(a) The federal general corporate rate is 15%, plus a 5.5% solidarity surcharge, with local trade tax rates bringing the effective tax rate to between 26% and 33%. Capital gains from the sale of the shares in a corporation and dividends are 95 % tax exempt for corporate shareholders.
(b) there are exceptions, for example, interest paid by banks
Advisers agree the German government has had trouble finding the right answers to overcome the economic downturn. "We expected the government to do more and we recommended more, but they rejected most suggestions," said one tax professional. The Ministry ...
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Advisers agree the German government has had trouble finding the right answers to overcome the economic downturn. "We expected the government to do more and we recommended more, but they rejected most suggestions," said one tax professional. The Ministry of Finance made some attempt to help businesses by introducing new rules for the deduction of interest. But, as one adviser noted, this is not enough. "The country needs better rules for the use of losses carried forward," he said. The problem stems from previously implemented rules which were justifiable in a growing economy but have a negative impact during a downturn. The Corporate Tax Reform Act in 2008 made losses more difficult to use. Loss carry forward relief was restricted for a company where there is a direct or indirect change of shareholders. This affected intra-group reorganisations.
The tax authorities have become more aggressive towards cross-border transactions and transfer pricing, practitioners say. One notes there is particular pressure on companies that are still profitable and the fear is the aggression will continue once the economy recovers. Offshore tax structures have also been a focus this year for the tax authorities. Advisers expect the government to go after taxpayers that are not paying their fair share of tax harder than before. "Individuals are at the forefront at the moment but corporates will eventually become targets," one adviser said. The feeling is it will become harder to enter into structured financing transactions because of the increased focus on tax havens.
Tax audits are expected to increase. The government is looking to increase the number of internal field auditors to 650, one source says. The number was closer to 110 a decade ago.
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