Corporate Tax Rates in Germany change in accordance with the need of the economy. The federal corporate tax rate in Germany is 25%. The German companies have to pay a business tax to the municipality. The calculation of the corporate tax depends on the business tax payable by the company. The corporation tax rate in Germany was a nominal one and has been cut down from the present year. There are various ways of deductions in tax in the corporate world. Prior to the tax reforms in 2000 the corporate tax rate was quite low. The corporate tax amounted to €23.6 billion in 2000 and was even less during the following two years.
However, it is not easy for the corporate houses to avail the tax deductions always and hence they are unable to save money for a long period of time so that they can gain a huge profit and invest money in some other enterprise. Their earnings are mostly spent for their regular chores.
Types of Corporate Tax
There are four types of corporate taxes in Germany. They are:
- Korperschaftssteuer
- Kapitalelrtragssteuer
- Veranlagte Einkommenssteuer
- Gewerbesteuer
Recent Change in the Corporate Tax Rate
The government of Germany has decided to slash corporate tax rates in a recent meeting. This move would encourage investment in various sectors of German economy. The cutting down of the corporate tax rate would put Germany in the league of the other West European countries. This step would not have much effect on the whole tax system. It would provide a little relief from the burden of tax. The government also plans to expand the tax base; it would curtail the deduction on the payment of interest, it would restrict the deduction on the fees paid for licensing as well.
The tax system in Germany has undergone a sea change after the reform in 2001. According to the Reforms if a German company receives around 95% of the capital gain from selling off shares from a German or any other foreign country then that gain is exempted from the taxable amount.
Payment of Tax
The company should announce the financial status by 31st May. Tax should be paid as soon as the company obtains the receipt.