Germany offers a competitive system of corporate taxation. The average tax burden is just under 30 per cent, with some municipalities offering lower tax rates.
All corporations - including limited liability companies (GmbH), public limited companies (AG) and German permanent establishments of foreign corporations - are subject to corporation tax. The income tax of corporations generally consists of three components: corporation tax, the solidarity surcharge and trade tax.
Due to the local differences in the level of trade tax, there is no standardised nationwide tax rate for corporation tax. However, the corporation tax rate plus solidarity surcharge is set nationwide. Many municipalities offer combined corporation tax rates below 25 per cent. The average German corporation tax rate is around 29.9 per cent.
Corporation tax
All corporations are subject to corporation tax. This is levied nationwide at a flat rate of 15 per cent on the company's taxable profit.
Trade tax
Every commercial business operation is subject to trade tax. Although trade tax is regulated by federal law, it is a municipal tax with different rates at municipal level.
Taxation of dividends
In order to avoid double taxation in international business transactions, Germany has an extensive network of double taxation agreements.
Value added tax
Value added tax (VAT) is a consumption tax on the exchange of goods and services. Companies are obliged to add VAT to their prices and charge their customers accordingly.
Taxation of property
Every property owner in Germany is liable for property tax. The tax rate depends on the type of property.
Tax returns
Companies must submit a tax return to the tax office once a year. The tax office in the place where the company in question has its (German) registered office is responsible.
Tax deductions
The German tax system offers companies tax deductions to reduce their annual tax burden - provided certain conditions are met.
The choice of legal form is of crucial importance, especially with regard to the regulations on profit determination. It is therefore important to consider not only tax law, but also commercial and company law and, depending on the circumstances, family and inheritance law.
