Gross Price Is Meaningless Without Net Proceeds
When business owners talk about selling their company, they usually talk about price. What actually matters is net proceeds after tax.
Two owners can sell similar companies for the same price — and walk away with millions of euros difference, purely due to tax structure.
This article explains:
which taxes apply when selling a business
how the partial income method works
how holding structures change outcomes
and the realistic best- vs worst-case net scenarios
1. Which taxes apply when selling a business?
In the DACH mid-market, most transactions are structured as share deals. The seller is typically either:
a private individual
or a holding company
Each scenario leads to a fundamentally different tax outcome.
Income tax vs capital gains tax (Germany-focused logic)
Unlike some jurisdictions, Germany does not apply a flat capital gains tax for significant shareholdings in operating companies.
Instead:
Business sales are taxed under income tax rules
The partial income method (Teileinkünfteverfahren) usually applies
This distinction alone explains many misconceptions about exit taxation.
2. The partial income method (Teileinkünfteverfahren) explained simply
Under the partial income method:
60% of the capital gain is taxable
40% is tax-free
The taxable portion is taxed at the seller’s personal income tax rate
Why this exists
The logic is to avoid double taxation, as profits were already taxed at the company level.
Example calculation
Sale price: €5.0m
Acquisition cost: €0.5m
Capital gain: €4.5m
Taxable base:
60% of €4.5m = €2.7m
Assuming a 45% marginal tax rate:
Tax due: €1.215m
👉 Effective tax rate: ~27% 👉 Net proceeds: ~€3.8m
3. Private ownership vs holding company: the decisive difference
Selling from private ownership
Typical outcome:
Effective tax rate: 25–30%
Net proceeds depend heavily on marginal tax rate and add-backs
Risk: No tax deferral. Once sold, the tax is due — regardless of reinvestment plans.
Selling via a holding company
If the seller owns the operating company through a holding entity:
95% of the capital gain is tax-exempt
Effective tax rate: approx. 1.5–2%
Proceeds can be reinvested almost tax-free
Example:
Capital gain: €4.5m
Tax: ~€70k
Available for reinvestment: ~€4.43m
This is why most serial entrepreneurs and PE-backed founders use holding structures.
The critical limitation
A holding structure must exist well before the sale.
Creating one shortly before signing usually:
triggers tax leakage
raises red flags with tax authorities
fails to deliver the intended benefit
4. Worst-case vs best-case net outcome (realistic comparison)
Let’s compare two realistic scenarios for the same company:
Scenario A: Poor tax structuring
Private individual
No preparation
Asset deal forced by buyer
Outcome:
Combined tax burden: 35–45%
Net proceeds: €2.7–3.2m
Scenario B: Optimised structure
Share deal
Holding company
Clean preparation
Outcome:
Effective tax burden: 1–2% (deferral model)
Net proceeds: €4.4–4.5m available for reinvestment
The difference
Same business. Same buyer. Difference in net outcome: €1.2–1.8 million.
That gap is not market-driven. It is structure-driven.
5. The most common misconceptions about exit taxes
“My accountant already optimised my taxes”
Most accountants optimise annual taxation, not one-off transactions.
“I’ll just pay capital gains tax”
In many cases, this assumption is simply wrong.
“I can fix the structure shortly before closing”
Usually false — and often expensive.
Conclusion: Don’t negotiate blind
Negotiating a business sale without understanding your net outcome is like negotiating salary without knowing the tax bracket.
Professional exit planning starts with:
a defensible tax logic
realistic net scenarios
and early structural decisions
Everything else is speculation.
Start your valuation now
Theory is good, but concrete numbers are better.