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'.