Corporate Tax Law in Germany

German Tax Lawyers

Corporate Tax Law in Germany

German Tax Lawyers

Whether turnover tax, trade tax, corporation tax, income tax or capital gains tax – when running a business in Germany, there is an almost unmanageable amount of tax regulations to consider. The applicability of a particular tax depends on various factors, such as the type of business and whether your company can claim tax exemptions in certain areas. However, incorrect or incomplete information in the tax return can lead to criminal tax investigations, which are usually emotionally stressful and a considerable legal challenge for those affected.

To prevent such problems and to keep track of the ever-changing tax laws in Germany, it is highly advisable to continuously work with a German corporate tax lawyer who will develop individual solutions for your company’s goals and needs.

As a full-service law firm, we offer comprehensive services in German tax law. With excellent expertise and many years of experience, our legal team provides you with comprehensive advice and defence. Our lawyers always keep you up to date regarding the current tax laws. If you have been confronted with the suspicion of tax evasion, we will ensure that you strengthen your position during the investigation proceedings and that your rights as an accused person are always protected.

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Corporate Taxes 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.

Founding a Company in Germany

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.

Trade Tax for Companies

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.

Expansion of Business and M&A Advice

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.