Paying Taxes in Germany

1. What is the corporate tax in Germany?
Since the comprehensive reforms in 2001 and 2008 the tax system in Germany has been modified to better suit the country's economy. The corporate tax in Germany applies to a standard rate of 15%. In addition a business tax of 14% up to 17% is applied, being payable to the municipality.

2. What is the VAT in Germany?
According to German Tax Law the standard VAT rate is 18%. However in certain cases reductions can be made, the VAT rates varying between 1% and 8% for certain goods and services defined by law.

3. How can the VAT be refunded in Germany?
The Value Added Tax or Umsatzsteuer of 18% applied to companies is deductible, as the tax is a transit item for entrepreneurs. The system is straight-forward and the entrepreneurs can choose their own refund period from the minimum period of three months and maximum of one calendar year. If the chosen period is one year, the minimum refundable amount is 25 Euro. In order to obtain the refund, a company must submit an application to the German tax authorities. The application needs to be signed by the business owner personally. The refund is usually made by credit transfer to the bank account of the company within a maximum of 24 months after the claim.

4. What is the dividend tax in Germany?
Under German Tax Law taxable entities are subject to a dividend withholding tax of 26%.

5. Are there any incentives for foreign investors in Germany?
Many foreign entrepreneurs choose to set business in Germany due to the thriving economy and the resources offered by the country. There are plenty of incentives in the form of programs designed to fit diverse economic activities. The government offers cash incentives for labor-related activities and research and development. Also Germany offers different grants and special loans for different business fields. The business environment is welcoming there is no discrimination against foreign companies compared to local companies.

6. Why do I need a local accountant for my German business?
German companies are subject to certain regulations. Accountants are needed for tax fillings and other procedures. Even though the system is comprehensive and straight-forward local accountants offer a better understanding of the economical environment also having more experience in dealing with the financial needs of companies in any business sectors.

BridgeWest offers advice on how to open a company in Germany, including virtual office services, opening of bank accounts and accounting services.