Essay: Comparative Analysis of Corporate Taxation in Germany

Sample Essay

Words 2,130

Corporation taxes are sometimes misunderstood because of their complexity and continuous scrutiny under the law. European countries have been on a mission to reduce their corporate taxes in the past few years to appeal to foreign investors and to be more competitive in the global market. Germany started off being one of the highest corporate taxing countries and has been in a continuous battle with itself do decrease these numbers. England is also jumping on the bandwagon and following the lead of other European countries to reduce its corporate taxes. Over the years both countries have introduced new tax reforms and Acts to serve the same purpose: to be more competitive in the global market and keeping their corporations from relocating to lower taxing countries.

“Corporations are legally capable associations based on the membership of persons; they are organized on a membership basis and exist independent of the change of the individual members. The legal form corporation is a legal person, whose “body” exists of individual natural or other legal persons.” (Definition of corporation and scope of tax liability, n.d.) Only companies registered as joint stock companies or having limited liability are considered corporations whereas partnerships are considered to be small businesses that do not have corporate taxes levied on them. Each individual though has to pay a specific amount of tax on his or her net income. .” (Definition of corporation and scope of tax liability, n.d.) How much a corporation gets taxed within a year depends on its entire net income in the operating cycle and the taxes are levied according to German Acts and laws. (Determination of taxable income, n.d.) “The corporation tax rate for retained and distributed profits is 15 percent (Flat Tax). On the level of the involved parties, a capital gains tax is levied on principle with a tax rate of 20 percent.” (Corporation tax rate, n.d.) All the balance sheets and accounts are reviewed for profits and loss for the proper taxes to be levied on the corporations. (Assessment Procedure, n.d.) To relieve the burden from the corporations and the shareholders “the half income system” is implemented and it “achieves removal of the double taxation of distributed profits in a flat-rate form by providing relief both on the corporate level and the shareholder level.” (Half income system/distributed profits)

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