Taxes for a GmbH: The Complete Overview 2026

The three pillars of GmbH taxation

The tax burden of a GmbH consists of three components that apply in parallel.

Corporate income tax

Corporate income tax is the main income tax for corporations. In 2026 it is a uniform 15% of taxable income nationwide, regardless of profit level.

The starting point is the profit in the commercial balance sheet, adjusted under tax law. Key adjustments are hidden profit distributions, non-deductible expenses and trade tax, which itself is not deductible as a business expense.

Key features:

• ✛flat rate of 15%, no progression
• ✛dividends and capital gains from shares in other corporations are 95% tax-exempt (section 8b KStG)
• ✛losses can be carried forward and back
• ✛minimum taxation: above EUR 1m, losses carried forward can only offset 70% of profit until 2027, 60% thereafter

Under the investment programme of July 2025, corporate tax falls by one percentage point a year from 2028 – to 10% in 2032.

Solidarity surcharge

A 5.5% solidarity surcharge applies on top of corporate tax, effectively 0.825% of profit. It was abolished for most individuals in 2021 but still applies to corporations. The Federal Constitutional Court upheld it in March 2025. Corporate tax and solidarity surcharge together amount to 15.825%.

Trade tax

Trade tax is a municipal tax. Each municipality sets its own multiplier, at least 200%. Unlike partnerships, a GmbH has no allowance.

The calculation has five steps:

1. 1determine the business profit
2. 2add-backs, such as 25% of financing elements like interest, rent and royalties above an allowance of EUR 200,000
3. 3reductions, such as 1.2% of the assessed value of real estate
4. 4multiply by the base rate of 3.5%
5. 5multiply by the municipal multiplier

In large cities the total burden is therefore between 30 and 33%. Municipalities with low multipliers, for example around Munich, reduce it significantly. A change of location requires real management on site, though.

Double burden on distributions

A central feature of taxes for a GmbH is two-tier taxation: first at the company, then on distribution to the shareholders.

Flat-rate withholding tax on dividends

If a shareholder holds the shares privately, dividends are subject to the flat-rate withholding tax of 25% plus 5.5% solidarity surcharge, 26.375% in total, plus church tax where applicable. Expenses are not deductible, only the saver's allowance of EUR 1,000.

The taxes are not simply added up, because the withholding tax only applies to the GmbH's after-tax profit. Worked example Berlin, profit EUR 100,000:

In Munich the total burden rises to 50.7%, with church tax by about one more percentage point. Profits retained in the GmbH, by contrast, only bear the roughly 30% at company level.

Partial income method

If the shareholder holds the shares as business assets, the partial income method applies. 60% of the dividend is taxed at the personal rate, 40% is tax-free. In return, costs such as financing interest are 60% deductible.

Privately held shares can also be switched to the partial income method on application if the shareholder holds at least 25%, or at least 1% and works for the GmbH. At the top rate of 42%, this gives 25.2% on the dividend – barely less than the withholding tax. The application is mainly worthwhile where financing costs for acquiring the shares are high.

Tax planning within the GmbH

Taxes for a GmbH can be managed with several legal instruments.

Managing director salary or profit distribution

The most important lever is the split between managing director salary and distribution. The salary is a business expense for the GmbH and reduces corporate and trade tax. For the managing director it is subject to progressive income tax.

Advantages of salary:

• ✛reduces corporate and trade tax
• ✛uses the basic allowance and low tax brackets
• ✛predictable income, even in loss years of the GmbH
• ✛pension commitments and company pension schemes possible

Disadvantages and limits:

• ✛income tax up to 42%, 45% for very high incomes, plus solidarity surcharge
• ✛the salary must be reasonable, otherwise it is a hidden profit distribution
• ✛non-controlling shareholder-managers pay social security contributions

Shareholder-managers with at least 50% of the shares or a comprehensive blocking minority are generally not subject to social security. A status determination procedure provides legal certainty. In practice a combination of salary and distribution is usually optimal.

Pension commitments

With a pension commitment to the shareholder-manager, the GmbH forms provisions that reduce profit. The tax authorities only recognise them under strict conditions:

• ✛written, clear commitment
• ✛vesting: for controlling shareholders at least ten years until retirement age, commitment not after age 60
• ✛probation period after appointment, usually two to three years
• ✛reasonableness and affordability for the GmbH

Pension commitments make a later sale or liquidation of the GmbH more difficult. The German government publications on taxes in Germany give an overview of the tax framework.

Investment deduction and depreciation

For planned purchases of movable assets, a GmbH with profit of up to EUR 200,000 can use the investment deduction. Up to 50% of the expected costs can be deducted up to three years before the investment. After the purchase, an additional special depreciation of 40% is possible.

The 2025 investment programme adds:

• ✛30% declining-balance depreciation for movable assets acquired from July 2025 to the end of 2027
• ✛75% special depreciation in the first year for new electric company cars until the end of 2027
• ✛0.25% company car taxation for electric cars with a list price up to EUR 100,000

Cross-border aspects

For internationally active companies, foreign matters are also part of taxes for a GmbH.

Double tax treaties and withholding tax

Germany has concluded double tax treaties with more than 90 countries. They determine which country may tax and how double taxation is avoided.

Cross-border dividends, interest and royalties are often subject to withholding taxes. Treaties usually limit them to 0 to 15%. Within the EU, withholding tax on dividends between parent and subsidiary companies does not apply from a 10% stake.

CFC rules

The German CFC rules under sections 7 to 13 AStG prevent passive income in low-taxed foreign companies from escaping German tax. Since 2024, a company is low-taxed if its burden is below 15% (previously 25%). If German taxpayers control the company, its passive income is attributed to the shareholder – whether a GmbH or an individual.

The rules are complex. The technical information of the German Association of Tax Advisers provides current analyses of case law and administrative practice. Practical examples are in our article on permanent representatives and CFC taxation.

International tax planning and OECD compliance

Tax planning must comply with the OECD standards against profit shifting (BEPS). GmbHs with foreign activities should base their structures on substance, not purely on tax benefits.

For certain business models a foreign subsidiary can make sense. Company formation in Georgia is one example but requires careful review of substance and transfer pricing. How a Swiss GmbH is taxed by comparison is shown in our guide to Swiss taxes by canton.

Ongoing obligations and deadlines

A GmbH must meet its obligations on time to avoid surcharges and interest.

Prepayments and annual returns

GmbHs make quarterly prepayments of corporate and trade tax. They are based on the last assessment and later offset against the actual tax.

The current information from KPMG Germany keeps companies up to date on changes.

VAT and input tax

The GmbH pays the VAT collected to the tax office and deducts the input VAT paid. The standard rate is 19%, the reduced rate 7%.

Advance returns are due monthly if VAT in the previous year exceeded EUR 9,000, otherwise quarterly. A permanent extension postpones the deadline by one month. SWICOR handles ongoing accounting and tax for companies at home and abroad.

Holding, GmbH & Co. KG and tax group

For groups of companies, holding structures offer additional ways to reduce taxes for a GmbH.

Holding GmbH

If a holding GmbH holds shares in an operating GmbH, dividends and capital gains are 95% tax-free. The effective burden is around 1.5%. For dividends this requires a stake of at least 10%, for trade tax at least 15%. Profits can thus be accumulated and reinvested in the holding almost tax-free.

The GmbH & Co. KG as an alternative

The GmbH & Co. KG combines limited liability with partnership taxation. Profits are attributed directly to the partners and taxed at their personal rate. No corporate tax applies.

Advantages:

• ✛no corporate tax and no double burden
• ✛flexible profit allocation
• ✛trade tax is largely credited against income tax (section 35 EStG)
• ✛losses can be offset against other income

Disadvantages:

• ✛two companies, higher administrative costs
• ✛trade tax still applies
• ✛full progression up to 45% on profit
• ✛retention only favoured via the special rule in section 34a EStG

Since 2022, partnerships can also opt for corporate taxation (section 1a KStG).

Tax group (Organschaft)

A tax group combines several companies for tax purposes. Profits and losses of parent and subsidiaries can be offset.

Requirements:

• ✛financial integration: majority of voting rights from the start of the financial year
• ✛profit transfer agreement for at least five years that is actually performed
• ✛the parent is a commercial business

Since 2002, the same requirements apply to the trade tax group. Economic or organisational integration is no longer required. The Federal Ministry's start-up portal offers further resources for founders and companies.

Silent partnerships and mezzanine capital

Profit shares of a typical silent partnership are a business expense for the GmbH and reduce corporate tax. For trade tax, however, 25% is added back above the allowance. The recipient is generally subject to the flat-rate withholding tax, related parties to the personal rate. Mezzanine financing needs careful tax review.

Current developments 2026

Several reforms affect taxes for a GmbH.

Falling corporate tax

Corporate tax falls from 15% by one percentage point a year from 2028 to 10% in 2032. The total burden in large cities thus falls to around 25 to 28%. Those who invest can also use 30% declining-balance depreciation until the end of 2027.

Global minimum tax

The global minimum tax of 15% has applied in Germany since 2024 under the Minimum Tax Act. It affects groups with revenue of at least EUR 750m. For medium-sized GmbHs it is not directly relevant.

E-invoicing and digitalisation

Since 1 January 2025, every GmbH must be able to receive electronic invoices. From 2027, companies with prior-year revenue above EUR 800,000 must issue e-invoices, from 2028 all companies. Paper and PDF invoices in B2B business are thus being phased out. More guides are available on swicor.ch.

Incentives for electric mobility

The special depreciation for new electric company cars and the 0.25% rule for electric cars up to EUR 100,000 list price offer concrete savings. These incentives should be part of investment planning.

Tax advice and liability

Given the complexity of taxes for a GmbH, professional support almost always makes sense.

Choosing the right adviser

• ✛specialisation in corporations
• ✛experience in your industry
• ✛proactive advice instead of mere compliance
• ✛digital way of working
• ✛transparent fee model

The costs are business expenses. What to look for when choosing is explained in our article on tax advice.

Managing director liability

Managing directors are personally liable for GmbH taxes that they fail to pay intentionally or through gross negligence (section 69 AO). For wage tax, case law applies a particularly strict standard. Failing to pay social security contributions is also a criminal offence.

Proper bookkeeping and deadlines are therefore essential. In a liquidity squeeze, wage tax and social security should always be paid first.

Conclusion

Taxes for a GmbH affect two levels and require an overall view. Salary, distribution, retention and holding interlock. With corporate tax falling from 2028, now is a good time to review your structure.

SWICOR . SWISS CORPORATE SOLUTIONS supports you with OECD-compliant structures in various countries, from tax optimisation and company formation in Switzerland to international banking. Whether you want to optimise your GmbH or expand internationally – contact us for personal advice. A compact summary is also available in our article on GmbH taxes.

Frequently asked questions