| Germany
has high corporate income tax rates
and has never been considered a tax-efficient
financial center. Nonetheless it offers
significant fiscal concessions to
corporates through co-ordination centres,
holding companies and a number of
special corporate income tax regimes.
In
November 2006, Germany's coalition
government arrived at an agreement
over key company tax reforms which
has reduced the overall corporate
tax burden, previously one of the
highest in the world.
The
reforms have cut the overall corporate
tax burden to a little under 30% from
almost 40%.
This
has been brought about by a cut in
the 25% headline corporate tax rate,
paid by large companies, to 15% in
2008. Companies will continue to pay
corporate tax at the local level at
an average of about 14%.
The
reforms are expected to cost EUR5
billion in the first year and EUR30
billion overall, but EUR25 billion
of this will be clawed back through
efforts to widen the tax base.
One
offsetting measure is the controversial
decision to restrict the amount of
interest that German companies can
deduct from loans received from overseas
units. Many business leaders worry
that this measure will restrict companies'
ability to invest.
The
ruling coalition parties also agreed
to introduce a 25% capital gains tax
from January 1, 2009. This will replace
the current system, whereby capital
gains are subject to personal income
tax, which can be as high as 42%.
This will apply to income from earned
interest and dividends, and private
investors' share sales.
Small
companies, which are also taxed under
the personal income tax system, will
receive preferential treatment on
retained profits.
Germany
Knowledge Base
- GERMANY
C0-ORDINATION CENTRES
- GERMANY HOLDING
COMPANIES
- GERMANY SPECIAL
CORPORATE INCOME TAX REGIMES
|
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