Körperschaftsteuergesetz

Körperschaftsteuergesetz (KStG) is the German federal law that governs corporate income tax. It regulates the taxation of earnings of juristische Personen (juridical persons) and certain taxable associations in Germany. The act applies to corporations such as Aktiengesellschaften (AG) and Gesellschaften mit beschränkter Haftung (GmbH), as well as other Körperschaften, Genossenschaften and certain investment vehicles, while providing reliefs for non-profit entities under specific conditions.

Tax base and rate: The taxable income is calculated from the profits of the taxpayer for the year, with adjustments for non-deductible expenses, depreciation methods, and other allowances set out in the KStG. The base corporate tax rate is 15%. A solidarity surcharge of 5.5% on the corporate tax is levied, resulting in a combined rate of 15.825% on the corporate tax base. This is complemented by the Gewerbesteuer (trade tax) assessed by municipalities, so the overall effective tax burden varies by location and business activity.

Special regimes and reliefs: The KStG includes provisions to prevent double taxation, such as participation exemptions for certain dividend income and capital gains from shareholdings, as well as rules for loss carryforwards and for group taxation (Organschaft) under defined conditions. It also provides rules governing the taxation of foreign-source income and incorporates anti-avoidance measures.

Administration and scope: The law is administered by German tax authorities, with annual tax returns, assessments and penalties for non-compliance. The KStG interacts with other major taxes, including trade tax, value-added tax, and international tax rules influenced by EU law and BEPS guidelines.

History and significance: The KStG is a central element of German corporate taxation, having been amended repeatedly to reflect economic policy, EU rulings, and developments in international taxation.