Germany taxes residents on worldwide income and non-residents on Germany-source income only. Germany does not use self-assessment in the way many other countries do - the tax office (Finanzamt) issues a final assessment notice (Steuerbescheid) after reviewing the taxpayer's income tax return, and taxes are payable within one month of that assessment being issued. Where income is fully covered by wage tax withholding (Lohnsteuer) and capital-gains withholding at domestic banks, no return or assessment is required at all - the withholding itself settles the liability.
The German tax year is the calendar year. The standard individual filing deadline is 31 July of the following year for self-filed returns; taxpayers represented by a registered tax advisor (Steuerberater) receive a materially extended deadline, historically running to the end of February of the second following year.
Germany levies a flat 15% federal corporate income tax (Koerperschaftsteuer) plus a 5.5% solidarity surcharge on that tax amount, for a combined federal rate of 15.825%. On top of this, municipal trade tax (Gewerbesteuer) applies at a rate set by each municipality, generally ranging from 8.75% to 20.3% depending on location, for a typical combined effective corporate tax burden of around 30%.
The headline personal income tax (PIT) rate is 45% plus surcharges.
The standard VAT/GST (or equivalent consumption tax) rate is 19%.
An individual is a German tax resident with unlimited tax liability (worldwide income taxed) if they maintain a domicile (Wohnsitz) in Germany or their habitual abode (gewöhnlicher Aufenthalt) - in practice, presence exceeding roughly six months generally establishes this. Notably, simply retaining the right to use a residence in Germany can be enough to trigger residency even if rarely used. Non-residents are taxed only on German-source income.
A non-German entity has a German permanent establishment through a fixed place of business used for the entity's business activity, or through a dependent agent habitually concluding contracts on the entity's behalf in Germany, per Germany's General Tax Code (Abgabenordnung) Section 12, subject to modification by an applicable tax treaty.
Germany's CFC regime under the Foreign Tax Act (Außensteuergesetz, AStG §§7-14) attributes a foreign subsidiary's low-taxed passive income directly to the controlling German shareholder where the subsidiary is deemed an "intermediate company" (Zwischengesellschaft). The low-tax threshold was reduced from 25% to 15% effective 2024 as part of Germany's Minimum Tax Directive implementation, aligning it with the global minimum tax rate - meaning fewer foreign subsidiaries now fall within scope than under the pre-2024 rules. A further 2026 change is expected to exempt CFC taxation where passive income is both under 30% of total income and under EUR 100,000 at the CFC level.
Germany has no formal thin capitalization rule; its substitute is the interest barrier (Zinsschranke, §4h EStG / §8a KStG), which limits deductible net interest expense (interest paid less interest received) to 30% of tax-EBITDA for both corporate and trade tax purposes. A de minimis exemption applies where net interest expense is below EUR 3 million. Following a December 2023 amendment, the rule now aligns with the EU Anti-Tax Avoidance Directive (ATAD) and applies regardless of whether the lender is a shareholder, related party, or third party.
Germany does not use an elective check-the-box classification system; entity classification generally follows a "type comparison" (Typenvergleich) test comparing the foreign entity's actual legal characteristics against German entity types to determine whether it is treated as transparent (partnership-like) or opaque (corporation-like) for German tax purposes. Germany has implemented ATAD2-aligned anti-hybrid rules denying deductions for payments that would otherwise produce a hybrid mismatch (double deduction or deduction without corresponding inclusion).
No foreign bank account or foreign financial asset reporting regime exists in Germany requiring residents to separately disclose foreign accounts; foreign income is reported through the standard annual income tax return.
Germany provides a participation exemption under Section 8b of the Corporate Tax Act (KStG): qualifying dividends and capital gains received by a German corporation from another corporation are 95% exempt from corporate tax (5% is deemed a non-deductible business expense and remains taxable), with no minimum ownership threshold required for capital gains, though a minimum 10% direct shareholding at the start of the calendar year is required for the dividend exemption specifically.
Germany has a real foreign tax credit regime under Section 34c of the Income Tax Act (EStG) for individuals and the corresponding provision under Section 26 of the Corporate Tax Act (KStG) for companies, generally an ordinary credit capped at the German tax otherwise due on the same foreign-source income (per-country limitation), available where a tax treaty does not instead prescribe an exemption method for that specific income.
Germany maintains income tax treaties with nearly 90 countries, covering most industrialized nations, though notable gaps remain - Germany has no income tax treaty with Brazil or Hong Kong, and its treaty with the UAE expired at the end of 2021 without renewal. Full text of Germany's treaties is maintained by the Bundesministerium der Finanzen (Federal Ministry of Finance). For US-specific treaty text, see the IRS Germany Tax Treaty Documents page.