GmbH Taxes 2026: Corporate Tax, Trade Tax and Distributions Explained
The GmbH is the most popular legal form for entrepreneurs in Germany. For tax it means two levels: around 30% on the company's profit and, on distribution, a further 26% or so for the shareholder. This guide to GmbH taxes shows how the burden is made up, which deadlines apply, what the 2028 corporate tax cuts change and which structures work legally.
- ✛Corporate tax: 15% plus solidarity surcharge = 15.825%. From 2028 the rate falls by 1 point a year to 10% in 2032.
- ✛Trade tax: 3.5% × multiplier (min. 200%). At 400% that is 14%.
- ✛Total burden at company level: around 24.6% to 33%, depending on the municipality.
- ✛With full distribution (withholding tax 26.375%) the total burden rises to around 44.5% to 51%.
- ✛Holding GmbH: dividends and gains on participations are 95% tax-free (§ 8b KStG).
The three main taxes of a GmbH
Corporate tax (KSt)
Corporate tax is 15% of taxable income. With the 5.5% solidarity surcharge, this gives 15.825%. The July 2025 investment programme law reduces the rate gradually from 2028: 14% (2028), 13% (2029), 12% (2030), 11% (2031) and 10% from 2032.
The starting point is the accounting profit, adjusted for off-balance-sheet add-backs. Typical are 30% of entertainment costs, gifts above EUR 50, fines and trade tax itself, which is not deductible.
Trade tax
Every GmbH pays trade tax to its municipality. The base is trade income with add-backs (e.g. 25% of financing costs above a EUR 200,000 allowance) and deductions. Unlike sole traders, a GmbH has no allowance.
| Municipality | Multiplier | Trade tax | KSt + trade tax |
|---|---|---|---|
| Minimum multiplier | 200% | 7.00% | 22.83% |
| Rural municipality | 250% | 8.75% | 24.58% |
| Average | approx. 400% | 14.00% | 29.83% |
| Hamburg | 470% | 16.45% | 32.28% |
| Munich | 490% | 17.15% | 32.98% |
The choice of seat thus changes the burden by up to 10 percentage points. A seat in a low-tax municipality only works if there is a real permanent establishment there; otherwise trade income is apportioned.
VAT
The standard rate is 19%, the reduced rate 7%. The GmbH collects VAT, offsets input VAT and pays the difference. The small business scheme (since 2025: prior-year turnover up to EUR 25,000, current year up to EUR 100,000) also applies to a GmbH.
Obligations and deadlines
- ✛VAT advance returns: monthly or quarterly by the 10th of the following month, one month later with a permanent extension
- ✛Start-ups: the obligation to file monthly in the first two years is suspended for 2021 to 2026 – the expected tax is decisive
- ✛Payroll tax returns: for employees, including the shareholder-managing director
- ✛EC sales list: for intra-community supplies
Annual returns (KSt, trade tax, VAT) for 2025 are due by 31 July 2026, with a tax adviser by 1 March 2027 (28 February is a Sunday). Balance sheet and P&L are sent to the tax office as an e-balance sheet via ELSTER.
Since 2025 all businesses must be able to receive e-invoices. Issuing them becomes mandatory from 2027 for businesses with prior-year turnover above EUR 800,000 and from 2028 for all. The case law of the Federal Fiscal Court continually develops the standards.
Profit distribution and shareholders
When the GmbH distributes profits to individuals, 25% withholding tax plus solidarity surcharge applies, i.e. 26.375% (excluding church tax). The GmbH withholds and pays it.
On application, the partial income method applies: 60% of the dividend is taxed at the personal rate, 40% is exempt. It is available for stakes of at least 25%, or at least 1% if the shareholder works for the GmbH. It pays off with a low marginal rate or high financing costs.
| Multiplier | Company burden | Distribution burden | Total burden |
|---|---|---|---|
| 250% | 24.58% | 19.89% | approx. 44.5% |
| 400% | 29.83% | 18.51% | approx. 48.3% |
| 490% | 32.98% | 17.68% | approx. 50.7% |
The total burden is therefore comparable with the top income tax rate (47.5% incl. surcharge). The GmbH's advantage lies in retention: undistributed profits bear only around 30%.
Planning within the GmbH
Managing director salary vs. dividend
A reasonable salary reduces the GmbH's profit and thus corporate and trade tax. For the director it is subject to income tax up to 45% plus surcharge. Controlling shareholder-directors are usually exempt from social security. Excessive salaries or payments not agreed in advance are treated as a hidden profit distribution (vGA).
Investment deduction and depreciation
- ✛Investment deduction (§ 7g EStG): deduct up to 50% of planned acquisition costs in advance, investment within three years. For a GmbH only with profit up to EUR 200,000.
- ✛Special depreciation: an additional up to 40% in the first five years (since 2024, previously 20%)
- ✛Declining-balance depreciation: 30% for movable assets acquired between July 2025 and end-2027
- ✛Electric vehicles: 75% special depreciation in the year of acquisition (July 2025 to 2027)
Pension commitment
A pension commitment to the shareholder-director reduces profit through provisions. Conditions: written agreement in advance, earnability (10 years to retirement age for controlling shareholders), affordability and reasonableness. The later pension is taxable for the shareholder.
Holding GmbH and tax group
A holding GmbH between shareholder and operating GmbH is the most important structure for entrepreneurs with growth or exit plans.
- ✛Dividends from the subsidiary are 95% tax-free if the stake is at least 10% at the start of the year. For trade tax the threshold is 15%.
- ✛Capital gains are 95% tax-free regardless of the size of the stake (§ 8b KStG). Effective burden around 1.5%.
- ✛Profits can be reinvested in the holding without triggering withholding tax.
In a tax group (Organschaft) the subsidiary's profits are attributed to the parent. The only requirements are financial integration (majority of voting rights) and a profit transfer agreement for at least five years. Economic and organisational integration is no longer required for corporate tax. Advantage: profits and losses are offset. Disadvantage: liability for the subsidiary's losses.
The GmbH & Co. KG is a partnership. Its profits are taxed at the partners' income tax rates, with trade tax largely credited under § 35 EStG. For pure real estate management the extended trade tax deduction is possible.
International aspects
- ✛Foreign permanent establishments: under treaties usually taxed abroad, exempt in Germany
- ✛CFC rules: passive income of subsidiaries taxed below 25% is picked up in Germany
- ✛Transfer pricing: arm's length principle, master file and local file above thresholds, CbCR from EUR 750m
- ✛Place of management: a foreign company effectively managed from Germany is fully taxable in Germany
How CFC rules apply to foreign companies is covered in our article on permanent representatives and CFC taxation. For international payment flows, a bank account in Georgia with multi-currency accounts can be useful.
Shareholder moving abroad
If a shareholder with a stake of at least 1% moves abroad, Germany taxes the hidden reserves in the shares under § 6 AStG as if sold. On application the tax can be paid in seven annual instalments. Anyone planning a move to Switzerland or another country should review the holding structure first. More under residency abroad.
GmbH in Germany or in Switzerland?
For entrepreneurs who already operate internationally, the comparison is worth it: a Swiss GmbH in Zug pays an effective 11.71% corporate tax in 2026, in Lucerne 11.66% – less than half the German burden. Real management in Switzerland is required. Anyone living in Germany and running the Swiss GmbH from there remains taxable in Germany.
Details are in our articles on Zug taxes and Swiss taxes by canton. SWICOR handles company formation in Switzerland, including domicile and board members.
Review your structure: German GmbH, holding or Swiss company?
Tax optimisation →Tax audits and tax compliance
Large businesses are generally audited continuously, medium and small businesses at longer intervals or on specific grounds. Focus areas are hidden profit distributions, director salaries, transfer prices, business expenses and VAT.
- 1Clear processes for tax-relevant transactions
- 2Documentation of material decisions
- 3Four-eyes principle for payments to shareholders
- 4Regular updates on legislative changes
A documented tax compliance management system can rebut allegations of intent or recklessness in an audit. New reporting rules such as DAC7 for platforms and CARF for crypto assets further increase transparency.
Frequently asked questions
How high are GmbH taxes?
At company level around 23% to 33% (corporate tax 15.825% plus trade tax depending on the multiplier). With full distribution, about 44.5% to 51% in total.
Is corporate tax going down?
Yes. From 2028 by one point a year, to 10% in 2032.
Is a holding GmbH worthwhile?
Usually yes, if profits are to be reinvested or participations sold later. Dividends and capital gains are then 95% tax-free.
What is a hidden profit distribution?
A benefit to the shareholder that fails the arm's length test, e.g. an excessive salary. It is added back to profit.
When is the 2025 tax return due?
By 31 July 2026, or by 1 March 2027 with a tax adviser.
Optimise your GmbH structure?
We analyse your GmbH, plan a holding, a move abroad or a Swiss company and implement the structure OECD-compliant – remotely and at fixed prices.
This article is a general analysis and does not replace individual tax or legal advice. Regulations change; the information reflects the status at the date of publication.