Corporate Tax in Germany: Rates for Foreign-Owned Companies

Corporate tax in Germany comes to roughly 30% of profit for most companies. That figure is not a single tax but a stack: corporation tax of 15%, a solidarity surcharge of 5.5% on that tax, and a municipal trade tax that changes from city to city. A foreign-owned company pays exactly the same rates as a German-owned one, so ownership alone never raises your bill. This guide breaks the number down, explains what is specific to foreign and non-resident owners, and points to the levers that legitimately reduce it.

One thing to clear up at the outset: this page is about company tax on a GmbH, UG, or AG, not the personal income tax that tops out around 42% for individuals. Those are different systems, and the headline rates people quote often mix them up.

Germany’s corporate tax at a glance

A German company’s profit passes through three layers of tax before you reach the effective rate. Each one is set by a different law and, in the case of trade tax, by your municipality.

Corporation tax and the surcharge are fixed nationwide. Trade tax is where your address matters, because each town sets its own multiplier. Together they land most companies near 30%, which is high by European standards but predictable, treaty-backed, and the same for everyone.

Corporation tax and the solidarity surcharge

Corporation tax (Körperschaftsteuer) is the federal tax on a company’s profit, charged at a flat 15% under KStG §23. It applies uniformly to every incorporated company, a GmbH, UG, or AG alike, regardless of who owns it.

On top of the corporation tax sits the solidarity surcharge (Solidaritätszuschlag) of 5.5%. The surcharge is calculated on the corporation tax owed, not on profit, so it works out to roughly 0.8 percentage points of profit. Add it to the 15% and the federal layer comes to 15.825%. While the surcharge has been largely phased out for individuals, it still applies in full to companies, so corporate taxpayers should keep counting it.

Trade tax (Gewerbesteuer): the part that varies by city

Trade tax is the layer that makes the same company cheaper or dearer depending on where it is based. It starts from a uniform base rate of 3.5% of taxable trade income (GewStG §11), which is then multiplied by the municipality’s Hebesatz, a multiplier each town sets for itself (GewStG §16). The minimum multiplier is 200%, but most business cities sit between 400% and 500%, with some reaching higher.

A few worked examples show the spread:

Two points often surprise foreign owners. First, trade tax is not deductible against corporation tax, so the layers genuinely add up. Second, because the multiplier is local, choosing a low-Hebesatz municipality for your registered office is a legitimate and common way to shave the overall rate. The exact figures change as councils adjust their multipliers, so treat city numbers as indicative.

The combined effective rate, and how Germany compares

Stack the three layers and the typical effective burden is around 30%, ranging from roughly 23% in low-multiplier locations to about 33% in the most expensive cities, Berlin near 30%, Frankfurt near 32%, Munich near 33%. On a statutory basis Germany’s combined corporate rate is about 29.9%, against a European Union average near 21.3%, which places Germany among the higher-taxed jurisdictions in Europe.

That gap is exactly why some founders compare locations before they commit. If you are weighing alternatives, see our guides to corporate tax in Switzerland and corporate tax in Austria, our overview of the lowest-tax countries in Europe, and the side-by-side Germany, Switzerland and Austria comparison. What Germany trades for the higher rate is a deep treaty network, legal certainty, and access to the EU’s largest market.

How foreign-owned companies are taxed

This is the question that brings most readers here, and the answer is reassuring: a German company is taxed the same way whoever owns it. There is no surcharge, premium, or special rate for foreign shareholders. A GmbH owned from Dubai, Mumbai, or New York pays the same corporation tax, surcharge, and trade tax as one owned in Düsseldorf.

What does change with cross-border ownership is the scope of taxation, and that turns on where a company is managed, not on the nationality of its owners:

• A resident corporation (managed or registered in Germany) is taxed on its worldwide income.
• A non-resident corporation is taxed only on its German-source income, typically profits attributable to a German permanent establishment (Betriebsstätte) or German real estate.

So a GmbH with its management in Germany is fully taxable here regardless of where its owners live, while a foreign company without German management is taxed only on what it earns inside Germany. If you are buying into Germany from abroad, our guide on how to buy a company in Germany as a foreigner sets out the practical side, and a ready-made GmbH gives you a resident entity from day one.

Dividends, withholding tax and double taxation treaties

Tax on the company is only half the picture. When profit leaves the company as a dividend to a foreign shareholder, Germany levies a withholding tax (Kapitalertragsteuer) of 25%, which becomes 26.375% once the solidarity surcharge is added. Left there, that would mean a second bite on money already taxed at company level.

In practice it is usually reduced, and this is where Germany’s treaty network earns its keep:

• A double taxation treaty between Germany and the shareholder’s country typically cuts the withholding rate, often to somewhere between 0% and 15%, and credits or exempts the tax in the other country so the same profit is not taxed twice. Germany maintains a double taxation treaty network with most major economies.
• The EU Parent-Subsidiary Directive can remove the withholding tax entirely on dividends paid to a qualifying parent company in another EU member state, where the parent holds at least 10% of the shares for at least a year.

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Royalties paid abroad carry a 15% withholding tax, and interest is generally free of withholding, again subject to treaty terms. Because the relief depends on the specific country and holding, the right figure is always the one in the applicable treaty.

Holding companies and the participation exemption

For groups, the most valuable feature of German tax is the participation exemption under §8b of the Corporation Tax Act. When a German company receives dividends from, or sells its shares in, another corporation, 95% of that income is tax-exempt; only a notional 5% is added back as a non-deductible expense. In effect, qualifying inter-company dividends and share-sale gains are taxed at roughly 1.5% rather than the full ~30%.

There are thresholds. For corporation tax, the company should hold at least 10% of the subsidiary; for trade tax purposes the threshold is 15% at the start of the year. Holdings below the line, so-called portfolio dividends, stay fully taxable. This is the engine behind most German holding structures and a key reason international groups place a holding company in Europe in Germany or a neighbouring DACH country. We help match the structure to your goals rather than applying a template.

GmbH, UG or AG: does the legal form change the tax?

The legal form changes your capital and governance, not your corporate tax rate. A GmbH, a UG (the “mini-GmbH”), and an AG are all corporations and all pay the same corporation tax, solidarity surcharge, and trade tax on their profits. The headline difference between a GmbH and a UG is minimum capital, not taxation, so a UG is not a tax shortcut.

If you are choosing between structures, see our breakdown of the types of companies in Germany and our page on the UG (mini-GmbH). A GmbH & Co. KG behaves differently because the partnership layer is taxed transparently, which is a separate topic from the corporate rate covered here.

VAT and other company taxes

Beyond income taxes, a trading company deals with value-added tax (Umsatzsteuer) at a standard rate of 19%, with a reduced 7% rate for certain goods and services. VAT is collected from customers and passed to the tax office rather than borne by the company, but it shapes pricing and cash flow, and registration is part of getting trading-ready. If your business touches property, note that real estate carries its own property transfer tax; our guide to a real estate company in Germany covers that. Regulated sectors such as fintech have extra layers, explained on our crypto company in Germany page.

Is Germany’s corporate tax rate changing?

Yes, and in the company’s favour. Germany has legislated a gradual cut to corporation tax, dropping one point a year from 2028 until it settles at 10%:

The solidarity surcharge continues to apply to each reduced rate, and trade tax stays a municipal matter, so the combined effective burden will ease over the next decade rather than collapse. For planning purposes it is worth knowing the direction of travel, but base today’s decisions on today’s rates.

Pillar Two: the global minimum tax

You may have read about the OECD’s 15% global minimum tax, which the EU has implemented and Germany has adopted. It applies only to large multinational groups with consolidated annual revenue of €750 million or more. For the overwhelming majority of owner-managed GmbHs and mid-sized businesses it is not relevant, since the German effective rate already sits well above 15%. We flag it only so the term does not cause unnecessary worry.

Lowering the burden legitimately

There is no magic switch, but there are well-established, lawful levers. Choosing a registered office in a lower-Hebesatz municipality reduces trade tax. A holding structure using the §8b participation exemption can sharply cut tax on inter-company dividends and exits. Double taxation treaties prevent the same profit being taxed twice and lower withholding on dividends leaving Germany. And for some founders, comparing Germany with Switzerland, Austria, or other low-tax European jurisdictions before they commit is the simplest optimisation of all. These are planning choices, not loopholes, and they work best when set up correctly from the start.

Ongoing tax compliance for your German company

A German company carries real, recurring tax obligations, and staying compliant is what keeps the rate from becoming a penalty. After formation or acquisition, the company registers with the local Finanzamt and receives its tax number. From there it must keep proper books, file an annual corporation tax return, trade tax return, and VAT returns, and submit its accounts electronically (the e-Bilanz). Deadlines are firm, and late or incomplete filing risks estimates, surcharges, and audits.

For foreign owners managing a company from abroad, this is often the part worth delegating. Müller Konsult sets up accounting, prepares and files the returns, and deals with the tax office on your behalf, so the obligations are met on time. You can pair that with a German business bank account and, if you form rather than buy, with company formation in Germany.

Frequently asked questions

Official sources

• German Corporation Tax Act (Körperschaftsteuergesetz, KStG) — gesetze-im-internet.de
• German Trade Tax Act (Gewerbesteuergesetz, GewStG) — gesetze-im-internet.de
• Federal Ministry of Finance (Bundesfinanzministerium) — bundesfinanzministerium.de
• Corporate tax rate data, Europe — Tax Foundation

Considering a German company?

Müller Konsult helps foreign founders set up, acquire, and run compliant German companies, with the tax, accounting, and filing handled for you. We assess your situation and propose a structure that fits your goals. Müller Konsult · Königsallee 27, 40212 Düsseldorf · +49 211 5403 8800 · info@gmbhforsale.com · Request a callback

Reviewed by Stefan Stelthove, Corporate & Commercial Lawyer, Müller Konsult. Last updated 7 June 2026.

Related: Corporate tax in Switzerland · Corporate tax in Austria · Tax haven Europe · Holding company in Europe · Types of companies in Germany