New withholding tax rules for corporations

With the Budgetary Adjustment Act 2027–2028 a new rule has been passed which could have practical significance for many limited companies: in future, a claim by the company against a natural person as a shareholder shown on the shareholder clearing account can, under certain conditions, be treated as a distribution for tax purposes. This rule is anchored in Section 8 (2a) of the 1988 Corporate Income Tax Act (KStG).

For practice, the following is particularly important: the new distribution fiction is based on the open balance sheet as at the balance sheet date. According to the regulatory concept described, fluctuations during the year are not relevant.

What is meant by a shareholder clearing account

In practice, clearing accounts are frequently used to record various financial transactions between the company and the shareholder. Typically, both credits and debits are recorded there. According to the illustrated practical scenario, the clearing account contains, for example:

credits such as salaries for managing directors or distributions
burdens such as SVS contributions or private withdrawals, for example through the use of a company credit card for private purposes

According to the explanatory notes on the government bill, it has become apparent in practice that claims on such clearing accounts accumulate over years and are not fully settled in the longer term. This is precisely where the new statutory regulation comes in.

When the deemed distribution rule may apply

The new provision stipulates that, under certain conditions, a claim on the shareholder clearing account is deemed to have been distributed and received as an outstanding amount. This applies where the balance exceeds EUR 50,000 as at the balance sheet date. No deemed distribution shall take place insofar as the clearing claim:

is settled by the balance sheet date, or
is converted into a loan receivable by the balance sheet date

What is therefore decisive is not the trend over the course of the year, but the position as at the balance sheet date.

Furthermore, the deemed distribution rule does not apply to the extent that the respective shareholder’s clearing account does not exceed a total of EUR 50,000 as at the balance sheet date. In accordance with the adopted version, the settlement accounts of close relatives must also be taken into account: the shareholder’s settlement account and that of the relative(s) are added together.

Conversion into a loan claim only if it is at arm's length

If a clearing account is to be excluded from the deemed distribution by converting it into a loan claim, the statutory text requires a claim arising from a loan agreement complying with the arm's length principle. In particular, the following criteria are relevant for this purpose:

writing
running yield
Repayment obligation

According to the Budget Committee’s explanations, what is decisive is not only the formal agreement, but also that, taking the overall circumstances into account, it is in fact being implemented accordingly. An interest rate agreed in the loan agreement that is slightly too low should therefore not, in itself, lead to a deemed distribution.

What tax consequences are envisaged

If the outstanding claim is neither settled nor converted into an arm's length loan claim, the relevant claim amount is deemed to have been openly distributed and received on the day following the resolution to prepare the annual financial statements, but at the latest after five months.

For the company, this means that it must declare and pay the capital gains tax within the seven-day deadline. The distribution amount is subject to capital gains tax at a rate of 27.50 %. It is particularly important to note that the date on which the annual accounts are drawn up by the management is decisive, not the date on which they are approved.

Which organisations and individuals may be affected

Section 8 of the Corporate Income Tax Act (KStG) applies to corporations, but not to partnerships. These include GmbHs, FlexCos and AGs, both domestic and foreign capital companies.

The legislation is intended to cover natural persons as shareholders, regardless of the size of their shareholding. According to the draft bill as presented by the Budget Committee, the deemed distribution rule may also apply in the case of indirect shareholdings. Close relatives are also expressly mentioned.

However, in this area in particular, there are still unresolved practical issues, such as detailed questions concerning indirect structures or certain special scenarios.

When the new rules come into force

The fiction of profit distribution regarding shareholder clearing accounts applies to financial statements with a balance sheet date after 31 December 2026. For a financial year corresponding to the calendar year, 31 December 2027 is therefore the first relevant reporting date. If the balance sheet date differs, the rule can take practical effect correspondingly earlier.

What businesses should be focusing on right now

For limited companies with shareholder clearing accounts, the need for action thus increases from 2027. Existing balances should be reviewed in good time before the next relevant balance sheet date. In order to avoid the deemed distribution, two measures in particular come into consideration:

Settlement of the clearing account by the balance sheet date
Conversion into an arm’s-length loan

The new rules may have additional tax implications, particularly in the context of restructuring and planning relating to balance sheet dates.

Conclusion

The new regulation on shareholder clearing accounts brings a significant change for limited companies from 2027. Open balances of more than EUR 50,000 can trigger a deemed distribution and therefore a withholding tax liability under certain conditions.

Anyone who maintains clearing accounts in a company should therefore check early on how high the outstanding receivables are as of the balance sheet date and whether measures should be taken in good time. Precisely because not all application issues have yet been clarified, careful tax categorisation in each individual case is recommended.