German corporate tax rules enter 2026 under a framework of fiscal continuity rather than reform. The statutory headline remains familiar, yet for investors and operating groups the decisive variables sit elsewhere: profit allocation, shareholder qualification, holding periods, and the interaction between trade tax and participation exemptions.
In Germany, tax outcomes are rarely driven by rates alone. Substance allocation, balance sheet architecture, and shareholder positioning determine whether profits are efficiently retained or structurally eroded.
For multinational groups, family offices, private equity platforms, and foreign-owned German subsidiaries, 2026 is a year where dividend and capital gain mechanics deserve renewed scrutiny.
Corporate income tax framework in 2026
Germany applies a dual-layer corporate tax system. Corporate income tax (Körperschaftsteuer) remains fixed at 15%, supplemented by the 5.5% solidarity surcharge on the assessed tax amount.
In parallel, German entities are subject to municipal trade tax (Gewerbesteuer). While locally administered, the effective trade tax burden typically ranges between 14% and 17%, depending on the municipal multiplier.
Taken together, the combined effective tax burden for German corporations in 2026 generally falls between 29% and 33%.
Municipal impact: location still matters
Trade tax remains the most variable component of the German system. For groups operating across multiple German cities, location planning continues to influence effective returns.
- Berlin maintains a mid-range municipal multiplier, often used as a baseline for service and technology activities.
- Munich applies a higher multiplier, increasing trade tax exposure for profitable operating companies.
- Frankfurt remains competitive for financial and holding structures, though trade tax planning is essential.
- Leipzig and other eastern municipalities often offer structurally lower multipliers.
Tax residency and scope of taxation
German resident corporations are taxed on worldwide income. Residency is determined by either the statutory seat or the place of effective management.
Non-resident entities are taxed solely on German-source income, including profits attributable to a German permanent establishment. In practice, permanent establishment exposure frequently arises through operational control rather than formal registration.
Common risk factors include:
- Decision-making authority exercised from Germany
- German-based executives or senior management
- Long-term operational facilities or dependent agents
Dividends in 2026: participation remains decisive
Germany continues to apply a participation exemption regime for dividends received by corporate shareholders.
Where a corporate shareholder holds at least 10% of the distributing company at the beginning of the calendar year, 95% of dividend income is exempt from corporate income tax and trade tax. The remaining 5% is treated as a non-deductible expense.
Dividends received below the 10% threshold do not qualify for the exemption and are fully taxable.
For foreign EU corporate shareholders, withholding tax relief depends on both shareholding percentage and anti-abuse compliance under German and EU law. Structures lacking economic substance or commercial justification face increasing scrutiny.
Capital gains on share disposals
Capital gains realised by corporate sellers on the disposal of shares are generally treated in line with dividend income.
Where the seller is a corporation, 95% of the gain is exempt from taxation, regardless of holding period or minimum participation threshold. As with dividends, 5% is treated as a deemed non-deductible expense.
However, this exemption does not apply to:
- Disposals by individuals
- Short-term trading portfolios
- Certain financial institutions subject to special regimes
Transaction structuring, seller classification, and balance sheet treatment materially affect exit outcomes.
Financial sector considerations
Banks, insurance companies, and regulated financial entities remain subject to deviations from standard participation exemption rules.
Trading portfolios and short-term holdings are generally excluded from exemption treatment, resulting in full taxation of gains and income. This distinction continues to be a focal point for audits and disputes.
Loss utilisation and interest limitation
Germany maintains restrictive loss utilisation rules. Loss carryforwards are usable without limit only up to €1 million of taxable income, with a 60% cap applied above that threshold.
Interest deductibility remains subject to the earnings-stripping rule, limiting net interest expense to 30% of EBITDA, subject to group and de minimis exceptions.
For leveraged acquisition structures, interest planning remains one of the most sensitive tax variables.
Withholding tax mechanics
Outbound dividends are subject to a statutory 25% withholding tax plus solidarity surcharge. Treaty relief and EU directives can reduce or eliminate this burden, but only where substance and compliance thresholds are met.
Refund procedures remain documentation-heavy and time-intensive, making upfront structuring preferable to ex-post recovery.
Outlook for 2026
Germany enters 2026 without headline rate disruption, yet effective taxation continues to evolve through participation rules, anti-abuse enforcement, and municipal trade tax exposure.
Groups aligning shareholder thresholds, operational substance, and financing structures remain best positioned to preserve dividend efficiency and capital gain exemptions.
Damalion facilitates international entrepreneurs and investors to register a company in Germany. Please contact your Damalion expert to assess structuring options.
FAQs – Germany Corporate Tax 2026: Dividends & Capital Gains
What is the combined corporate tax rate in Germany?
Typically between 29% and 33%, depending on trade tax.
Is there a participation exemption for dividends?
Yes, generally at a 10% holding threshold.
Are capital gains taxable?
Corporate sellers benefit from a 95% exemption.
Does location affect taxation?
Yes, trade tax varies by municipality.
Glossary
Körperschaftsteuer
German federal corporate income tax at 15%.
Gewerbesteuer
Municipal trade tax applied by local authorities.
Solidarity surcharge
Additional levy of 5.5% on assessed corporate tax.
Participation exemption
Regime exempting 95% of qualifying dividends and gains.
