Investor Guide
2026-10-10 08:21

Körperschaftsteuer (corporate income tax): A Falling Rate Lowers the Tax — and the Value of Tax Losses

Körperschaftsteuer is the income tax on companies: a German GmbH pays 15% of its taxable income plus a 5.5% solidarity surcharge on the tax — 15.825% in all — and the rate is legislated to fall to 10% by 2032. For a supermarket held in a company it is, with trade tax, the company-level tax on rent; withholding tax on dividends follows only when profit is paid out.

What it is

A corporation with its seat or place of management in Germany — every German GmbH — is taxable on its worldwide income (§ 1(1) no. 1, (2) KStG). A foreign company is taxable on its German income, including rent from and gains on German property (§ 2 no. 1 KStG; § 49(1) no. 2 lit. f EStG). All income of a GmbH counts as business income (§ 8(2) KStG), so the tax-free private sale after ten years (§ 23 EStG) does not apply. Hidden profit distributions, such as interest above an arm's-length rate paid to a shareholder, do not reduce taxable income (§ 8(3) sentence 2 KStG).
The rate is 15% up to assessment year 2027, then 14% in 2028, 13% in 2029, 12% in 2030, 11% in 2031 and 10% from 2032 (§ 23(1) KStG). The solidarity surcharge adds 5.5% of the tax (§ 4 SolZG 1995).

Why it matters to investors

Corporate tax is where the holding structure shows its effect. In the Part 11 example, the GmbH funded by a shareholder loan pays none for a decade, because interest and depreciation exceed its operating profit. Funded with equity only, the same company pays €28,300 in year one. Without the extended trade-tax reduction, corporate and trade tax together take roughly 25–33% of profit (Part 9).
The rate cut works in two directions. It lowers the tax on future profit: at 10%, the rate including solidarity surcharge falls to 10.55% (our calculation). It also lowers the value of deductions. The more than €1 million of tax losses in the Part 11 example will meet profits taxed at the lower rate, so each euro of loss saves less. Profit retained in the company bears only company-level tax; on distribution, German withholding tax of 26.375% applies, which EU rules or a tax treaty may reduce (Part 9).

What to check

• Where the company is managed: a foreign company managed from Germany is taxable here on its worldwide income (§ 1(1) KStG).
• A business plan that uses the legislated rates for 2028–2032.
• Tax losses carried forward, and whether a transfer of more than 50% of the shares to one acquirer within five years would forfeit them (§ 8c KStG; Part 11).
• The withholding tax on distributions, and how your country of residence taxes them.
Related terms: GmbH · Gewerbesteuer · Gesellschafterdarlehen
Sources: KStG §§ 1, 2, 8(2), 8(3), 8c, 23(1); SolZG 1995 § 4; EStG §§ 23, 49(1) no. 2 lit. f; Gordon Real Estate Group, "German Prime Retail", Parts 9 and 11. Legal position as of 10 October 2026.
Photo: Annie Spratt / Unsplash
This entry is general information and not legal or tax advice.