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Retained

  • Statutory Tax Rate 15
  • Surtax Based on Taxable Income 14
  • Surtax Based on Statutory Tax 5.5
  • Surtax Deductible from Taxable Income 0
  • Statutory Tax Deductable 0
  • Effective Tax Rate 29.825

Statutory Tax Rate

German business profits are subject to two taxes, corporation tax and business (trade) tax. The corporate income tax (CIT) rate is 15%, increased to 15.825% by the 5.5% solidarity surcharge. In addition, municipal business (trade) tax (MBT) is levied. The effective rate of MBT depends on a federal rate and a multiplier. The amount of the MBT is determined by first applying the basic federal rate of 3.5% to the taxable business income which results in a basic tax amount. The multiplier is then applied to this basic tax amount to determine the actual tax burden. The multiplier is fixed by the municipalities and varies according to their financial needs. At an average municipal coefficient of 400% the effective MBT amounts to 14%. Consequentially, the effective CIT burden on average is around 29.825%. The minimum municipal coefficient to be levied if the municipality has not specified a higher rate is 200%; therefore the lowest CIT burden will amount to 22.825%. The currently highest municipal coefficient is 490%; therefore the highest CIT burden will amount to 32.975%. These numbers are based on the assumption that the MBT base equals the CIT base. There are several add-backs of non-deductible interest payments and financing costs for MBT purposes that will affect these numbers.

Surtax Based on Taxable Income

The effective municipal business (trade) tax rate ranges between approximately 7% and 17%, depending on the municipality where a business is situated.

Surtax Based on Statutory Tax

The solidarity surcharge on corporate income tax is 5.5%.