Corporate Tax in Germany: KSt, GewSt, and SolZ for Startup Founders

You incorporated your GmbH. Your first tax return is due. Three separate taxes hit your profits, and their interaction determines your effective rate. Here is what each one does, how they combine, and what you can control.

The Three-Tax Structure

Every GmbH and UG pays three taxes on profits:

Tax	Rate	Statute	What It Taxes
Körperschaftsteuer (KSt)	15% flat	§ 23 KStG	Corporate income
Solidaritätszuschlag (SolZ)	5.5% of KSt = 0.825%	§ 4 SolZG	Surcharge on KSt
Gewerbesteuer (GewSt)	3.5% × Hebesatz	§ 11, § 16 GewStG	Commercial profit

At an average municipal Hebesatz of 400%, the combined effective rate is roughly 29.8%. There is no way to opt out of any of them.

Körperschaftsteuer: The Flat 15%

KSt is straightforward. A flat 15% on taxable corporate income. No brackets, no progressive rates. § 23 Abs. 1 KStG.

The Solidaritätszuschlag adds 5.5% on top of the KSt amount (not on profits), bringing the combined rate to 15.825%. Unlike for individuals, where SolZ was largely eliminated in 2021, corporations still pay it in full.

Gewerbesteuer: The Variable

This is the tax where location matters. Gewerbesteuer is calculated as:

Taxable profit × 3.5% (Steuermesszahl) × municipal Hebesatz

The Hebesatz is set by each municipality independently. The legal minimum is 200% (§ 16 GewStG). In practice:

City	Hebesatz 2026	GewSt Rate	Total Effective Rate
Berlin	410%	14.35%	30.2%
Frankfurt	460%	16.10%	31.9%
Hamburg	470%	16.45%	32.3%
Munich	490%	17.15%	33.0%
Rural minimum	200%	7.00%	22.8%

A Munich GmbH pays 10 percentage points more than one at the 200% minimum. That gap is real money. On EUR 500,000 profit, it is roughly EUR 50,000 per year. Note: the minimum Hebesatz is set to increase to 280% from 2027.

One complication: Gewerbesteuer adds back certain deductions (Hinzurechnungen, § 8 GewStG). If your GmbH pays interest on loans, license fees, or rent, 25% of those amounts get added back to the taxable base after a EUR 200,000 Freibetrag. This mostly affects companies with significant external financing.

The 2028 Rate Reduction

Körperschaftsteuer will decrease by one percentage point per year starting 2028, reaching 10% by 2032. This was enacted through the Steuerliches Investitionssofortprogramm (BGBl. I 2025 Nr. 161):

Year	KSt	KSt + SolZ	Total (at 400%)
2027	15.0%	15.83%	29.8%
2028	14.0%	14.77%	28.8%
2029	13.0%	13.72%	27.7%
2030	12.0%	12.66%	26.7%
2031	11.0%	11.61%	25.6%
2032+	10.0%	10.55%	24.6%

This matters for retained earnings. Profits you keep in the GmbH will face a decreasing rate over the next six years. If you plan to reinvest rather than distribute, the trajectory works in your favor. For founders with a holding structure, the picture is even better: dividends from the operating GmbH to the holding are 95% tax-exempt under § 8b KStG, on top of the rate reduction.

What Founders Get Wrong

Advance payments catch you off guard. The Finanzamt sets quarterly advance payments (Vorauszahlungen) based on your prior year's profits: March 10, June 10, September 10, December 10. In year one, these are based on estimated profits from your tax registration questionnaire. If your estimates were conservative and the business grows fast, the year-end bill surprises. I recommend revisiting your profit estimate each quarter and requesting an adjustment (Anpassung der Vorauszahlungen) if reality diverges.

Gewerbesteuer is not deductible. Since 2008, GewSt cannot be deducted as a business expense for its own calculation. The effective rate tables above already account for this.

Location optimization has limits. Registering your GmbH at a low-Hebesatz address while your team works in Berlin does not reduce your GewSt. The Betriebsstätte (permanent establishment) where operations happen determines the Hebesatz, not the registered address alone. If you genuinely run the business from a lower-rate municipality, the savings are legitimate. A mailbox address is not.

Bottom Line

A German GmbH pays roughly 30% tax on profits. The exact number depends on where the company operates. This rate is dropping: by 2032, the total will be closer to 25%. The three levers founders can influence are location (Hebesatz), structure (holding for capital gains), and timing of distributions (retain earnings while rates decline). Everything else is fixed by law.