Corporate Income Tax (Körperschaftsteuer)
Corporate income tax (Koerperschaftsteuer) is applicable exclusively to corporations (GmbH, AG, UG) and cooperatives.
Foreign corporations (Limited, PLC, etc.) with business premises (e.g. permanent establishment, branch office) in Germany are also subject to corporate income tax.
Tax regulations determine the taxable profit of each company. The profit according to the profit and loss statement is increased by some non-deductible business expenses.
- Non-deductible business expenses in Germany include:
- Expenses for corporate tax, business tax or solidarity surcharge
- Expenses for foreign profits tax
- Client gifts from a value of more than 35.00 EUR
- 30 % of expenses for provision of food and drink for business partners (Bewirtungen)
- 50 % of remunerations for the supervisory board (Aufsichtsratsverguetungen)
- Monetary fines, administrative fines and warning fines
- Bribe money (Bestechungsgelder)
15 percent corporate tax
All profits are taxed at 15 percent. Taxation is independent of whether the profits remain in the company (accumulation) or are distributed. In addition to the corporate tax, 5.50 percent solidarity surcharge is added to the fixed corporate tax.
Paying corporate tax to the Tax Office
Generally, companies must pay corporate tax in advance once per quarter year to their assigned tax office. An annual statement is made with the corporate tax return after the end of the calendar year.
"Hidden distributions of profit"
Caution is advised in cases of excessive payments from the corporation to the shareholders or affiliated companies.
For example, if excessive interest payments for loans, excessive prices for delivered goods, or unusual cost compensations are made from the subsidiary company to the parent company, the tax office can assess the excessive part of these payments as "hidden distribution of profit". The tax office can add such payments (in whole or in part) to the corporation's taxable income.
This will increase the corporate tax appropriately. Especially internationally active companies may be impacted by this, if they agree on unusual invoicing prices within the group of companies. Costs that a third party would normally pay are all that can be deducted.