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Who pays corporate tax – and on what?
Corporate tax is payable by corporations (GmbH, UG, AG), cooperatives, associations and foundations with their seat or management in Germany – on their worldwide income. The tax base is taxable income, derived from the commercial profit and adjusted for tax corrections: non-deductible business expenses, hidden profit distributions, tax-exempt income under § 8b KStG and loss carry-forwards.
Tax rate and total burden: the 30 % formula
The corporate tax rate is a flat 15 % (§ 23 KStG), plus a 5.5 % solidarity surcharge – 15.825 % in total. Unlike personal income tax, there is no basic allowance and no progression: the first euro of profit is taxed exactly like the ten-millionth. Trade tax is added on top; for corporations it is not credited against any other tax and is therefore a definitive burden.
- Corporate tax: 15.0 % of taxable income.
- Solidarity surcharge: 5.5 % of the corporate tax = 0.825 %.
- Trade tax (Berlin, 410 % multiplier): 3.5 % × 410 % = 14.35 %.
- Total burden in Berlin: around 30.2 % – around 33 % in Munich (490 %), below 23 % in low-multiplier municipalities.
Comparison with personal income tax: when does the GmbH win?
Sole proprietors and partners pay personal income tax of up to 45 % plus surcharge on their profit – softened by the trade tax credit under § 35 EStG. The GmbH pays a constant ~30 %. But: the comparison is only fair if you include the second layer. If the GmbH distributes the entire profit, 26.375 % withholding tax on the remaining ~70 % is added – bringing the total burden to around 48 %, i.e. top-rate territory. The GmbH advantage therefore does not come from the legal form itself, but from retaining profits.
Special features and pitfalls
- Hidden profit distributions (excessive salary, private expenses) increase income retroactively – a classic in every tax audit.
- Loss carry-forwards can be forfeited when more than 50 % of shares change hands (§ 8c KStG) – before any change of shareholders, check whether § 8d KStG (continuation-bound loss carry-forward) provides relief.
- Trade tax is not a deductible expense (§ 4 (5b) EStG) – the 30 % is a real burden, not a gross figure.
- Pre-payments are due quarterly (10 March, 10 June, 10 September, 10 December) and should be actively adjusted when profits jump.
Legal form comparison
GmbH or sole proprietorship – which really costs you less?
Tax burden, retention ratio, social security and administrative costs – we run the legal-form comparison with your real numbers, not with textbook examples.
Frequent questions
What clients ask about this most often
- Not for GmbHs and other corporations – the 15 % rate applies from the first euro. Only certain associations, cooperatives and agricultural corporations receive an allowance of €5,000 or €15,000 (§§ 24, 25 KStG).
- No, there is no fixed profit threshold. The retention ratio is decisive: the more profit stays in the company, the more the rate advantage of ~30 % versus up to 47 % pays off. If everything is withdrawn, the total burden after distribution is similar – then other factors such as liability and social security decide.
- In principle by 31 July of the following year; with a tax advisor, the deadline regularly extends to the end of February of the year after next. In parallel, quarterly pre-payments are due based on the most recently assessed profit.
Your next step
How does Corporate income tax (Körperschaftsteuer) impact your business specifically?
Theory is one side – your concrete numbers are the other. In a 30-minute introductory call we will show you which lever fits your situation. Free, written offer included.
030 555 721 370