Tax
Progressive income tax to 55%, corporate tax at 23% and 20% VAT
Personal income tax is progressive with a top marginal rate of 55% on very high incomes, applied through banded brackets that are indexed for inflation. Corporate income tax is 23%, standard VAT is 20% (with reduced rates of 10% and 13%), and a minimum corporate tax applies even to loss-making companies.
Key rules
- Personal income tax is banded and progressive, reaching a top rate of 55% on income above one million euros.
- Corporate income tax is a flat 23%.
- Standard VAT is 20%, with reduced rates of 10% (e.g. food, rent, books) and 13% (e.g. certain cultural and agricultural supplies).
- A minimum corporate income tax is due even in loss years (EUR 500 for a GmbH).
Governing law
- Income Tax Act (Einkommensteuergesetz, EStG)Personal income tax
- Corporation Tax Act (Körperschaftsteuergesetz, KStG)23% corporate tax
- Value Added Tax Act (Umsatzsteuergesetz, UStG)20% standard VAT
Penalties and consequences
- Surcharges and interest on late or understated tax
- Fiscal-criminal penalties for evasion under the Financial Criminal Act
In practice
Bracket creep has been curbed by annual inflation indexation of the income-tax bands. Employees are generally taxed at source through payroll withholding, with an optional annual assessment to reclaim over-withheld tax.