Silent Partnership Taxation in Austria and Germany

Austria taxes a typisch stiller Gesellschafter (a typical silent partner, with no share in hidden reserves) at the full income tax tariff of up to 55 per cent: § 27a Abs 2 Z 3 EStG expressly excludes this income from the special flat rate. The atypisch stiller Gesellschafter (atypical silent partner) earns business income under § 23 Z 2 EStG. In Germany, the typical silent partner falls under the Abgeltungsteuer (the German flat-rate withholding tax on investment income) at 25 per cent — unless § 32d Abs 2 Nr 1 EStG disapplies it, in which case the personal tariff applies here as well. The atypical silent partner is a Mitunternehmer (co-entrepreneur for tax purposes) under § 15 Abs 1 S 1 Nr 2 EStG.

For the sale of an Austrian limited company, our approach to selling a GmbH covers the process from valuation to the notarial deed.

Two exception provisions explain why the numbers usually quoted are wrong — one in each country, and both are missing from most freely available accounts.

Both exceptions catch precisely the situation in which silent partnerships are normally agreed: an investor close to the company, or a shareholder who puts in additional capital. Anyone budgeting for the general rule is budgeting incorrectly.

The basic forms and their civil law framework are covered in the overview article on the silent partnership. This article deals with taxation alone — during the term and on exit, in Austria and in Germany.

The four cases side by side

Four combinations need to be distinguished. They differ in the category of income, in the rate, in the procedure and in the burden they place on the operating company.

	AT typical silent	AT atypical silent	DE typical silent	DE atypical silent
Provision for the silent partner	§ 27 Abs 2 Z 4 EStG	§ 23 Z 2 EStG	§ 20 Abs 1 Nr 4 EStG	§ 15 Abs 1 S 1 Nr 2 EStG
Category of income	investment income	business income	investment income	business income
Rate during the term	general tariff up to 55 %	general tariff	25 % flat-rate tax, otherwise tariff	general tariff
Special tax rate	excluded (§ 27a Abs 2 Z 3 EStG)	not applicable	flat-rate under § 32d EStG, exception in § 32d Abs 2 Nr 1 EStG	not applicable
Withholding at source	no KESt (Austrian capital yields tax) deduction since the Budgetbegleitgesetz 2011	no	yes, Kapitalertragsteuer (German capital yields tax) at 25 %	no
Procedure	assessment	separate determination under § 188 BAO	assessment or final withholding	separate determination under § 180 Abs 1 S 1 Nr 2a AO
Loss relief	replenishment of the contribution under § 27 Abs 2 Z 4 EStG	§ 23a EStG, suspended losses	§ 20 Abs 6 EStG, falls away under § 32d Abs 2 Nr 1 EStG	§ 15a Abs 5 Nr 1 EStG
Saver''s allowance	does not exist	does not exist	yes, falls away under § 32d Abs 2 Nr 1 EStG	no
Trade tax	abolished in 1994	abolished in 1994	add-back under § 8 Nr 1 GewStG at the operator	separate trade business (BFH IV R 8/14)
Solidarity surcharge	no	no	5.5 %, including on tax under § 32d Abs 3 and 4 EStG	5.5 % within the assessment
Exit	§ 24 EStG, allowance of EUR 7,300	§ 24 EStG, § 37 Abs 5 EStG	investment income	§ 16 Abs 1 S 1 Nr 2 EStG, § 34 Abs 3 EStG

The row on the special tax rate is the most expensive difference in the table. It costs an Austrian investor up to 27.5 percentage points against the assumption he is likely to arrive with.

Where a figure has to hold up in front of a buyer, a bank or a court, our approach to company valuation explains how we arrive at it.

Austria, typical silent partnership: the tariff, not 27.5 per cent

The profit share of a typical silent partner is investment income under § 27 Abs 2 Z 4 EStG. That is where the parallel with the sale of a GmbH shareholding — see selling a GmbH — already ends.

§ 27a Abs 2 Z 3 EStG expressly removes income from a holding as a silent partner from the special tax rate. The general income tax tariff applies instead, which at the top means up to 55 per cent.

This is the single most frequently misstated point in the whole subject area. Any source claiming final taxation at 27.5 per cent for a typical silent partner is misdescribing the law. § 27a Abs 1 EStG provides for 25 per cent only in respect of cash deposits and unsecuritised money claims held with credit institutions, and 27.5 per cent in the remaining cases — the silent partnership is taken out of both.

There has been no capital yields tax deduction since the Budgetbegleitgesetz 2011 (the Austrian budget accompanying act of that year). The silent partner declares the profit share himself in his assessment.

§ 27 Abs 2 Z 4 EStG also has to be kept in mind: profit shares are taxable only to the extent that they are not required to replenish a contribution that has been reduced by losses. After loss-making years, in other words, cash flows that initially triggers no tax at all.

Anyone wanting to compare the burden of a silent partnership with that of a share sale will find the other side in tax on a company sale.

Germany, typical silent partnership: when the flat-rate tax does not apply

The general rule is straightforward. Profit shares are investment income under § 20 Abs 1 Nr 4 EStG, the company withholds capital yields tax at 25 per cent, and the Abgeltungsteuer under § 32d EStG settles the matter.

The general rule, however, is exactly what does not apply to the situation being marketed. § 32d Abs 2 Nr 1 EStG excludes the flat rate where creditor and debtor are nahestehende Personen (related parties) (lit a), or where the silent partner also holds at least 10 per cent of the company or is a related party of someone who does (lit b). The personal tariff then applies.

The consequence goes beyond the rate. § 32d Abs 2 Nr 1 Satz 2 EStG provides: "Insoweit findet § 20 Absatz 6 und 9 keine Anwendung" — to that extent, § 20 Abs 6 and 9 do not apply. The saver''s allowance and the special loss relief rules for investment income therefore fall away.

Feature	Flat-rate tax (general rule)	§ 32d Abs 2 Nr 1 EStG
Rate	25 %	personal income tax tariff
Saver''s allowance (§ 20 Abs 9 EStG)	applies	excluded
Loss relief (§ 20 Abs 6 EStG)	applies	excluded
Typical triggers	unconnected third party with no shareholding	related party, holding of 10 % or more

The solidarity surcharge remains in both variants. Under § 3 Abs 3 S 2 SolzG and § 4 S 3 SolzG it is levied at 5.5 per cent on tax under § 32d Abs 3 and 4 EStG, irrespective of the exemption thresholds and the tapering rule. Anyone relying on the raised thresholds is overlooking this special provision.

Where family members are involved, the tax authorities additionally test whether the profit share is appropriate. The yield ceilings on the nominal amount of the contribution are: a maximum of 15 per cent where the contribution was gifted; up to 25 per cent where it was not gifted and there is a profit share only; and up to 35 per cent where there is participation in both profits and losses. The authorities are BFH VIII R 17/19, X R 14/99, X R 1/19 and IV R 27/13; BFH IV R 19/20 makes clear that there is no rigid upper limit. Austria has no comparable rule.

Repealed: § 20 Abs 6 Satz 5 und 6 EStG

This is the point at which most of the material in circulation is out of date.

§ 20 Abs 6 Satz 5 and Satz 6 EStG have been repealed without replacement. The legal basis is the Jahressteuergesetz 2024 (the German annual tax act 2024) of 02.12.2024, BGBl. 2024 I Nr. 387, published on 05.12.2024. Art. 3 Nr. 7 Buchst. c reads: "Absatz 6 Satz 5 und 6 wird aufgehoben." In force since 6 December 2024.

Art. 3 Nr. 22 of the Jahressteuergesetz 2024 amends § 52 Abs 28 Satz 25 and 26 EStG so that neither sentence applies any longer to any open case. The repeal therefore reaches back into every assessment that has not yet become final.

	Position to 05.12.2024	Position since 06.12.2024
§ 20 Abs 6 Satz 5 und 6 EStG	in force	repealed without replacement
Cap on loss relief	EUR 20,000 per year	none
Application to earlier years	yes	no longer applicable to any open case
Action required	none	reopen open prior-year cases

The practical consequence: the widespread statement that losses from forward transactions or from bad debts can only be relieved up to EUR 20,000 a year reproduces repealed law. Anyone quoting that ceiling today is working with a provision that no longer exists.

If you declared a loss from a silent partnership in an assessment period that is still open and the relief was capped, the case is worth revisiting. The effort is small and the effect can cover the entire loss.

Atypical silent partnership: a co-entrepreneur in both countries

The atypical silent partner is a Mitunternehmer for tax purposes. That takes him out of investment income altogether. The underlying framework is dealt with in detail under atypical silent partnership.

In Germany, the income arises under § 15 Abs 1 S 1 Nr 2 EStG. It is determined separately and uniformly under § 180 Abs 1 S 1 Nr 2a AO; the determination notice binds the follow-on assessments under § 182 Abs 1 AO. Loss relief is governed by § 15a EStG, whose paragraph 5 Nr 1 expressly covers the silent partner.

In Austria, the attribution follows from § 23 Z 2 EStG and the procedure from § 188 BAO (the Bundesabgabenordnung, the Austrian federal fiscal code). For a purely capital-providing co-entrepreneur, § 23a EStG applies with its suspended losses; the details are set out in the BMF information of 07.07.2016, GZ BMF-010203/0200-VI/6/2016. Losses are therefore not lost, but can only be used against later profits.

Procedurally, the Austrian side runs through the determination return E 6 and the partnership questionnaire Verf 16. The occasionally cited "Formular E 106" is an EU social security form and has nothing to do with a silent partnership.

For social insurance purposes, active involvement by an atypical silent partner in Austria can trigger compulsory insurance under § 2 Abs 1 Z 4 GSVG (VwGH Ro 2014/08/0059 of 29.04.2016). On the boundaries of co-entrepreneur status, see also VwGH Ra 2020/13/0085 of 27.01.2021 and VwGH Ra 2018/13/0103 of 26.02.2020.

Whether a holding is typical or atypical is decided by how it is actually structured, not by the heading on the document. The clauses that draw the line are set out in the silent partnership agreement.

Trade tax: a German cost block with no Austrian counterpart

Austria has had no trade tax since 1994. Everything in this section concerns German facts only — and it is the reason why an identical structure costs different amounts on either side of the border.

With a typical silent partner, the profit shares are a deductible business expense for the operator. Under § 8 Nr 1 GewStG, however, a quarter is added back to the extent that total financing expenses exceed the allowance of EUR 200,000. That allowance has applied since the 2020 levy period.

With an atypical silent partner the position is fundamentally different. Under BFH IV R 8/14 of 08.12.2016, the atypical silent partnership constitutes a separate trade business in the objective sense under § 2 Abs 1 S 2 GewStG. The taxpayer under § 5 Abs 1 S 1 GewStG is the owner of the commercial business alone.

In practice, a dual structure means two trade tax returns — one for the operator, one for the atypical silent partnership. See R 5.1 Abs 2 GewStR. The trade tax allowance of EUR 24,500 under § 11 Abs 1 S 3 Nr 1 GewStG and the 3.5 per cent assessment rate are available to each of the two trade businesses.

Anyone weighing a silent partnership against other mezzanine forms will find the alternatives under mezzanine capital, subordinated loans and participation rights.

Exit: allowances, rate relief and the negative capital account

On departure, the form of the holding determines the tax on the settlement balance. The calculation of the balance itself is dealt with under settlement balance.

Feature	Austria, atypical silent	Germany, atypical silent
Provision	§ 24 EStG	§ 16 Abs 1 S 1 Nr 2 EStG
Allowance	EUR 7,300	EUR 45,000 under § 16 Abs 4 EStG
Age condition for the allowance	none	from the completed age of 55
Tapering	none	from a gain of EUR 136,000
Frequency	—	once in a lifetime
Rate relief	half the average rate under § 37 Abs 5 EStG	§ 34 Abs 3 EStG: 56 % of the average rate, minimum 14 %, up to EUR 5 million
Conditions for the relief	death, incapacity for work, or the completed age of 60 combined with ceasing gainful activity, in each case with the seven-year requirement	the age and once-only conditions of § 16 Abs 4 and § 34 Abs 3 EStG

The Austrian half rate under § 37 Abs 5 EStG is narrower than is often assumed. It requires death, incapacity for work or the completed age of 60 combined with ceasing gainful activity, in each case together with the seven-year requirement.

The most unpleasant item is the negative capital account. § 24 Abs 2 S 2 EStG provides that a negative capital account is in any event to be brought into account on departure. A taxable gain therefore arises without any cash coming in.

Anyone leaving an atypical silent partnership after several loss-making years may accordingly pay tax while receiving nothing. That case belongs in the calculation before notice is given, not afterwards.

For a typical silent partner the exit is less dramatic: he receives his contribution back to the extent that it has not been absorbed by loss allocations, plus any outstanding profit shares. The routes out of an existing holding are set out under selling a shareholding.

Total loss of the contribution: unresolved at the highest level

Here a negative finding is the most honest answer.

There is no BFH decision dealing specifically with the loss of a typical silent contribution under § 20 Abs 2 S 1 Nr 4 EStG. The question has not been settled by the highest court.

The decision usually relied on is BFH of 24.10.2017 – VIII R 13/15, BFHE 259, 535, BStBl II 2020, 831. On that authority, the final default of a private money claim within the meaning of § 20 Abs 1 Nr 7 EStG produces a deductible loss under § 20 Abs 2 S 1 Nr 7, S 2, Abs 4 EStG. The mere opening of insolvency proceedings is generally not enough.

That decision was handed down on Nr 7, not on the silent contribution. Applying it to § 20 Abs 2 S 1 Nr 4 EStG is reasoning by analogy. The analogy is defensible, but it is an analogy and not settled law.

Be careful with citations suggesting the opposite. BFH IX R 5/20 concerns § 17 EStG and is not in point. The occasionally cited references BFH VIII R 5/21 and BFH VIII R 15/21 cannot be traced and are likely to be misquotations.

For Austria the position is more open still. On the final total loss of a typical silent contribution, neither an express provision nor a VwGH decision is available. Anyone needing certainty here should obtain a binding ruling rather than rely on an opinion in the literature.

Common mistakes

Quoting the EUR 20,000 ceiling. It comes from § 20 Abs 6 Satz 5 und 6 EStG and has been repealed by the Jahressteuergesetz 2024 — including for open prior-year cases.

Budgeting at 27.5 per cent in Austria. § 27a Abs 2 Z 3 EStG excludes the special tax rate. The difference from the tariff can exceed half the net return.

Budgeting at a flat 25 per cent in Germany. As soon as the silent partner holds at least 10 per cent or is a related party, § 32d Abs 2 Nr 1 EStG applies. The saver''s allowance and loss relief fall away on top.

Writing off the solidarity surcharge because of the exemption thresholds. § 3 Abs 3 S 2 SolzG and § 4 S 3 SolzG levy it on tax under § 32d Abs 3 and 4 EStG regardless.

Filing only one trade tax return for a German dual structure. Under BFH IV R 8/14 there is a second trade business in the objective sense.

Ignoring a negative capital account on an Austrian exit. § 24 Abs 2 S 2 EStG brings it into account in any event, even where nothing is paid.

Labelling the agreement typical and structuring it atypically. The tax authorities follow the actual structure, not the heading. How a silent partner is properly admitted is set out under admitting a silent partner.

This article is not a substitute for legal or tax advice.

How IGCP helps

International German Capital Partners has been advising on capital raisings and equity participations for more than 20 years, across more than 100 completed transactions, and is 100 per cent independent of banks, funds and buyers.

For a silent partnership that means one thing above all: the structure is settled before the search for an investor begins. Typical or atypical, Austria or Germany, current yield or a share in value on exit — these decisions determine the tax burden across the entire term. The legal and tax implementation is carried out with your own advisers; the commercial terms are negotiated beforehand.

Our typical remit covers companies with revenues of EUR 300,000 to EUR 15 million, with a focus on niche businesses and scalable business models in the DACH region. An IGCP process usually runs three to six months rather than the six to twelve that are common in the market.

If you are planning a silent partnership, or want an existing one reviewed for its tax effect, send us the key parameters at office@igcp.at and we will place the structure in context in a confidential first conversation.

FAQ

What is the tax rate on a typical silent partnership in Austria?

The general income tax tariff applies, reaching up to 55 per cent at the top. § 27a Abs 2 Z 3 EStG expressly removes income from a holding as a silent partner from the special tax rate. The rate of 27.5 per cent that is often quoted is simply wrong here.

When does the German flat-rate tax not apply to a silent partnership?

Where creditor and debtor are related parties, or where the silent partner holds at least 10 per cent of the company or is a related party of someone who does (§ 32d Abs 2 Nr 1 EStG). The personal tariff then applies. In addition, Satz 2 removes the saver''s allowance and the loss relief rules of § 20 Abs 6 and 9 EStG.

Does the EUR 20,000 loss ceiling still apply?

No. § 20 Abs 6 Satz 5 und 6 EStG were repealed without replacement by the Jahressteuergesetz 2024 of 02.12.2024 (BGBl. 2024 I Nr. 387), in force since 6 December 2024. Following the amendment to § 52 Abs 28 Satz 25 und 26 EStG, neither sentence applies any longer to any open case.

Is the loss of a typical silent contribution deductible?

That has not been settled at the highest level. There is no BFH decision on the loss of a typical silent contribution under § 20 Abs 2 S 1 Nr 4 EStG. Relying on BFH VIII R 13/15 of 24.10.2017 is reasoning by analogy, because that decision was handed down on § 20 Abs 1 Nr 7 EStG.

Does a silent partnership trigger German trade tax?

With a typical silent partner the profit shares are a deductible business expense, but a quarter is added back under § 8 Nr 1 GewStG to the extent that financing expenses exceed EUR 200,000. With an atypical silent partner, BFH IV R 8/14 establishes a separate trade business with its own return. Austria has had no trade tax since 1994.

What allowances apply on exiting an atypical silent partnership?

In Austria, EUR 7,300 under § 24 EStG. In Germany, EUR 45,000 under § 16 Abs 4 EStG from the completed age of 55, tapering from a gain of EUR 136,000 and available only once in a lifetime.

Can tax fall due on exit without any payment being received?

Yes, in Austria. Under § 24 Abs 2 S 2 EStG a negative capital account is in any event brought into account on departure. The resulting gain is taxable even though no money changes hands.