Value added tax (Mehrwertsteuer – MwSt) is 19%. Company is obliged to register as VAT payer if turnover in the previous business year makes more than 17.500 € or if it makes more than 50,000 € in current business year. At the beginning is every subject obliged to register as monthly payer. Only after two years it is possible to register as quarterly payer.
Corporation tax (Körperschaftsteuer) is 15%. Out of these 15% is every subject obliged to pay solidarity tax (Solidaritätszuschlag) of 5, 5%.
Every federal state prescribes trade tax (Gewerbesteuer) of 3, 5%. Except this taxation there is also additional tax of the municipality (Hebesatz) of minimally 400% out of prescribed trade tax.
An example: if companies profit exceeds 1 million € the company must pay 15% of the corporate tax, or:
1,000,000 € - 150,000 € (15%), out of these 15% company pays another 5,5% of solidarity tax.
There is also obligation to pay trade tax of 3,5% and additional tax of the municipality (min. 400%):
1,000,000 € - 140,000 € (35,000 € (3,5%) x 400% )
According to this example the complete taxation of the legal entity makes app. 29%.
|taxable income|| 1,000,000 € |
|a) corporation tax - 15%|| 150,000 € |
|b) solidarity tax - 5,5% from a)|| 8,250 € |
|c) trade tax and additional tax of municipality 3,5% x 400% || 140,000 € |
|profit|| 701,750 € |
|complete taxation || 29,83% |
If the profit is to be paid to associates they are obliged to pay dividend tax (Dividendensteuer) of 25% (+ solidarity tax. It makes the total tax burden of 26,4%).
Germany has double taxation treaties with most European countries. It provides possibility for foreign nationals to pay taxes in their home countries.
Tax clearance is to be submitted until May 31st. In the case the company is represented by tax advisor this term is prolonged until December 31st.
Since German tax system is quite complicated it is strongly recommended to use the services of accountant. Minimal price makes 100-200 € per month.