Business Succession in Hotels & Gastronomy: Saving taxes using a retained usufruct interest

Succession planning is a sensitive matter for many hotel and catering businesses. Often structured as family enterprises built up over decades, their value lies not only in real estate and furnishings but also in the brand reputation, loyal clientele and intangible goodwill. At the same time, the pressure to minimise tax burdens on transfer — while preserving personal financial security — is high.

A frequently used structuring model in hotel and gastronomy succession is the transfer of partnership shares with a retained usufruct interest (also called a “usufruct arrangement”).

What does a retained usufruct interest mean for hoteliers and restaurateurs?

Under a retained usufruct interest, the current owner transfers their company shares—e.g. to children, family members or long‐serving employees—while retaining the right to receive the income generated by those shares.

In practice this means: the successor becomes a formal co‑entrepreneur (or partner), but the senior retains the right to partake in profits and thus secures their ongoing income. For many in hospitality, this is an attractive strategy, as it allows gradual handover without immediately giving up one’s source of income.

Tax advantages: Utilising relief reductions

BWhat makes this succession model particularly interesting is the possibility of relief reductions under §§13a/b of the German Inheritance and Gift Tax Act (ErbStG). Under certain conditions, up to 100 % of the business value can be exempt from inheritance or gift tax.

For partnership structures (such as GbR or KG), which are common in hospitality, this is a key means of reducing tax burden and safeguarding the future viability of the operation.

However, in order for these tax advantages to be recognised, two conditions must be satisfied:

1. Entrepreneurial risk sharing (“Mitunternehmerrisiko”)
   The successor must participate in profit and loss, and share in silent reserves. If the usufruct arrangement is structured so that the acquirer bears little or no real risk, the tax authority may deny the relief.
2. Entrepreneurial initiative (“Mitunternehmerinitiative”)
   The acquirer must have voting rights, control rights or other genuine influence powers. If these are absent, the acquirer is not treated as a true partner—and the relief reductions can be lost.

Especially in hospitality, where investments in property, equipment, or new concepts often decide success or failure, it is crucial that the successor is not merely a nominal partner, but carries real responsibility.

Particular considerations in hotel and gastronomy businesses: What to watch

Hotels and restaurants differ from many other industries in some key respects:

• Real estate values and hidden reserves (e.g. buildings, kitchen equipment, inventory) often form a large part of the business value.
• Permits, supplier contracts and staff must be considered when transferring influence rights.
• Liquidity is critical: even with reduced tax burdens, ongoing financial strength must not be jeopardised.

These factors make it all the more essential to have a custom‑tailored contractual design.

Our recommendations for structuring succession with a retained usufruct interest

• Plan early: start the succession planning well in advance so as to exploit all tax options (including the possibility of obtaining a binding ruling from the tax office).
• Define contracts clearly: precisely delineate which income rights remain with the transferor and which rights the successor receives.
• Ensure genuine partner status: structure so that the successor bears both opportunities and risks—including voting or decision‑making rights.
• Conduct a full valuation: a clean valuation of all hidden reserves is essential.
• Include professional support: involve tax advisers and lawyers closely; in complex cases, a binding ruling from the tax authority may be advisable.

Conclusion

For hoteliers and restaurateurs, transferring partnership shares under a retained usufruct interest offers an attractive path to handing over the business to the next generation while preserving your financial security. The tax benefits can be considerable—but only if the structuring meets the requirements for risk and influence.

With early planning and professional advice, you not only optimise tax outcomes but also secure the future of your hotel or hospitality business.

FAQ: Business succession and retained usufruct in the hotel & hospitality sector

1. What is a usufruct arrangement?
In this setup, the owner transfers company shares but retains the income generated and certain rights of influence or control.

2. What are the tax advantages of retaining a usufruct interest?
Under certain conditions, up to 100% of the business value can be exempt from inheritance and gift tax through relief deductions.

3. What are the risks involved?
If the successor does not bear entrepreneurial risk or does not have genuine decision-making rights, the tax authority may deny the reliefs.

4. Who is this succession model suitable for?
It is especially well-suited to family-run hotels and restaurants looking for a gradual handover while securing the financial future of the senior generation.

5. What specific considerations apply in the hotel and hospitality industry?
High property values, complex contracts and staff structures make succession planning more intricate than in many other sectors.

6. How should one best prepare for the handover?
Start planning early, carry out a full business valuation, clearly define contractual arrangements, and seek professional tax advice.