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Corporate Tax in Germany

Updated on Friday 21st April 2017

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The basis for corporate taxation in Germany

 
Corporate tax in Germany is levied for all companies that operate in the country. Resident companies are taxed on their worldwide income while non-resident companies must pay taxes only for the income derived from their office in Germany.
 
A company in Germany is considered a tax-resident if it has a registered office (also mentioned in its incorporation documents) or if its main place of management is situated in Germany. The place of incorporation of that company is not relevant for taxation purposes.
 
Investors who want to open a company in Germany must be familiar with these rules referring to corporate taxation, as well as with the annual deadlines for tax filing. Our team of German company formation consultants can offer assistance for these procedures. 

 

The corporate tax rate in Germany

 
After setting up a company in Germany, your newly formed company will have to pay the corporation tax. The corporate tax rate in Germany is set up at 15%. To this, a solidarity surcharge and a trade tax can apply to a total value of 30 to 33%. The tax varies according to the location: it is imposed at a higher value in cities like Munich or Frankfurt and lower in areas with less economic potential.
 
The corporate tax is imposed on the company’s profits, which may be the business or trading profits, passive income and/or capital gains. Some business expenses are deductible and individuals can apply certain legal tax minimization strategies.
 
The tax year can be the same as the calendar year, but at the same time companies can determine their own financial year. However, the accounting period can’t exceed more than 12 months; our team of German company formation agents can offer assistance on the legal requirements set up for the accounting periods. 
 

Other taxes in Germany 

 
Foreign investors seeking to begin the process of setting up a company in Germany, should be wawre of the other taxes for companies imposed by Germany:
 
- the municipal real estate tax;
- the real estate transfer tax;
- the customs and excise duties;
- the social security contributions.
 
Branches in Germany are taxed the same way as subsidiaries, at a rate of 15%.
 
Value Added Tax (VAT) in Germany has a standard rate of 19% or a reduced rate of 7%. The reduced VAT is applicable for a wide area of products, such as foodstuffs, water, medical equipment necessary for persons with disabilities, books and newspapers, cultural and sport events and others. 
 
There is no capital duty, no payroll tax and no stamp duty. Companies that hire employees in Germany must pay 50% of the social security contributions.
 
Germany applies a withholding tax on dividends (set up at a rate of 25%) and on royalties (taxed at a rate of 15%). In several cases, the withholding tax is also applicable for interests; when the rate is imposed on a company, the tax is set up a value of 25%. 
 
Double taxation relief is possible in Germany for companies and individuals through the large number of double tax treaties signed between Germany and other countries worldwide. Companies can benefit from the stipulations of such treaties only in the situation in which the businesses are tax residents of the countries with which Germany has signed this type of contract.  
 
Our company registration representatives in Germany can help businessmen with more details about the tax rates applicable in this country. If you need assistance in starting a company in Germany and complying with the tax regulations available in this country, we are at your disposal.
 

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