Corporations are popular legal forms for start-ups - but how are they taxed?
Anyone setting up a company should also keep an eye on tax issues - which is often not so easy. Each legal form has its own special features in terms of taxation. So what taxes are incurred by corporations? In this article, you can find out more about the topic of corporations and taxes.
What are corporations?
Corporations are a generic term for various legal forms. Many of them are well known: The Gesellschaft mit beschränkter Haftung (GmbH), the Unternehmergesellschaft haftungsbeschränkt (UG haftungsbeschränkt). They all have one thing in common: they have limited liability. This brings advantages in everyday business life. With limited liability, the private assets of the shareholders remain protected in the event of liability. Only the company is liable with its full assets.
What types of tax are there for corporations: an overview
There are many different types of tax that are relevant for corporations. Here you will find an overview of all taxes that are relevant for corporations:
- Corporation tax (KSt)
- Trade tax (GewSt)
- Capital gains tax (KapESt)
- Value added tax (VAT)
- Wage tax (LSt)
Capital tax for corporations
Corporations do not pay income tax on the company's income. Corporation tax taxes the income generated by the corporation. The tax rate is 15%, which is offset against the profits generated.
Would you like to set up a GmbH or UG and are not yet familiar with the tax issues? Then choose the right legal and tax advice package now.
Trade tax for corporations
Anyone who generates income from a commercial activity is liable for trade tax. This also applies to corporations. How high the trade tax rate is for your company depends on the municipality in which your company is based. The municipality also determines the so-called trade tax multiplier, which is a multiplier for your individual trade tax rate.
Would you like to understand how trade tax is calculated? Find out now on our page about trade tax: simply explained.
Capital gains tax for corporations
Corporations can distribute profits to the company. Capital gains tax is credited against the investment income in a similar way to income tax. It is 25% and is payable as soon as profits are paid out to the shareholders. The solidarity surcharge and church tax are also added to the capital gains tax.
Turnover tax and wage tax for corporations
Turnover tax applies to all services provided by the company in return for payment. The tax rate is 19% and can also be 7% depending on the product group.
Wage tax, on the other hand, does not affect the shareholders as such, but the employees, insofar as they are present in the company. Wage tax is levied on income from labour. If the managing director is categorised as an employee in the company, wage tax is also levied on their salary.
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