These GmbH taxes should be known and understood by founders

Regardless of the sector in which you operate, the taxes you need to calculate are always the same. A GmbH is a corporation and, as a legal entity, is taxed according to the Corporation Tax Act (KStG) and the Income Tax Act (EStG). As the founder of a GmbH, you pay

• Corporation tax (15%), as the GmbH is a corporation.
• Trade tax (15%, based on your respective income)
• Value added tax
• Wage tax (if you employ staff)
• Property transfer tax (if you buy property or land)
• Capital gains tax - (under certain conditions) if you distribute profits to shareholders
  
  

When you set up a GmbH, you are managing a corporation. You therefore pay corporation tax here. In addition, the income you generate with your GmbH falls under ‘trade’. This means that in most cases you have to pay trade tax. There are exceptions for property projects.

The amount of trade tax depends on the location where your company is based. The so-called assessment rate forms the basis for the calculation. This can vary considerably

If the GmbH generates profits, these can either remain in the company or be paid out to the shareholders. Corporation tax is payable regardless of how the profits are handled. The corporation tax rate is 15%, and is offset against profits. 

You must submit an annual corporation tax return to the tax office together with your GmbH's annual financial statements. Based on your return, the tax office will determine the amount of your quarterly advance payments, which you must pay on time. 

The due dates for the payments are: 

• 10 March
• 10 June 
• 10 September 
• 10 December

The solidarity surcharge is 5.5% and is levied both on the income of the company and on the income of the directors as individuals.

A GmbH that operates a trade - i.e. any permitted independent economic activity that is carried out for its own account, on its own responsibility and for a certain period of time with the intention of making a profit - must pay trade tax. As a rule, every GmbH that offers a product or service operates a trade. The only exception is a GmbH that manages assets. 

What you should know about trade tax: 

• Trade tax (GewSt) is an income tax 
• It is paid in quarterly advance payments to the relevant municipality 
• The amount of trade tax is based on the GmbH's profit in a calendar year
• The national trade tax rate is 3.5 %
• There is no trade tax allowance for corporations 

How to determine the trade income: 

• You determine the taxable profit or loss resulting from the Corporation Tax Act and Income Tax Act
• Further reductions or additions are made in accordance with the Trade Tax Act
• This tax assessment amount is multiplied by the individual assessment rate of the responsible municipality
• Trade losses can be deducted up to an amount of 1 million euros (amounts above this are only credited at 60%)

The GmbH pays value added tax (VAT) on deliveries, services and imports and exports. The tax rate is 19%, but in some cases it can be reduced to 7%. The tax rate is added to the net amount and must be shown on every invoice. If the GmbH makes purchases for the company, these are reported to the tax office via the input tax deduction in the advance VAT return. 

Did you know? Under the Small Business Act, it is possible to be exempt from VAT if the turnover subject to VAT is less than €22,000 in a financial year. In this case, no input tax is deducted.

If your GmbH employs staff, income tax (LSt) and church tax (if applicable) must be withheld and paid to the tax office every month. The same applies to directors and mini-jobbers.

In these cases, real estate tax and real estate transfer tax are relevant: 

• If your GmbH acquires a property, real estate transfer tax (GrESt) is payable once. The basis of assessment is the purchase price, which is multiplied by a tax rate of 4.5 %. 
• If your GmbH is already the owner of a property subject to property tax, the property tax is collected by the relevant municipality. This takes the form of a quarterly advance payment

As a founder of a GmbH, you can benefit from various tax advantages. In accounting terms, these are often referred to as 'partial exemptions'. This means that you can save money on, for example, investments in shares and property sales through a GmbH.

Some of the biggest benefits you can enjoy are in relation to income from ETFs & equity funds, property income and dividend payments. The Digitale Gründung team will be happy to help you.

When it comes to profit distribution you have two options as a director of a GmbH.

• If you are a shareholder-managing director and also an employee of the GmbH, you can pay yourself a salary. You will then pay income tax at your rate. The salary is added to the costs of the GmbH. This means that you pay less tax.
• If you opt for the traditional method of profit distribution, you will pay either a flat-rate withholding tax or tax according to the partial income method. In the latter case, 40% of your income is tax-free. The remaining 60% is calculated according to your income tax rate.