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Measure Name
Date when measure came into force
CIT taxation of dividends to minority shareholders 2013/03/21
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Generic Tax Name Corporate income tax
Tax name in the national language Körperschaftsteuer
Tax name in English Corporate income tax
Member State DE-Germany
Tax in force since 1920/04/15
If abolished, date on which the tax ceases to apply
Business version date 2015/01/01
Version date 2015/02/17
This file was last updated on

Type of tax
Direct taxes Personal income tax
Corporate income tax
Other

Indirect taxes VAT
Excise duty (EU harmonised)
Alcoholic beverages
Energy products and electricity
Manufactured tobacco
Other

Social security contribution Employers
Employees
Other
 
Legal base

The legal basis for the imposition of corporate tax is the Corporate Income Tax Act as published on 15 October 2002 (Federal Law Gazette 2002   I p. 4144), last amended by Article 6 of the law of 22 December 2014 (Federal Law Gazette 2014 I p. 2417), and the Corporate Tax Implementing Ordinance as published on 22 February 1996 (Federal Law Gazette 1996 I p. 365), last amended by Article 3 of the Ordinance of 17 November 2010 (Federal Law Gazette 2010 I p. 1544). Corporate tax law makes extensive use of the principles and   provisions of income tax law, especially as regards the determination of   profits, depreciation rules and the assessment and payment of   tax.  

Corporate tax provisions have been issued in the form of general administrative regulations to clarify uncertainties and issues requiring interpretation (see corporate tax provisions 2004 of 13 December 2004 (Federal Tax Gazette 2004 I special issue 2 p. 2).

 
Who sets
The tax rate is set by




The tax base is set by




The reliefs are set by




Comments
 
Beneficiary





Comments

The federal government and Länder governments are entitled to 50 % each.

 
Geographical Scope

Federal Republic of Germany (including that share of the continental shelf which belongs to the Federal Republic of Germany, insofar as natural resources of the seabed or its subsoil are explored or exploited or the continental shelf is utilizied for power generation using renewable energy sources)

 
Taxpayers
Domestic-source income of non-resident entities is Taxed
Not Taxed
Comments
 
Tax object and basis of assessment
As general rule, taxable income under corporate income tax includes also








Comments

Income considered Domestic income
Worldwide income (subject to double-tax relief)
Comments

Comments

 

Corporate tax is a special type of income tax for corporate entities, in particular incorporated businesses such as Corporations (AG) and Limited Liability Companies (GmbH), other associations of persons (to the extent that they are not partnerships as defined in income tax law), and conglomerations of property.  

The basis for assessment is the net profit in the fiscal year. The constitution and determination of the income is regulated by income tax law provisions. However, certain corporate tax law provisions contain special rules. In this respect, allowance must be made especially for constructive dividends.  

Corporate tax and individual income tax exist side by side. A profit realized by a corporate entity makes up part of the basis on which corporate tax is calculated, and if such profit is subsequently distributed, it also forms part of the basis on which the shareholders' income tax (if they are individuals) or corporate tax (if they are corporate entities) is calculated.

TC: In 2008, the previously applicable thin capitalization legislation was replaced with a general limitation on the deduction of interest payments (Zinsschranke). For details see section on 'Deductions, Allowances, Credits, Exemptions'.

 
Deductions, Allowances, Credits, Exemptions
Valuation of inventory
System First-in first-out (FIFO)
Last-in first-out (LIFO)
Average cost
Specific identification (unit method)

Comments

The basic principle for the valuation of inventory is the method of individual valuation.


Depreciation rules
 
Buildings
System Straight-line method
Declining balance
Production method
Combination of above
Other
Not-depreciable

Comments

Buildings used for domestic purposes: average depreciation period of 50 years and average depreciation rate of 2 %.

Average depreciation period 33  Years
Average depreciation rate 3.0 %
 
Movable (tangible) assets
System Straight-line method
Declining balance
Production method
Combination of above
Other
Not-depreciable

Comments

In the case of movable depreciable assets with a useful life of more than one year, part of the purchase or manufacturing cost is to be deducted each year such that the cost is spread evenly over the asset's entire useful life (straight-line depreciation). The average depreciation period and depreciation rate are based on the expected useful life of the asset in question.

Depreciable assets with acquisition or construction costs of up to €410 or between €150 and €1,000 are subject to special rules - option of immediate deduction of acquisition or construction costs and option of pool depreciation (Sofortabschreibung und Sammelposten).

Average depreciation period
Average depreciation rate
 
Movable fixed assets
System Straight-line method
Declining balance
Production method
Combination of above
Other
Not-depreciable

Comments

In the case of movable depreciable assets with a useful life of more than one year, part of the purchase or manufacturing cost is to be deducted each year such that the cost is spread evenly over the asset's entire useful life (straight-line depreciation). The average depreciation period and depreciation rate are based on the expected useful life of the asset in question.

Depreciable assets with acquisition or construction costs of up to €410 or between €150 and €1,000 are subject to special rules - option of immediate deduction of acquisition or construction costs and option of pool depreciation (Sofortabschreibung und Sammelposten).

Average depreciation period
Average depreciation rate
 
Intangible assets
System Straight-line method
Declining balance
Production method
Combination of above
Other
Not-depreciable

Comments

Goodwill is subject to a fix depreciation rate over 15 years. All other intangible assets are subject to a depreciation rate based on their expected useful life.

Average depreciation period
Average depreciation rate
 
Land (if any)
System Straight-line method
Declining balance
Production method
Combination of above
Other
Not-depreciable

Comments
Average depreciation period
Average depreciation rate


Comments

Are there limits to interest deductions? Yes No
If yes:
Definition of deduction limit

Comments

Pursuant to section 4h subsection (1) of the Income Tax Act, the interest expenses of a business may only be deducted up to a value equivalent to 30% of earnings before interest, taxes, depreciation and amortization (EBITDA). If the interest expenses do not exceed the interest income derived by the company, they remain deductible.

Non-deductible interest expenses may be carried forward indefinitely. With effect from 2010, "unused EBITDA" (i.e. where the interest expenses are less than 30% of the EBITDA in the tax year) can be carried forward for a maximum period of 5 years.

The following exceptions to the rule pursuant to section 4h subsection (2) of the Income Tax Act apply:

  • The interest barrier is waived if net interest expenditure/income (interest expenditures minus interest income) in a      given fiscal year is less than €3 million (safe haven).
  • The interest barrier is only applicable for companies belonging to a group of related companies (stand-alone-clause).
  • The interest barrier does not apply to companies that are part of a group of companies if the ratio of equity to total assets of the company is equal to or higher than the same ratio for the group (escape clause).

Section 8a of the Corporation Tax Act stipulates special requirements for the deductibility of interest expenses for corporations by spelling out additional scenarios to supplement those in section 4h subsection (2) of the Income Tax Act.


Is there an Allowance for Corporate Equity? Yes No
If yes:
Notional rate applied for allowance

Comments

Losses
Loss carry-forward exists? Yes No
If yes:
Time limit: Indefinite
 
Size limit:
 
Loss carry-backward exists? Yes No
If yes:
Time limit: Indefinite
1  Years  
Size limit: 1,000,000.00  EUR/Natcur
 

Comments

Loss carry-forward exists: no time limit and no size limit. The offsetting of carried-forward losses against profits exceeding €1,000,000 is limited to 60% of these profits.

Loss carry-backward exists: the time limit is 1 year, the size limit is €1,000,000.



Comments

 

As of 1 January 2009 private investors` income from dividends and capital gains are subject to a final flat-rate withholding tax of 25% (Abgeltungsteuer). Private investors do not need to declare such income. However, if the investor's personal income tax rate is below that of the final flat-rate tax, assessment and thus taxation at the lower personal tax rate may be selected. 

Dividends received by a commercial partnership or an individual enterprise are taxed under the “partial income” regime (Teileinkünfteverfahren): unlike the final flat-rate withholding tax, 60% of the dividends raise the personal tax base.

As a general rule, inter-company dividends and capital gains are tax exempt. Exemption: dividends received by a company which holds less than 10% of the distributing corporation, are subject to corporate income tax.

 
Rate(s) Structure
Nominal corporate income tax rate Rate: 15.00 %

Central government surcharge Rate: 0.82 %
Regional government surcharge Rate:
Local government surcharge Rate:
Combined rate (all-in rate) Rate: 15.82 %


Comments

Central government surcharge: 0.825% (see 'Solidarity surcharge', described in this database)

Combined rate (all-in rate): 15.825%, but companies also pay trade tax (this is not a surcharge on corporate income tax but a tax of its own (see description "trade tax", available in this database ).

The trade tax rate consists of a 0.035 general rate and a local multiplier ("Hebesatz") (e. g. 410% = sub-central government trade tax rate for Berlin = 14.35%). For Berlin, the combined corporate income tax rate therefore amounts to 30.18%.


Special tax rate for SMEs
Special tax rates apply to SMEs: Yes No
If yes:
Nominal corporate income tax rate Rate:
Central government surcharge Rate:
Regional government surcharge Rate:
Local government surcharge Rate:
Combined rate (all-in rate) Rate:


Comments
 
International aspects
Treaty countries Non-treaty countries
 
Repatriated profits are taxed according to the following system Exemption system Exemption system
Tax credit Tax credit
Deduction Deduction
 
Interest received is taxed Yes No Yes No
Tax rate on interest received 15.00 % 15.00 %
Outgoing dividends withholding tax 25.00 % 25.00 %
Outgoing interest payments withholding tax
 
Foreign losses can be set-off Yes No Yes No
If yes:
Minimum direct or indirect shareholding to qualify loss-offset (if applicable)
 
Loss carry-forward exists? Yes No Yes No
If yes:
Time limit: Indefinite
 
Indefinite
 
Size limit:
 
Loss carry-backward exists? Yes No Yes No
If yes:
Time limit: Indefinite
1  Years  
Indefinite
1  Years  
Size limit:
 
Controlled foreign company (CFC-)rules exist? Yes No Yes No
If yes:
Time limit: Indefinite
 
Indefinite
 
Size limit: 80,000.00  EUR/Natcur 80,000.00  EUR/Natcur
 
Threshold for capital or voting power held directly or indirectly by resident in non-resident company
CFC-rules apply if foreign tax rate is lower than 25.00 % 25.00 %
CFC-rules apply for passive income only? Yes No Yes No

Comments   Treaty countries

Foreign losses can be set-off (treaty countries): No (for the exemption method), Yes (for the credit method).

Loss carry-forward exists (treaty countries): No time limit and no size limit. The offsetting of carried-forward losses against profits exceeding €1,000,000 is limited to 60% of these profits.

Loss carry-backward exists (treaty countries): The time limit is 1 year, the size limit is €1,000,000.

Threshold for capital or voting power held directly or indirectly by resident in non-resident company for treaty countries: No individual threshold. However, more than 50% interest or voting power must be held by residents.


Comments   Non-treaty countries

Tax rate on interest received from non-treaty countries: only the burden of corporate income tax is taken into account in each case.

Outgoing interest payments withholding tax to non-treaty countries: Tax is only payable on interest if the capital investment is secured by domestic real property.

Foreign losses can be set-off (non-treaty countries): Yes (as for the credit method, but only where section 2a of the Income Tax Act does not impose a restriction).

Loss carry-forward exists (non-treaty countries): No time limit and no size limit. The offsetting of carried-forward losses against profits exceeding €1,000,000 is limited to 60% of these profits.

Loss carry-backward exists (non-treaty countries): The time limit is 1 year, the size limit is €1,000,000. 

Threshold for capital or voting power held directly or indirectly by resident in non-resident company for non-treaty countries: No individual threshold. However, more than 50% interest or voting power must be held by residents.

 
Measures against profit shifting
 
Do Thin Capitalization (TC) rules exist? Yes No
If yes:
Date of first introduction
1994/01/01
Introduced as Explicit TC law
Part of CIT law
Test for TC Ratio
Arm's length
If ratio
Value of numerical ratio:
Definition numerator
Definition denominator
 
Debt considered for test Internal
Internal and external
TC depends on shareholding? Yes No
Substantial shareholding threshold
 
Type of shareholding Direct
Indirect
Automatic remedy Yes No
Remedy Non-deductibility of interest
Reclassification as dividend
 
Rules apply to All companies
Foreign companies
Non-EU companies
Transfer pricing rules exists? Yes No
If yes:
Arm’s length principle applied? Yes No
 
Remedy Fee
Tax base increase
 
Tax due date

Corporate tax prepayments are made in accordance with a prepayment notice issued by the tax office based on the estimated tax liability for the year. The taxpayer is obliged to make quarterly advance payments on tax due on 10 March, 10 June, 10 September and 10 December. If final accounting shows that additional tax is due, the taxpayer must make a final payment of this amount.

If current prepayments exceed the tax liability, the excess is refunded. The final payment must be made within one month of the tax assessment notice being issued.

 
Tax collector

Corporate tax is collected by the Länder.

 
Special features

 
Economic function







Comments
 
Environmental taxes



Comments
 
Tax revenue
ESA95 code d51oa

Year
Annual tax revenue (millions)
Currency
Tax revenue as % of GDP
Tax revenue as % of total tax revenue
2012 17,473.00 EUR 0.63
2011 16,586.00 EUR 0.61
2010 12,835.00 EUR 0.50
2009 8,270.00 EUR 0.34
2008 16,742.00 EUR 0.65
2007 23,724.00 EUR 0.94
2006 23,675.00 EUR 0.99
2005 17,802.00 EUR 0.77
2004 14,361.00 EUR 0.63
2003 9,518.00 EUR 0.43
2002 4,370.00 EUR 0.20
2001 1,262.00 EUR 0.06
2000 24,537.00 EUR 1.16

Comments