Tax
Worldwide taxation, 19% VAT and a solidarity surcharge
Residents are taxed on worldwide income under the Einkommensteuergesetz on a progressive scale, collected via the Finanzamt. Standard VAT is 19% (7% reduced), and corporations pay corporate tax plus trade tax.
Key rules
- Income tax is progressive with a tax-free basic allowance (Grundfreibetrag).
- A church tax is collected with income tax for registered members.
- Corporations pay corporate income tax plus municipal trade tax (Gewerbesteuer).
Governing law
- Einkommensteuergesetz
- Umsatzsteuergesetz
- Abgabenordnung
Penalties and consequences
- Late surcharges and interest; criminal liability for tax evasion (Steuerhinterziehung)
In practice
Trade tax varies by municipality through a local multiplier (Hebesatz), so effective corporate rates differ noticeably between cities.