Withdrawing Money by Recording It as a Debit in the Shareholders’ Current Account
Withdrawing Money by Recording It as a Debit in the Shareholders’ Current Account
Transferring money from the company’s bank account to a shareholder’s personal bank account is recorded in accounting as a debit to the shareholders’ current account. When money is withdrawn this way, the shareholder becomes indebted to the company, meaning the amount taken must eventually be repaid.
When using this method, special care should be taken to ensure that the total amount withdrawn does not exceed the company’s capital. In addition, the balance of the current account should not remain high for long periods. From time to time, this balance should either be repaid to the company or converted into salary (board remuneration / director’s fee) to reduce the outstanding amount.
If the balance of the shareholders’ current account remains high, it may attract the attention of the tax authorities and potentially trigger a tax audit. Moreover, if the balance consistently stays high, the company may be required to calculate interest (ADAT) on the receivable and issue an invoice including VAT to the shareholder. Since this is a sensitive issue, it is highly recommended to stay in close contact with your certified public accountant.
Key Points to Consider When Recording Debt in the Shareholders’ Current Account
- The account balance must be closely monitored
- Withdrawn amounts must be repaid to the company
- No SGK (social security), income tax, or stamp tax applies
- Interest calculation and invoicing may be required
Withdrawing Money Through Board Remuneration (Director’s Fee)
Another method is to pay yourself a director’s fee (board remuneration), which functions similarly to a salary.
In joint-stock companies, this applies to members of the board of directors; in limited liability companies, it applies to company partners. No social security premium is calculated on director’s fees, but income tax and stamp duty are withheld.
To make director’s fee payments, there must be a relevant clause in the articles of association, or a formal company resolution must be adopted.
Points to Consider When Using Board Remuneration
- It must be stated in the articles of association or company resolutions
- Income tax and stamp duty apply
- Director’s fees can be recorded as an expense by the company
Withdrawing Money Through Profit Distribution
Another available method is profit distribution. However, certain conditions must be met in order to distribute profits:
- The company must have generated profit
- A profit distribution resolution must be adopted at the General Assembly
- Profit distribution is carried out at year-end
Net profit refers to the amount remaining after corporate tax is paid and statutory reserves are set aside. A 15% withholding tax is calculated on the distributed profit amount.
Advance Profit Distribution
It is also possible to distribute advance profits during the year without waiting for year-end. This requires meeting the following two conditions:
- A General Assembly resolution approving advance profit distribution
- The company must have generated profit in interim periods of 3, 6, or 9 months
