Corporate Tax Law in Germany

The corporation income tax rate in Germany stands at 15% but when the solidarity charge, the trade tax and other taxes are included the real tax burden figure is approximately 30%. All income such as corporate profits, capital gains and investments are taxable. However, exemptions exist within the law and reducing your company’s tax burden can be achieved. As a foreign company established in Germany, the manner in which you are taxed will depend on whether your company has opened its headquarters in Germany or whether it is a branch office. With branch offices, it is only the profits made through business in Germany which are taxed in Germany. Furthermore, Germany has many double taxation agreements in place with different countries to prevent the double taxation on profits made.

When starting a business in Germany or expanding a business into Germany, it is important to received advice from an experienced German tax lawyer. Your company’s tax situation will be decided by which form of business your company takes. The GmbH model (limited company) and the AG (stock corporation) are subject to corporate tax, whereas partnership and sole trader models are subject to income tax. When opening your business, it is important to register with the local tax authorities to become tax compliant for corporation tax and VAT.

As an entrepreneur, be aware that tax requirements regularly change and therefore having a German tax lawyer will ensure that you are up to date with the current tax situation. By working with our team, your company can stay ahead of any changes which do occur in tax law and, thus, modify your approach when necessary while remaining tax compliant.

For companies expanding to Germany, the German tax law system can appear complex, and disagreements can occur. Tax conflicts can be damaging on several levels and can be difficult to resolve. Our tax lawyer will provide the representation you need should you have any disputes with the tax authorities. Our tax lawyers will look to resolve conflicts in a time-saving and cost-effective manner. Achieving this goal entails careful negotiations, knowledge of the legal field and understanding of legal disputes.

The most cost-effective means of resolving disputes is to avoid them in the first place. Working with our tax lawyers from the start and regularly consulting with them on an ongoing basis will ensure that you remain tax compliant.

The trade tax is another requirement for companies in Germany to be aware of. All corporations and most business models are subject to trade tax. Trade tax is not decided upon on a federal basis as it is paid to local authorities. Therefore, the cost of trade tax varies between different parts of Germany. Urban areas will generally have a higher rate of trade tax than rural areas, but there are divergences in the cost of trade tax between municipalities. Trade tax can vary between 7% and 20% of business income and therefore where you set up your company will have a major impact on your tax affairs.

At Schlun & Elseven our tax specialists will provide all guidance needed when it comes to trade tax requirements. For those companies looking to expand to Germany, knowing where to establish your business can have a drastic impact on your company’s tax issues. Our German tax lawyers will provide the guidance needed in this regard.

Running your business in a successful manner may lead to a desire to expand the business. Often such an expansion is achieved by a merger or an acquisition. However, when making decisions in the field of mergers and acquisitions, make sure to get in contact with our corporate tax lawyers. As part of our due diligence service we will analyse the tax situation as M&A actions can often lead to changes in the company structures. In turn these lead to changes in how the company is taxed. The manner in which an acquisition occurs – whether by share deal or asset deal – as well as the form of consideration (cash vs. stock) used will also play a key role in the company’s tax situation. Therefore, the best way to ensure that you make the right decisions is to be provided with the facts for your situation. Specialised analysis and advice from our corporate tax lawyers will provide this peace of mind and help you in your decisions around business expansion.

Facing a tax assessment notice can leave businesses questioning their decisions and asking how they can be non-compliant with their tax requirements. However, it is not unusual for tax assessment notices to be wrong. Human mistakes and errors in the system do happen and can leave businesses facing difficult questions. Such tax assessment notices can be challenged. The tax authorities are aware that such mistakes can be made and can be reasonable to deal with. Court cases can be avoided. Allow our German business lawyers to examine your case and assess the applicable documentation. Working together we can determine the best strategy in the event of challenging a tax assessment notice.

If your company fears facing legal action due to a suspected error made in your own accounting, the temptation may exist to use the voluntary self-disclosure mechanism. However, this mechanism should only be used on the advice of a legal professional. The self-disclosure must be completely correct, has to be made in good time and your company has to repay the applicable taxes immediately. Without these steps, the self-disclosure will not carry the exempting effect sought after.

Should the case need to be resolved in court, our tax lawyers will provide the representation you need. The consequences for tax criminal law sanctions can be drastic! From fines and imprisonment to managerial disqualifications, this is not a minor offence! Therefore, it is advisable that throughout such proceedings, your company should be advised by a professional in the field of German tax law. Should a case reach the Federal Fiscal Court, a professional legal representative is a requirement. Our lawyers will provide the calm, fact-driven approach needed to resolve in-court cases.