Retention Calculator

Partnerships and sole traders generally tax their profit at their personal income tax rate - whether or not the money is withdrawn or stays in the business. This is exactly where Section 34a of the Income Tax Act comes in: anyone who retains profit in the company can, on request, tax it at a reduced rate of 28.25% (plus solidarity surcharge) instead of up to 45%. The catch comes later - subsequent taxation on withdrawal.

The calculator does the comparison for you. You enter your profit and personal tax rate, pick the legal form, and three scenarios sit side by side: full immediate taxation on withdrawal, retention under Section 34a at the reduced rate, and for contrast the GmbH with corporate tax, trade tax and capital gains tax on the distribution.

The real crux is the subsequent taxation under Section 34a(4). The reduced rate is not a gift but a tax credit: as soon as you do withdraw the retained profit later, 25% (plus surcharge) falls due. Whether retention pays off therefore depends on how long the money stays in the business and what it earns there. The calculator works out the short-term advantage and the long-term overall effect separately.

Because a single year says little, there is the multi-year simulation. It projects over up to 30 years how immediate withdrawal, retention and the GmbH variant drift apart, and shows the path as a curve. At a glance you see from which time horizon retention earns back the subsequent taxation.

Trade tax feeds in via your municipality's multiplier. The calculator uses a standard multiplier that you can adjust to your location, because there is a noticeable difference between 250% and 500%. For the GmbH comparison, corporate tax, surcharge, trade tax and the flat capital gains tax on the distribution flow in cleanly separated.

A dedicated section summarizes the relevant sections - Section 34a on the relief, the subsequent taxation, the order of use - with references to the statute so you can read up yourself if in doubt. This is no substitute for tax advice, but it makes the calculation traceable rather than a black box.

Everything runs in your browser; the income tax calculation uses the stored tariff zones. Your figures stay with you, there is no signup and no accountant appointment just to run the numbers on whether the topic is worth it for you at all. For the binding decision, still get professional advice - the calculator is the groundwork, not the final word.