Germany imposes certain taxes on profits of domestic and foreign corporations with a permanent establishment in Germany. There are federal taxes such as corporation income tax (tax rate: 15%) and solidarity surplus charge (tax rate: 5,5% on corporation income tax rate). The combined tax rate is 15,83%.

In addition to this there is a local business tax. Subject to this tax is everybody who carries out business or trade activities. Companies are always presumed to carry on a business. Taxable income for business tax is detemined in the same manner as for income tax purposes. But this income is subject to certain adjustments. Some adjustments increase the taxable income other reduce it. For example the following expenses are not deductible if they exceed together a threshold of € 100,000:

  • Financing costs (100%)
  • Rental costs for real estate (20% of rent)
  • Rental or leasing costs for cars, trucks, IT-Hardware, other equipment (50% of rental and leasing costs)



Income for corporation tax purpose (Profit)


Financing costs (interests)




Rent for office and warehouse space




Leasing costs (Trucks, equipment)






Income for business tax purposes (tax base)


There are deductions especially to avoid double taxation senarios such as for profits of foreign permanent establishments or dividends derived from qualified shareholding investments.

Before mentioned tax base is multiplied by a federal rate of 3,5% and results in a basic tax amount. This basic tax amount is multiplied by a special rate set by each city or municipality. The current multiplier for major German cities are for example:

  • Berlin: 410%
  • Frankfurt am Main: 460%
  • Hamburg: 470%
  • Munich: 490%

Smaller towns might have considerable lower rates. The tax burden in general varies between 14% to 17% of profits. Business tax like other income taxes are not deductible for tax purposes.

Business Tax Gewerbesteuer
Corporation Income Tax Körperschaftsteuer
Solidarity Surplus Charge Solidaritätszuschlag
Business Tax Base Gewerbeertrag
Federal Rate Gewerbesteuer-Messzahl
Basic Tax Amount Gewerbesteuermessbetrag
Municipal Multiplier Gewerbesteuerhebesatz