For example, private withdrawals can be made by shareholders in sole proprietorship, as they do not receive a normal salary. You can take a share from the cash register or choose an item. However, the withdrawals must in no way reduce profit, for example in order to be able to save taxes.
In the case of private extraction, there is a sales tax liability, but these are again divided into two categories. On the one hand, there is a withdrawal of money that is exempt from sales tax and, on the other hand, an object or other service is considered to be taxable.
Who can take a private sample?
In contrast to corporations, sole proprietorships do not pay themselves any salary, they are allowed to take a private withdrawal. This is to cover the living expenses, but there must always be some kind of sub-account where the withdrawal must be posted, because there must be no negative amount.
Many people think when they take private withdrawals that there should actually be a lack of money in the account. That is a mistake, because a profit is not to be equated with the business assets. So if there is a private withdrawal, it cannot be booked under business expenses .
According to wholevehicles, the tax authorities see private withdrawals as sensitive, because when it comes to sales tax, they have no mercy. If, for example, a cost of goods of 500 euros is given and the goods are resold for 1200 euros, the difference must also be booked as private withdrawals. This is difficult to understand for laypeople in this field, but a tax advisor can provide precise information about it.
How high can a private withdrawal be?
How high a withdrawal may be differs from company to company, but something like this always has a negative effect on a tax payment and, in the worst case, results in a high tax demand. There are a few rules that must be observed when making a private sample.
Everyone who handles their business responsibly determines at the beginning of the year what amount should be taken from the private extraction. For example, the tax office settles a flat rate with a baker, which is as high as it is needed for a living. If employees have to carry out private renovations for their boss, he must state these services in the sales tax as a private withdrawal.
If a car is used for private journeys, this is covered by a 1 percent flat rate. Those who keep a logbook should make every private trip and thus set a dividing line between private and business.
In short, a private withdrawal can be defined in such a way that capital can be withdrawn from a company’s assets and used for private life. It doesn’t always have to be cash, because if, for example, a new computer is purchased in a company and the old one is used for private use, this is also a private withdrawal.
The same applies if repairs are carried out during normal working hours or the company car is used for private trips.
How is a private withdrawal taxed?
Whoever withdraws cash does not reduce the profit. No tax has to be paid on the withdrawal itself. This is paid on the profit, which is defined as the “difference between the business assets at the end of the financial year and the business assets at the end of the previous financial year, increased by the value of the withdrawals and reduced by the value of the deposits” (Section 4 EStG). However, care should be taken to ensure that no more is withdrawn than the company makes profit.
In short: Basically, private deposits / withdrawals can be said to increase or decrease equity. They are sub-accounts of the ECs in the balance sheet and therefore the accounts are not part of the profit & loss account (P & L) and are therefore not included in the determination of profit. Therefore, they are not profit-reducing and are not included in the calculation of the tax.
When you take over from an old PC, things look different, because if this was already deducted for tax purposes in the past, only a certain residual value, usually 1 euro, has to be written off. Since private extraction results in a loss for a company, no taxes are incurred there. The withdrawal must be attributed to the private assets and must then be taxed.
Can a GmbH make private withdrawals?
In principle, a GmbH is not allowed to do this, there must be a clearing account for this, on which a partner must then pay the money back in. However, there are some design options for private withdrawal, which look like an advance on wages or salaries is granted or as an advance on a profit, but distributions may be with a GmbH.
Will the profit be minimized?
A private withdrawal minimizes equity. It must also be posted correctly. For this, the accounting department must create a sub-account as a private account, private withdrawals can then be booked as debit.
However, there are only sub-accounts with sole proprietorships, others are not allowed to withdraw private withdrawals. The accounting department also has to ensure that the private account and a real current account are not confused.
Whether a private withdrawal has any effect on profits always depends on what is withdrawn. This is mostly about cash in the first place. Then come economic goods and finally there are private withdrawals in the form of uses or services. A sole trader has no tax advantages with a private withdrawal, because he does not get a salary, but makes private withdrawals, which he can transfer from the business account to his private account. A private withdrawal does not represent a reduction in profit, because it is not a business expense. Ergo income tax must also be paid.
An entrepreneur does not get a fixed salary like his employees, so he has to take a private withdrawal, because the boss cannot put himself on a payroll after all. The private extraction is completely legal and has no tax disadvantages, but also no advantages.
Examples of private extraction
- The most common private withdrawal from a company is the withdrawal of money. For this purpose, cash is transferred from the business assets to the private assets of the entrepreneur. As a result, the money must be withdrawn from the respective cash account. The cash account is debited here, while the money is credited to the private account. This is a withdrawal from the company’s equity.
- Selling a company vehicle can lead to an increase in a company’s equity. This occurs when the residual book value is less than the sales price for the vehicle. The sales price achieved is then recorded as sales revenue in financial accounting. Based on the residual book value of the vehicle, which was lower than the sales price achieved, this is deducted from the sales revenue. The resulting difference increases the company’s annual revenue.