Geschäftsführergehalt: How much is a GmbH CEO allowed to earn in Germany?

CEO salary in a GmbH (limited liability company) is a frequent point of contention in Germany, including during tax audits. Many companies are unsure of how much they should pay their CEO. How much is appropriate, and how much is a CEO even allowed to earn? We’re here to explain.


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The average CEO of a GmbH is 50 years old and earns €137,500 per year (BBE Media Study on CEO Salaries 2014). But what are the legal guidelines? What’s mandatory, and what can you decide for yourself? The CEO salary for a GmbH is a constant point of contention between tax offices and companies. Entrepreneurs should ensure that the CEO’s remuneration is “legally binding” and that the tax authorities accept it at the specified amount. Suspicions of hidden profit distribution can arise quite quickly.


One way to deal with such accusations is certainly the written Geschäftsführervertrag (management contract). With this, entrepreneurs can ensure a clear separation between CEO remuneration and the withdrawal of profits as shareholders.

This separation is clear: CEO remuneration is taxed through Lohnsteuer (wage tax), and profits are taxed through income from Kapitalvermögen (capital assets). As a result, profit transfers are also taxed, but the company saves on Gewerbesteuer (trade tax).

Concealed profit distributions are, therefore, additionally and subsequently offset against the GmbH tax (corporate income tax and trade tax) as soon as they are disclosed. Shareholder-managing directors, who hold shares in the company and can participate in determining their salaries, should also ensure that the amount of their wages correlates with the industry average and are “appropriate”.

What is an appropriate salary for a CEO of a GmbH?

To assess whether the salary of a shareholder-managing director is appropriate, entrepreneurs should take a close look at the individual items of the total remuneration of their CEO. This is done because the salary of the CEO and its appropriateness are verified at the latest during the Betriebsprüfung (tax audit). The following items should be checked for remuneration:

  • Monthly or fixed annual salary
  • Vacation pay, Christmas bonus
  • Emoluments, bonuses
  • Pension commitments
  • Discounts
    Company vehicles
  • etc.

Remuneration, one-off payments, bonuses, etc., are regulated in the so-called managing employment contract. This should always be recorded in writing so that all essential details are immediately available in the event of an unexpected tax audit. Entrepreneurs should carefully examine all these remuneration components, include them in their invoices and subject them to a comprehensive industry comparison with other companies. This is the only way to ensure the CEO’s salary will stand up to an audit. As a guide, you can refer to current remuneration studies, such as the study by BBE Unternehmensberatung, whose figures are recognised by the tax office as a payment standard.

The CEO’s salary is measured not only by the industry but also by various other factors, such as the GmbH’s annual turnover, the company’s size, and the CEO’s degree of responsibility (sole or co-director, chairman).

How to secure the salary of a CEO

Which regulations do the auditors look at closely? How can you ensure that your CEO’s salary doesn’t become a target of the tax authorities? Check the following points to see whether your GmbH management contract adequately regulates the remuneration:

Check salary components

We recommend writing down the following salary components in the contract: monthly fixed salary, annual one-off payments (vacation and Christmas bonuses), bonuses, commissions, premiums, pension commitments, tax-free benefits, pension benefits, and a privately used company car.

Check fringe benefits

In contrast to the conventional employment contract, some services must also be regulated in the GmbH management contract since the CEO of a GmbH counts only as an employee in special cases. Thus, regulations of the employee protection law do not apply to this. The following fringe benefits must be stipulated individually in the management contract: Continued payment of remuneration in the event of illness, maternity protection or survivors’ benefits.

Overtime arrangements

As a rule, separate overtime remuneration is irrelevant since the CEO of a GmbH is paid a fixed salary rather than hourly.

Regulate emoluments and remuneration ratios.

There are two types of payments: Umsatztantiemen (sales bonuses) and Gewinntantiemen (profit bonuses). While most entrepreneurs use profit bonuses, very few rely on sales bonuses, and then only for a limited period.

Sales bonuses are only recommended in certain business situations, such as immediately after the company is founded; they are only recognised in exceptional cases. If a GmbH is in a development or restructuring phase, the sales bonus is accepted since the profit bonus would amount to nothing. The profit bonus depends on earnings and cannot endanger the GmbH’s liquidity.

Furthermore, the fixed salary-to-bonus ratio should generally be 75 to 25. This means that the remuneration may not be disproportionately performance-related. Deviations are typically possible and permitted, but they should be easily explainable since it’s easy for a German court to reach a verdict of “hidden profit distribution. The compensation ratio must also be adjusted for several CEOs; the combined bonus of the managing directors may not exceed 25%.


Retirement provision for the CEO of a GmbH: Verifying the pension commitment

Since CEOs at a GmbH are usually not members of the statutory pension insurance scheme, they have to pay for their retirement provision. With a pension commitment, the GmbH can support its CEO in securing her retirement; however, the management director contract must note the pension commitment. As such, the GmbH continues to remunerate the CEO even after leaving the company.

The CEO of a GmbH does not have to take out insurance policies for old age and pay out of her own pocket but instead receives the corresponding protection from the GmbH by promising him or her benefits like an old-age pension, widower’s or orphan’s pension for the relatives, or disability pension. Entrepreneurs should regularly review the provisions for pension commitments, as contributions increase with salary annually and must be adjusted accordingly.


Salary increases for GmbH CEOs

As the CEO of a GmbH in Germany, should you pay yourself a higher salary? There are, in fact, good reasons for a salary increase. However, salary increases should always be done with caution. That way, you can avoid possible problems and also convince the shareholders’ meeting of your salary increase:

In the event of liquidity problems, you can act immediately

Even if you should have low liquidity at short notice, for example, due to a financial crisis or the loss of an important client, entrepreneurs remain capable of acting and free of tax risks despite the increased CEO’s salary. That’s because the CEO of the GmbH can decide at any time to waive her salary and carry out a salary waiver. The tax office will even recognise this if you agree with the limited liability company that the payments will be made as soon as the company’s economic situation has improved.

Vorsichtsprinzip: the principle of prudence

To protect the financial situation of the GmbH, most managing directors act like business people and pay themselves too little rather than too much. However, transferring the company’s profits into private assets can get expensive. Entrepreneurs pay double taxes for retained earnings, namely the GmbH tax (corporation and trade tax) and, on top of that, the final Abgeltungssteuer (withholding tax) on the distribution of profits (25%). However, if you raise your salary, you will achieve your goal with more profit after wage and income taxes.

A minimum wage cannot be offset.

If you find years later that you were actually able to pay out more, this private loss of income cannot be compensated for without taking taxes into account. The tax office only accepts gradual salary increases, not sudden ones. As long as increases are based on the general wage level, the tax office will usually have no objections. However, as soon as the wage increase exceeds 10%, entrepreneurs can expect a hidden profit distribution to be assumed.


The salary for a CEO at a GmbH in Germany can vary widely. Depending on the size of the company, annual turnover, and the level of responsibility of the CEO and the industry, there may be considerable differences in remuneration. No amount could be concretely and generally given as a salary recommendation. Suppose all the above steps are followed, and there is still uncertainty about whether the calculated amount is appropriate. In that case, an entrepreneur can apply the following rule of thumb: A CEO of a GmbH may earn 2.5 times what the second-best-paid employee makes without any tax risk. This rule of thumb applies according to the Federal Finance Court ruling and is referred to as a company internal salary comparison. Be aware that this figure may fluctuate. In the industry sector, it’s around 2.2 and around 2.95 in the service sector.


[BEGIN: Insert an Image between this tag]

Andreas Munck

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Still, have questions about limited liability companies in Germany?

  • Startup expert
  • 10+ years experience

Hi, I’m Andreas, and I’ve been advising businesses in Germany for over a decade. I’d be happy to call you and answer any questions you have in a one-on-one consultation.


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