The German Mittelstand, the family-owned companies that form the backbone of the German economy, is passing through one of the largest generational transfers in its history. Tens of thousands of owners are approaching the moment when the business moves to the next generation or to new hands, and for many of them the structure through which the company is held was never designed for that transfer. It simply grew.
Succession is a structural question, not only a tax one
German succession planning is dominated, understandably, by the question of inheritance and gift tax, and the reliefs available for operating businesses. But succession is also a structural question: who controls the company after the transfer, how the family’s economic interest is separated from operational control, and how a business with several heirs avoids fragmenting. A Dutch holding, often with a foundation above it, gives the family a framework to answer those questions in advance rather than leaving them to be resolved among the heirs.
Separating control from ownership
The recurring problem in Mittelstand succession is that passing ownership to several children passes control to several children, which can paralyse a company that was run by one decisive owner. A structure that separates economic benefit from control, allowing the family to distribute the value while keeping the decision-making coherent, is exactly what a Dutch holding with a stichting can provide, as we set out in our note on how family offices use Dutch BVs and stichtingen.
Passing a company to several heirs passes its ownership easily and its control with difficulty. The structure is where that difficulty is resolved, and it has to be resolved before the transfer, not after.
The German tax position remains central
A Dutch holding does not remove German tax and must never be presented as though it does. Germany taxes its residents on worldwide income, operates controlled foreign company rules, and applies its own substance tests to foreign structures. The holding provides an efficient and coherent European layer that sits within the German rules, and the German inheritance and gift tax analysis, including the reliefs for operating businesses, remains the centre of the succession plan. The structure has to be built by German and Dutch advisers working to one design.
Substance the group already has
A Mittelstand company usually has deep operating substance, but the holding itself needs genuine decision-making and management in the Netherlands, as set out in our note on Dutch substance requirements. For a serious family business this is natural, provided the holding is given a real role in governance and ownership rather than being treated as a formality.
Beyond the immediate transfer
The best Mittelstand succession structures look beyond the immediate transfer to the generation after next, building governance that can survive more than one handover. This is where the German family holding meets the wider practice of family governance, and it connects to our note on why German investors use Dutch BVs for real estate and corporate structures. For a Mittelstand family, the structure is not a transaction, it is the constitution of the business for the next fifty years, and it deserves to be treated as such.
Montclare runs a dedicated DACH desk, structuring the corporate, tax and holding architecture for groups and families entering Europe through the Netherlands. Our services are set out on our services page.
This article is informational and does not constitute tax or legal advice. The treatment of any structure depends on its facts and on the law of each jurisdiction involved. Each engagement is subject to scope and applicable regulation.