Taxation of LLCs in Germany

Updated on Thursday 09th March 2023

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The GmbH or the limited liability company is one of the most commonly used business forms, both by local and by foreign investors.

The taxation is LLCs in Germany includes a set of taxes, typical both to this business form but also for other types of companies, such as the joint stock company or the AG. These include the corporate income tax, the value added tax, the municipal trade tax, and the withholding taxes.

Our team of German lawyers can assist investors in complying with the tax laws in the country and can give you detailed information on the taxation principles.

The main taxes for companies in Germany

Below, we list the main taxes for limited liability companies in Germany:

corporate income tax: 15%, applicable to the worldwide income of a limited liability company in Germany; however, the effective rate is higher because other taxes add to it; in practice, it can range between 30 and 33%.
trade tax: this type of tax varies and has a value of 14 to 17% in major German cities.
VAT: the standard rate of 19% with a reduced rate of 7% and exemption for some types of transactions.
social security: LLCs with employees will pay 50% of the social security contributions which vary according to wage.

Other taxes include the real property tax of 0.35% of the tax value of the property, the withholding taxes on dividend, which may be reduced according to an applicable double tax treaty, and other taxes such as the municipal tax.

As far as VAT registration in Germany is concerned, an LLC will be considered a resident business and, in general, it will need to register for this tax. An exemption applies to small businesses (under a special scheme), according to which they can be exempt from this registration, however, only when their turnover remains under a certain value. Our team can give you more details.

One of our lawyers in Germany can give you a complete count of the payable taxes according to the type of company, size and business field. Individuals can also contact the Central Tax Office in Germany.

Taxation reporting and accounting in Germany

Germany follows the International Financial Reporting Standards as well as the commercial GAAP for accounting purposes. companies are required to keep their books updated and store them at their headquarters in Germany. The financial statements and prepared and filed on an annual basis.

The LLC will need to observe the corporate income tax rates, the other applicable rates, as well as the rules for tax compliance. Most companies follow a tax year of 12 months, and our German accountants can offer assistance in preparing the annual financial statements. We also offer support in payroll issues, for audit purposes, or information about tax incentives.

The team of tax experts at our law firm in Germany can answer your questions about the Income Tax Act, the VAT Act, the General Tax Code and other sources of law. Contact us for complete legal counseling.