German business taxes

how much tax you have to pay as an employer

Germany is the 8th safest tax country in the world. There are many direct and indirect taxes in Germany and an individual wishing to start up their own business must be familiar with the most significant ones.

German business taxes

If you have lived in Germany for more than 6 consecutive months you are considered to be an “ordinary resident” and must pay tax on your worldwide income and property. Individuals who have not lived in Germany for more than 6 months are not considered to be tax residents and therefore only pay tax on the income earned in the country.

Paying business tax

All companies have to pay income tax, regardless of how much your business earns. Individuals wishing to start a business must also pay 25% of corporate tax, otherwise known as Körperschaftsteuer. An average of 18% of their taxes will go towards municipal trade tax, or Gewerbesteuer.

If you choose the AG or GmbH business model, you will also have to pay 25% corporate tax or Körperschaftsteuer. Depending on the item, either 19% or 7% will go towards value added tax or Mehrwertsteuer - also known as VAT.

If your company is affiliated with one of Germany’s established churches, 8% or 9% will go towards church tax and 5.5% towards solidarity surcharge.
The income tax return must be filed by May 31st of the year following the one in which the income was received. If you are using the assistance of a tax consultant, an automatic extension to file until September 30 is issued. You should bear in mind that late returns may result in a penalty.

If you have lived in Germany for more than 6 consecutive months you are considered to be an “ordinary resident” and must pay tax on your worldwide income and property. Individuals who have not lived in Germany for more than 6 months are not considered to be tax residents and therefore only pay tax on the income earned in the country.

Paying business tax

All companies have to pay income tax, regardless of how much your business earns. Individuals wishing to start a business must also pay 25% of corporate tax, otherwise known as Körperschaftsteuer. An average of 18% of their taxes will go towards municipal trade tax, or Gewerbesteuer.

If you choose the AG or GmbH business model, you will also have to pay 25% corporate tax or Körperschaftsteuer. Depending on the item, either 19% or 7% will go towards value added tax or Mehrwertsteuer - also known as VAT.

If your company is affiliated with one of Germany’s established churches, 8% or 9% will go towards church tax and 5.5% towards solidarity surcharge.
The income tax return must be filed by May 31st of the year following the one in which the income was received. If you are using the assistance of a tax consultant, an automatic extension to file until September 30 is issued. You should bear in mind that late returns may result in a penalty.

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