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

updated on 21. July 2023 14 minutes reading time
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CEO salary in a GmbH (limited liability company) is a frequent point of contention in Germany, and not just for 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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Andreas Munck

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Got questions about the GmbH?

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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? CEO salary for a GmbH is a constant point of contention between tax offices and companies. Entrepreneurs should ensure that the remuneration of the CEO is “legally binding” and that it’s accepted by the tax authorities at the specified amount. Suspicions of hidden profit distribution can arise quite quickly.

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

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

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 salaries correlate with the industry average and are “appropriate”.

When is the salary of a CEO in a GmbH appropriate?

In order 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 tax audit (Betriebsprüfung). 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 important 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 you can be sure that the CEO’s salary will stand up to an audit. As a guide, you can refer to current remuneration studies, for example, 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 annual turnover of the GmbH, the size of the company, and the degree of responsibility of the CEO (sole or co-director, chairman).

How to make the salary of a CEO at a GmbH secure

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

Check fringe benefits

In contrast to the conventional employment contract, some services must be also regulated in the GmbH management contract, since the CEO of a GmbH counts only as an employee in special cases and 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 remuneration for overtime is not relevant, since the CEO of a GmbH is paid with a fixed salary and not hourly.

Regulate emoluments and remuneration ratios

There are two types of emoluments: sales bonuses (Umsatztantiemen) and profit bonuses (Gewinntantiemen). While profit bonuses are used by most entrepreneurs, only very few of them rely on the sales bonuses, and then only for a limited period of time.

Sales bonuses are only recommended in certain business situations, for example, immediately after the company is founded; these are only recognised in exceptional cases. If a GmbH is in a development or restructuring phase, the sales bonus is certainly accepted, since the profit bonus would amount to nothing in this case. The profit bonus depends on the earnings situation and cannot endanger the liquidity of the GmbH.

Furthermore, the ratio of fixed salary to bonus should generally be 75 to 25. This means that the remuneration may not be disproportionately performance-related. Deviations are generally 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 entire managing directors may not exceed 25%.

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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 own retirement provision. With a pension commitment, the GmbH can support its CEO with securing his or her retirement; the pension commitment must be noted however in the managing director contract. As such, the GmbH continues to remunerate the CEO even after he or she has left the company.

The CEO of a GmbH does not have to take out insurance policies for old age and pay out of his own pocket, but rather receives the corresponding protection from the GmbH by promising him or her benefits like old-age pension or widower’s and 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

Should you as the CEO of a GmbH in Germany 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 his 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 economic situation of the company has improved.

Vorsichtsprinzip: the principle of prudence

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

A minimum wage cannot be offset

Should 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 and not sudden ones. As long as increases are based on the general wage level, there will usually be no objections from the tax office. However, as soon as the wage increase exceeds 10 %, entrepreneurs can expect that a hidden profit distribution will be assumed.


The salary for a CEO at a GmbH in Germany can vary widely. Depending on the size of the company, annual turnover, the level of responsibility of the CEO and the industry, there may be considerable differences in remuneration. There is no amount that could be concretely and generally given as a salary recommendation. If all the above steps are followed and there is still uncertainty as to whether the calculated amount is appropriate, 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.

If you would like to get a better idea of individual values or are interested in the earnings potential of the CEO of a GmbH in different industries, you can purchase the “GmbH Managing Director Remunerations 2017” study (only in German) in the online shop of VSRW-Verlag.


[BEGIN: Insert an Image between this tag]

Andreas Munck

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Still got 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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