meeting and cannot block a sale.

For the GmbH (an Austrian or German limited company) — by far the most important case in practice — the finding is clearly negative. Neither the BGH (the German Federal Court of Justice) nor the OGH (the Austrian Supreme Court) has decided whether § 221 Abs 3 AktG or § 174 Abs 3 AktG applies by analogy to the GmbH. Any source that presents a particular shareholder majority or a particular form requirement as settled law is claiming more than has been decided.

The practical consequence is a trade-off. Without clarification from the highest courts, a careful adviser will draft the shareholder resolution more strictly than the minority view would require, simply as a precaution.

The advantage of the Genussrecht nevertheless lies in its freedom from formal requirements. Transferring a share in a limited company requires notarial recording under § 15 Abs 3 GmbHG in Germany and a Notariatsakt (an Austrian notarial deed) under § 76 Abs 2 GmbHG in Austria. The Genussrecht needs neither — the same logic that applies to the silent partnership.

Without membership rights, the question remains what the holder can actually monitor. The BGH answered it on 14.06.2016 – II ZR 121/15: the holder of a Genussrecht is entitled to an account of the issuer''s stewardship, and where there is reasonable suspicion, a broader right to information applies. The case concerned a registered participation certificate over 2 million euros carrying 7 % interest, where the interest payment was not permitted to cause a balance sheet loss. The Klöckner decision, BGH 05.10.1992 – II ZR 172/91 (BGHZ 119, 305), should be read alongside it.

Substanzgenussrecht or obligation-like Genussrecht

The entire tax treatment hangs on a single fork in the road. Either the holder participates in profit and in the liquidation proceeds — in which case it is a Substanzgenussrecht, an equity-like participation in the substance of the business. Or one of the two is missing — in which case it is an obligation-like Genussrecht, economically a loan.

Feature	Substanzgenussrecht	Obligation-like Genussrecht
Participation in current profit	yes	yes, or fixed interest
Participation in liquidation proceeds or liquidation profit	yes (mandatory)	no
Share in hidden reserves	yes	no
German provision	§ 8 Abs 3 S 2 KStG, cumulative	—
Income at holder level (DE)	§ 20 Abs 1 Nr 1 S 1 EStG, treated like a dividend	§ 20 Abs 1 Nr 7 S 1 EStG, treated like interest
Exemption for corporate holders (DE)	§ 8b Abs 1 S 1 KStG via the reference to § 20 Abs 1 Nr 1 EStG	none
Austrian provision	§ 8 Abs 3 Z 1 KStG ("Liquidationsgewinn")	—
Exemption for corporate holders (AT)	§ 10 Abs 1 Z 3 KStG via § 8 Abs 3 Z 1 second indent KStG	none
Income at holder level (AT)	§ 27 Abs 2 Z 1 lit c EStG, 27.5 % KESt (Austrian withholding tax on investment income)	§ 27 Abs 2 Z 1 lit c EStG, applicable rate unresolved
Expense at issuer level	not deductible	deductible business expense

One detail of wording separates the two jurisdictions. The Austrian provision refers to "Liquidationsgewinn" (liquidation profit), the German parallel provision to "Liquidationserlös" (liquidation proceeds). In cross-border structures this divergence should be checked rather than read past.

Austria has one open flank. § 27a Abs 1 EStG provides for 25 % only on cash deposits and unsecuritised monetary claims held with credit institutions, otherwise 27.5 %. But § 27a Abs 2 Z 1, Z 2 and Z 3 EStG do not mention Genussrechte expressly. Whether a Nominalgenussrecht that has not been publicly offered falls under the ordinary tariff is unresolved — the only robust statement is that Substanzgenussrechte are captured at 27.5 % KESt.

Anyone who wants a fixed, profit-independent return is usually better served by a subordinated loan. Anyone who wants genuine participation in the substance of the business should place the atypical silent partnership next to it for comparison.

What the BFH decided — and what is wrongly attributed to it

The leading decision is BFH 14.08.2019 – I R 44/17 (DB 2020, 1376), from the German Federal Fiscal Court. The headnote reads verbatim: "Genussrechte führen nur dann zu Bezügen i.S. des § 20 Abs. 1 Nr. 1 EStG, wenn der Genussrechtsinhaber kumulativ sowohl am Gewinn als auch am Liquidationserlös beteiligt ist" — Genussrechte only produce income within the meaning of § 20 Abs 1 Nr 1 EStG where the holder participates cumulatively in both profit and liquidation proceeds.

Participation in the liquidation proceeds means participation in the hidden reserves. The BFH expressly recorded what does not suffice: a term of more than 30 years, the position of sole shareholder, and conversion rights.

This is the costliest misjudgement in practice. Contracts that try to simulate proximity to equity through long terms and conversion clauses still fail § 8 Abs 3 S 2 KStG.

Two case references circulate in the advisory literature that are not Genussrecht decisions at all: BFH I R 4/19 and BFH I R 43/12. They must not be cited in this context. Where a source lists them as Genussrecht case law, that is a reliable warning signal about the rest of its content.

The most recent position concerns employee Genussrechte: BFH 21.10.2025 – VIII R 14/23, published on 30.01.2026. An employee Genussrecht with an obligation-like design produces income under § 20 Abs 1 Nr 7 EStG rather than under § 19 Abs 1 S 1 Nr 1 EStG. The Genussrecht interest is subject to the flat-rate withholding regime, and a lack of arm''s length pricing on the interest does no harm.

For German employee schemes that is a material relief. The return is not recharacterised as employment income merely because the holder happens to be an employee.

The BMF circular of 11.04.2023, GZ IV C 6 - S 2133/19/10004 :002, applies in addition; here it is evidenced only through the secondary source Deloitte. It records that capital provided by unrelated third parties is always debt for tax purposes, that § 8 Abs 3 S 2 KStG is not an accounting rule, and that the debt-mezzanine swap is income-neutral (BFH 15.04.2015 – I R 44/14).

Employee participation: the DACH asymmetry

This is where the most important practical difference between the two countries sits — and it runs counter to what many owners expect.

In Germany, § 3 Nr 39 EStG grants relief for the free or discounted transfer of asset participations with an allowance of EUR 2,000. The Zukunftsfinanzierungsgesetz of 11.12.2023 raised it from EUR 1,440. The condition is that the offer is made to all employees.

The decisive point is the cross-reference to the 5. VermBG (the fifth German act on capital formation for employees). Relief covers Genussrechte both under lit f (certificated participation certificates) and under lit l (uncertificated Genussrechte), the latter in terms, "where the right to the profit of that undertaking is attached to it". Participation in liquidation proceeds is not required for this.

In Austria, the wording of § 3 Abs 1 Z 15 lit b EStG refers only to "Kapitalanteile (Beteiligungen)" — capital shares. usp.gv.at specifies, as at 01.01.2026, that Substanzgenussrechte and genuine silent partnerships are among the instruments qualifying for relief, with an allowance of 3,000 euros and a five-year holding period.

Topic	Austria	Germany
Core provision	§ 3 Abs 1 Z 15 lit b EStG	§ 3 Nr 39 EStG
Allowance	3,000 euros	2,000 euros (since the ZuFinG of 11.12.2023)
Nominalgenussrecht qualifies	no	yes, via 5. VermBG lit l
Substanzgenussrecht qualifies	yes	yes
Certificated participation certificate	—	5. VermBG lit f
Holding period	five years	—
Offer to all employees	—	yes, all-employee requirement
Further allowances	4,500 euros for shares held in trust (§ 3 Abs 1 Z 15 lit c EStG); 3,000 euros profit participation, capped by EBIT (§ 3 Abs 1 Z 35 EStG)	—
Start-up regime	§ 67a EStG, does not cover Genussrechte	—

The conclusion is unambiguous. A Nominalgenussrecht — pure profit participation without a share in the substance — qualifies for relief in Germany but not in Austria. Transferring a German employee scheme to Austria unchanged forfeits the relief.

The Austrian workaround via § 67a EStG runs into a trade-off of its own. The start-up employee participation regime likewise refers only to "Kapitalanteile (Beteiligungen)" and does not cover Genussrechte.

Its conditions are narrow: a maximum of 100 employees, turnover of no more than 40 million euros, transfer within ten years of formation, and an employee holding below 10 %. 75 % is captured at the fixed rate of 27.5 %, subject to an employment relationship of at least two years and inflow after three years.

Anyone wanting to use § 67a EStG needs real shares. And with that the Notariatsakt under § 76 Abs 2 GmbHG is back on the table — precisely the cost the Genussrecht was meant to avoid. This decision belongs before the first document is drafted.

There is no reliable public statistic on how widely Genussrechte are used as employee participation that could be relied on here.

Accounting: AFRAC 40 and IDW HFA 1/1994

In Austria, AFRAC 40 applies. Paragraph (4) states in terms: "Beispiele für hybride Finanzinstrumente sind Genussrechte, stilles Gesellschafterkapital, partiarische Darlehen und Perpetual Bonds" — examples of hybrid financial instruments are Genussrechte, silent partnership capital, profit-participating loans and perpetual bonds.

Paragraph (8) defines four criteria for classification as equity: subordination, capital maintenance on the return paid, capital maintenance on repayment, and the absence of a fixed term. The statement records: "Diese Kriterien sind nachfolgend definiert und kumulativ zu erfüllen" — these criteria are defined below and must be met cumulatively.

Watch out for abbreviated accounts. TPA lists only three criteria; the primary source, with four, governs. Under paragraph (37), first-time application covers financial years beginning after 31.12.2024. That AFRAC 40 replaces KFS/RL 13 is evidenced here only by a secondary source.

In Germany, IDW HFA 1/1994 (WPg 1994 p. 419) likewise sets out four cumulative criteria. Abbreviated three-criterion versions circulate here too, for example at steuba.de. Depending on the outcome, the item is shown within equity under § 265 Abs 5 HGB or within liabilities under § 266 Abs 3 C HGB.

The practical rule: a fixed term tips the equity classification in both countries, however subordinated the capital is in other respects. Anyone looking to strengthen their rating ahead of a financing round will find the alternatives in mezzanine capital.

The threefold split

The most common advisory error grows out of a silent assumption: that an equity-like design works the same way everywhere. It does not.

Three sets of criteria run in parallel. For tax, what counts is the cumulative test in § 8 Abs 3 S 2 KStG or § 8 Abs 3 Z 1 KStG. For accounting, what counts is the four criteria in AFRAC 40 or IDW HFA 1/1994. For employee relief, what counts is the definition in the 5. VermBG applied through § 3 Nr 39 EStG.

These three catalogues regularly come apart. An open-ended, subordinated Genussrecht without liquidation participation can be equity for accounting purposes and debt for tax purposes. A fixed-term Nominalgenussrecht can qualify under § 3 Nr 39 EStG and still sit in liabilities on the balance sheet.

On top of that sits an inversion of effects between the parties. An equity-like design is bad for the issuer, because the return is not a deductible business expense. For a corporate holder subject to corporation tax it is good, because § 8b Abs 1 KStG or § 10 Abs 1 Z 3 KStG applies.

From which follows an uncomfortable truth: there is no Genussrecht that is optimal for both sides. The only question is whose position the structure favours — and whether that is reflected in the price.

Public offerings: capital markets law and market reality

As long as you are negotiating with a single investor, the question does not arise. As soon as Genussrechte are offered broadly, a body of rules applies that starts from a different place in each country.

Topic	Germany	Austria
Coverage	§ 1 Abs 2 VermAnlG, eight items; Genussrechte are item 5	§ 1 KMG 2019 defines the "Veranlagung" (investment) and does not name Genussrechte expressly
Scope	uncertificated Genussrechte only	only via the general clause
Certificated participation certificates	securities under Regulation (EU) 2017/1129 and the WpPG	—
Exemptions (alternative)	§ 2 Abs 1 Nr 3 VermAnlG: lit a no more than 20 units, lit b at most 100,000 euros in twelve months, lit c at least 200,000 euros per investor	§ 3 KMG 2019: 100,000 euros per investor; below 2 million euros in twelve months across the EEA; qualified investors; fewer than 150 non-qualified persons per EEA state; Abs 3: 5 million euros over seven years
Crowdfunding thresholds	—	AltFG § 3 Abs 1: 2 million euros per issuer in twelve months, 5 million euros outstanding over seven years; § 4 Abs 1 information duty from 250,000 euros; § 3a Abs 1 retail investors at most 5,000 euros per issue and per twelve months
Historical change	—	§ 4 KMG in its former version fell away on 20.07.2019

The regulatory difference matters. Germany names Genussrechte expressly; Austria captures them only through the general clause — with correspondingly less legal certainty on classification.

How small the segment actually is emerges from the BaFin annual report 2025. Of 19 approved sales prospectuses for Vermögensanlagen, 14 related to corporate participations and 5 to Genussrechte. Among 257 investment information sheets (2024: 297), 81 % were subordinated loans, 12 % profit-participating loans and 7 % Genussrechte. Added to that were 206 information-sheet approvals, 16 prospectus approvals and 0 rejections, with an investment focus on solar and wind.

Genussrechte are therefore a niche instrument in the German retail market. Anyone resting their scheme on supposed market practice is resting it on very little.

The cautionary example is Prokon. In its notice of 07.04.2016, the insolvency administrator SJPP referred to "approximately 75,000 investors" and "around 1.4 billion euros"; the opening order is dated 1 May 2014. In its hib release of 10.02.2014 the Bundestag cited "around 74,000 investors" and more than 1 billion euros. The proceedings ended in a restructuring.

Bank Genussrechte remain a fringe area with rules of their own, for instance under savings bank law in § 3 Abs 3 SächsSparkG and, before the CRR, § 10 Abs 5 KWG in its former version. For operating companies it is of no relevance.

Common mistakes

The label in the contract decides nothing. Heading a deed "Substanzgenussrecht" without agreeing participation in the liquidation proceeds leaves you with an obligation-like Genussrecht, following BFH I R 44/17.

Using long terms as a substitute for participation in the substance. A term of more than 30 years, sole shareholder status and conversion rights are expressly not enough.

Copying German employee schemes to Austria unchanged. The Nominalgenussrecht loses its relief in the process, because § 3 Abs 1 Z 15 lit b EStG covers only Substanzgenussrechte.

Relying on § 67a EStG without pricing in the Notariatsakt. The provision does not cover Genussrechte, and real shares mean § 76 Abs 2 GmbHG.

Treating the accounting and tax classifications as one and the same. AFRAC 40 and § 8 Abs 3 Z 1 KStG test different features and regularly deliver different results.

Taking wrong case references from advisory sources. BFH I R 4/19 and BFH I R 43/12 are not Genussrecht decisions.

Leaving information rights unregulated. The BGH did grant an account of stewardship in II ZR 121/15, but a contractually defined reporting scope saves the argument about what "reasonable suspicion" means.

Failing to run the numbers on the settlement due at the end of the term. The same question decides the outcome for silent partnerships too, as settlement credit and silent partnership taxation show. This article is not a substitute for legal or tax advice.

How IGCP supports owners here

International German Capital Partners (IGCP) has advised on capital raisings and participation processes for more than 20 years, across more than 100 transactions, and is 100 per cent independent of banks, funds and buyers.

Structure before paper. The first question is whether a Genussrecht is the right instrument at all — or whether a silent partnership, a subordinated loan or a minority stake fits better. For growth financings, growth capital places the alternatives in order.

The three sets of criteria are worked through together before the first draft contract exists: the tax classification, the balance sheet effect and, for employee schemes, the relief available in the country concerned. Legal and tax implementation is carried out with your own advisers.

Where outside capital is to come in, suitable addresses are curated and several are approached in parallel, so that terms emerge instead of concessions. The typical range is companies with turnover between 300,000 and 15 million euros, with a focus on niche businesses and scalable business models in the DACH region; a process at IGCP takes 3 to 6 months rather than the 6 to 12 months common in the market.

Next step: send your draft or your key terms to office@igcp.at and have it checked, before signature, whether the tax, accounting and relief effects actually line up.

Genussrechte leave the shareholder position untouched; where the shares themselves are to be handed over, the process is set out under selling a GmbH.

FAQ

What is a Genussrecht?

A Genussrecht is a purely contractual claim against a company, typically to a share in its profit. According to Gabler it conveys "neither voting rights nor any other membership rights". No statutory definition exists; § 221 Abs 3 AktG (Germany) and § 174 Abs 3 AktG (Austria) govern only the issuing procedure for a public limited company.

What distinguishes a Substanzgenussrecht from an obligation-like Genussrecht?

With a Substanzgenussrecht the holder participates cumulatively in profit and in the liquidation proceeds and therefore shares in the hidden reserves. Where participation in liquidation proceeds is missing, the instrument is obligation-like. In Germany that leads to § 20 Abs 1 Nr 7 S 1 EStG instead of § 20 Abs 1 Nr 1 S 1 EStG.

How are Genussrechte taxed in Austria?

Substanzgenussrechte fall under § 27 Abs 2 Z 1 lit c EStG and are captured at 27.5 % KESt; for corporate holders the participation exemption in § 10 Abs 1 Z 3 KStG applies. For Nominalgenussrechte that have not been publicly offered, the applicable rate is unresolved, because § 27a Abs 2 Z 1 to Z 3 EStG does not name Genussrechte expressly.

Can a GmbH issue Genussrechte?

In practice yes, legally with an open flank. Neither the BGH nor the OGH has decided whether § 221 Abs 3 AktG or § 174 Abs 3 AktG applies by analogy to the GmbH. Statements about a specific required majority or form are therefore not settled law.

Do Genussrechte qualify for employee participation relief?

In Germany yes, including as an uncertificated Nominalgenussrecht: § 3 Nr 39 EStG with a EUR 2,000 allowance via 5. VermBG lit l, which requires only "the right to the profit of that undertaking". In Austria, § 3 Abs 1 Z 15 lit b EStG covers only Substanzgenussrechte, with a 3,000 euro allowance and a five-year holding period.

Why does § 67a EStG not help with Genussrechte?

The Austrian start-up employee participation regime refers only to "Kapitalanteile (Beteiligungen)" and does not cover Genussrechte. Using it means handing over real shares in the company and accepting the Notariatsakt under § 76 Abs 2 GmbHG — exactly the cost the Genussrecht was supposed to avoid.

Are Genussrechte equity on the balance sheet?

Only where all criteria are met cumulatively. In Austria, AFRAC 40 paragraph (8) requires subordination, capital maintenance on the return, capital maintenance on repayment and the absence of a fixed term; in Germany, IDW HFA 1/1994 likewise names four cumulative criteria. Otherwise the item is shown within liabilities under § 266 Abs 3 C HGB.