The participation of the leading management (Top-line-and Second-Line Managers) in the\nbusiness development of a parent company or a group company is a popular way to incentivise\nthe managers. In private equity transactions, managers fairly regularly get the opportunity to\npurchase shares in order to (indirectly) participate in the future business developments of the\ntarget company. These co-investment programmes, in which managers participate, are\ncurrently challenged by the tax authorities. In co-investment structures, there is a tussle\nbetween the tax authorities and the participating managers ââ?¬â? often in times of disposal of the\nco-investment ââ?¬â? over whether reimbursements out of the co-investment programme to the\nmanagers represent wage or capital income/capital gain. The type of income is a crucial factor\nfor all managers resident in Germany and especially abroad. The tax risks of these coinvestment\nmodels have to be borne by the managers. A careful implementation of the\nmanagement participation programme is necessary in order to structure these co-investments\nas a capital investment for the managers. That leads to low taxation for German residents or\npossibly even no taxation for non-German residents. The article wants to highlight the current\ndevelopments in this context and to carve out solutions for management participation\nprogrammes for international managers in Germany.
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