Corporate Income Tax in Germany
In general all companies are subject to corporate income tax with the legal form GmbH (LLC), AG (public or non-public corporation), and KGaA (partnership limited by shares). Additionally trusts and foundations are under certain conditions also subject to corporate income tax.
The corporation tax rate for retained and distributed profits is a flat-rate-tax of 15 percent. In case of distribution of dividends taxation is as follows:
- Dividends paid to German individuals or German residents according to double tax treaty there is a 25 % settlement tax (withholding tax).
- Dividends distributed to a foreign individual (non-German resident according to double tax treaty) there is no settlement tax according to German tax law. However in some double tax treaties there is a withholding tax.
- In case of the distribution to other German corporations 95 % of dividends are tax exempt from their income as long as withheld.
- Distributions to foreign companies are subject to the withholding tax as agreed in the double tax treaty.
According to a change in German income tax law, dividends received by individuals are subject to 25% settlement tax. The settlement tax was introduced for capital income on 01 January 2009 in Germany.