Glossary · Taxes

Corporation tax (Körperschaftsteuer)

Also: Körperschaftsteuer, corporate income tax

In short

Corporation tax is the tax on the profits of corporations such as the GmbH and UG. Until 2027 it is 15% plus solidarity surcharge, after which it falls gradually to 10% from 2032.

Corporation tax (Körperschaftsteuer) explained

Under Sec. 23 (1) KStG, the rate falls to 14% for 2028, 13% for 2029, 12% for 2030, 11% for 2031 and 10% from 2032. The solidarity surcharge is 5.5% of corporation tax (Sec. 4 SolZG). On top of this comes the municipality's trade tax: trade income times 3.5% times the multiplier, i.e. 14% at 400%. The GmbH and UG do not have an allowance like sole proprietors and partnerships. With 15% corporation tax, solidarity surcharge and a multiplier of 400%, this comes to just under 30% on profit. If the company distributes profits, the shareholder also pays flat-rate withholding tax privately.

Legal basisSec. 23 (1) KStG, Sec. 4 SolZG, Sec. 11 (2) GewStG

More in our guideWhat is a GmbH? Meaning and key features explained simplyGmbH stands for Gesellschaft mit beschränkter Haftung, a German limited liability company. It is a corporation and a legal entity in its own right, formed by one or more persons with at least €25,000 in share capital, of which at least €12,500 must be paid in before registration (Sec. 5 and 7 GmbHG). Once the GmbH is entered in the commercial register, only the company's assets are in principle liable for its debts (Sec. 13 (2) GmbHG).Read the guide

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Related terms

Corporation (Kapitalgesellschaft)In a corporation, the capital contributed is what matters, not the person of the shareholders; examples are the GmbH, UG and AG. It is a legal entity and in principle is only liable with the company's assets.GmbH (limited liability company)The GmbH is a corporation and legal entity formed by one or more persons with at least €25,000 share capital. As soon as it is entered in the commercial register, in principle only the company's assets are liable for its debts.Partnership (Personengesellschaft)In a partnership, at least two partners join together, and the partnership depends on their personal involvement; examples are the GbR, OHG, KG and PartG. There is no minimum capital, but at least one partner is liable without limit.UG (haftungsbeschränkt)The UG (haftungsbeschränkt) is not a separate legal form, but a GmbH with less than €25,000 share capital, mathematically from €1, which must be paid in full in cash before the application. In return, it must put a quarter of its annual net profit into a reserve every year.Hidden profit distribution (verdeckte Gewinnausschüttung, vGA)A hidden profit distribution occurs when a corporation grants a shareholder a benefit outside a regular distribution, such as an unreasonably high salary or an interest-free loan. For tax purposes, it may not reduce the company's profit.Opening balance sheet (Eröffnungsbilanz)The opening balance sheet sets out the assets and liabilities of the business at the start of its commercial activity. In principle, every merchant must prepare one, and so must every GmbH and UG.

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