Reduction of the corporation tax rate

Change in the corporation tax rate

Corporation tax was already reduced from the original 25% to 24% in 2023. This was followed in 2024 by the planned further reduction to 23%. For distributions to shareholders, the new tax rate now results in a total tax burden of 44.175% compared to the original 45.625% (2022).

   
Change in the minimum corporation tax

Since January 1, 2024, corporation tax has amounted to 23% of the profit generated. However, corporations with unlimited tax liability are subject to a so-called minimum corporation tax, regardless of whether a profit or loss is made. If the actual corporation tax for the current year is less than the minimum tax amount or even zero due to a small profit or loss, tax is still payable in a fixed amount. The minimum corporation tax paid is credited in later years (if profits are made and the tax burden for the year exceeds the amount of the minimum corporation tax) as an advance payment and thus reduces the future tax burden.
     

Minimum corporation tax € 500 per year

The amount of the minimum corporation tax is linked to the statutory minimum share capital of the corporation. The minimum tax amounts to 5% of the statutory minimum share capital per calendar year and is payable quarterly. Until 31.12.2023, the minimum share capital of the GmbH was € 35,000, the minimum corporation tax was therefore € 1,750 per year. The reduction of the legally required share capital of the GmbH to € 10,000 as of 1.1.2024 also reduces the minimum corporation tax to € 500 per year. A capital reduction for GmbHs with a share capital of € 35,000 is not necessary in this context. The previous statutory regulation, according to which the minimum corporation tax amounts to € 125 per calendar quarter in the first 5 years from the start of unlimited tax liability and € 250 per calendar quarter in the following 5 years, is therefore no longer applicable and was repealed on 31.12.2023; there are no plans to increase the minimum corporation tax after 5 years.

   
Reduction request

Every taxpayer must make quarterly advance payments for the income or corporation tax for a given year. The amount of the advance payments is prescribed by the tax office in a notice. This advance payment is based on the results of the previous year. If an extrapolation of the annual result and the associated tax burden falls short of the profits assumed by the tax office or the advance payment prescribed by the tax office, an application for a reduction can be submitted to the tax office. This must contain a justification for the reduced profit expectation as well as corresponding evidence (e.g. sales statement, interim balance sheet).
In connection with the minimum corporation tax, it should be noted that in some cases advance corporation tax payments based on the old minimum corporation tax are still prescribed by notice. If this is the case, according to the Federal Ministry of Finance (BMF), there is no legal basis for an official reduction of the advance payment notice. Instead, an individual application for a reduction to the amount of the new minimum corporation tax must be submitted.