Germany Tax Rates 2025

1. Corporate Income Tax (Körperschaftsteuer):

• Standard Rate:
  • The corporate income tax rate is a flat percentage applied to taxable profits.
  • It is very important to get the most up to date information regarding the tax rate, as it is subject to change.
• Solidarity Surcharge (Solidaritätszuschlag):
  • A surcharge is added to the corporate income tax.
  • It is very important to get the most up to date information regarding the solidarity surcharge, as it is subject to change.
• Trade Tax (Gewerbesteuer):
  • This is a municipal tax levied on business profits.
  • The rate varies depending on the municipality.
  • It is deductible for corporate income tax purposes.
• Key Considerations:
  • Taxable profits are determined according to German accounting standards (Handelsgesetzbuch - HGB) and tax laws.
  • Transfer pricing rules apply to transactions between related companies.
  • Loss carryforward and carryback rules exist, with limitations.

2. Value Added Tax (Umsatzsteuer):

• Standard Rate:
  • The standard VAT rate applies to most goods and services.
  • It is very important to get the most up to date information regarding the VAT rate, as it is subject to change.
• Reduced Rates:
  • Reduced VAT rates apply to certain goods and services, such as food, books, and cultural events.
• Key Considerations:
  • Businesses must register for VAT if their taxable turnover exceeds a certain threshold.
  • Input VAT can generally be deducted from output VAT.
  • Intra-Community transactions and imports/exports are subject to specific VAT rules.

3. Individual Income Tax (Einkommensteuer):

• Progressive Rates:
  • Individual income tax rates are progressive, meaning higher incomes are taxed at higher rates.
  • It is very important to get the most up to date information regarding the tax rates, as they are subject to change.
• Solidarity Surcharge:
  • A surcharge is added to the individual income tax.
  • It is very important to get the most up to date information regarding the solidarity surcharge, as it is subject to change.
• Key Considerations:
  • Residents are taxed on their worldwide income.
  • Non-residents are taxed on their German-source income.
  • Various deductions and allowances are available.

4. Withholding Taxes:

• Dividends, Interest, and Royalties:
  • Withholding tax may apply to payments of dividends, interest, and royalties to non-residents.
  • Double taxation treaties may reduce or eliminate withholding taxes.
• Key Considerations:
  • The specific withholding tax rates depend on the type of payment and the recipient's country of residence.
  • It is essential to consult the relevant double taxation treaty.

5. Real Estate Transfer Tax (Grunderwerbsteuer):

• Tax on Real Estate Transactions:
  • This tax is levied on the acquisition of real estate in Germany.
  • The rate varies depending on the federal state.
• Key Considerations:
  • The tax is typically paid by the buyer.
  • Certain exemptions may apply.

6. Double Taxation Treaties (Doppelbesteuerungsabkommen - DBA):

• Extensive Network:
  • Germany has an extensive network of double taxation treaties with countries worldwide.
  • These treaties aim to prevent double taxation and provide tax relief.
• Key Considerations:
  • It is crucial to consult the relevant double taxation treaty to understand its impact on your tax liabilities.

7. Key Considerations for Foreign Investors:

• Documentation:
  • Maintain accurate and complete records of all financial transactions.\
• Compliance:
  • Ensure compliance with German tax laws and regulations.
• Professional Advice:
  • Seek advice from German tax professionals.