Körperschaftsteuer: the German corporate tax
The Körperschaftsteuer (KSt) is the equivalent of Spanish corporate tax. The rate is a fixed 15% on the profits of your GmbH, regardless of the federal state in which you incorporate it.
To that amount is added the Solidaritätszuschlag (solidarity surcharge), 5.5% calculated on the tax itself. In practice it is equivalent to an additional 0.825%, so the effective burden of this tax is around 15.83%.
There are no brackets or reduced rates for SMEs: the 15% applies from the first euro of profit, which simplifies planning compared to other progressive systems.
Gewerbesteuer: the municipal tax on business activity
The Gewerbesteuer is the tax on economic activities collected by municipalities. Its base is 3.5% (Steuermesszahl), which is multiplied by a municipal coefficient (Hebesatz) set by each city.
That coefficient usually ranges between 400% and 490% in large cities, which leaves an effective Gewerbesteuer of between 14% and 17% depending on where your company is domiciled. Munich applies 490%, Berlin 410% and Frankfurt 460%.
Since 2008 the Gewerbesteuer is no longer deductible as an expense from its own tax base, so it is added almost directly to the Körperschaftsteuer when calculating your total burden.
Taxes in Germany: the total burden of a GmbH
Adding the Körperschaftsteuer (15% plus solidarity) and the municipal Gewerbesteuer, taxes in Germany on profits are between 30% and 33%. This is the figure you should use to compare with the 25% corporate tax in Spain or the 21% Portuguese IRC.
The range depends almost entirely on the municipality: it is not the same to pay tax in a city with a low Hebesatz as in one of those that apply the maximum. That is why the choice of registered office has a direct tax impact.
Key points
- Körperschaftsteuer: 15% fixed
- Solidaritätszuschlag: 5.5% on the tax (≈0.825%)
- Gewerbesteuer: 14-17% depending on municipality
- Total burden: 30-33% on profits
VAT in Germany: 19% Umsatzsteuer
German VAT (Umsatzsteuer or Mehrwertsteuer) has a standard rate of 19% and a reduced rate of 7% for essential goods and services such as food, books or passenger transport.
To trade with other EU companies you will need the USt-IdNr, the German equivalent of the intra-community VAT number. It allows you to invoice without VAT on intra-community supplies and to deduct input VAT on your purchases.
VAT is filed through monthly or quarterly returns (Umsatzsteuervoranmeldung) via Elster, the German tax administration's electronic system.
Key points
- Standard rate: 19%
- Reduced rate: 7%
- Intra-community identification: USt-IdNr
- Filing: monthly or quarterly via Elster
Filing deadlines and obligations
The annual Körperschaftsteuer and Gewerbesteuer return is filed electronically before 31 July of the following year. If you work with a tax adviser, the deadline is extended to February of the following year.
VAT returns are filed monthly during the first year and thereafter monthly or quarterly depending on turnover, always before the 10th of the following month. Gewerbesteuer is also paid in quarterly instalments (15 February, May, August and November).
The German system is strict about deadlines and late penalties are applied automatically. Having local advice avoids filing errors; at Filnet we include it in the monthly tax plan.
Double taxation treaty with Spain
Spain and Germany have a treaty to avoid double taxation. If your GmbH pays taxes in Germany and you are a tax resident in Spain, you will not be taxed twice on the same profits, although you must declare them correctly in both countries.
