Germany as an investment location is unattractive for businesses. Especially the business taxation is far too high in international comparison. Over the past few years, statements such as these were heard over and over again. And in fact, a look at the current tax burden of companies located in Germany, France and Switzerland, respectively, points to a bleak situation. Particularly due to the high corporation tax plus solidarity surcharge – being about 11% higher than in France and about 26% higher than in Switzerland – Germany clearly appears to be the location with the highest tax burden. With a rate of 51.5 %, a similar French company is significantly less exposed to tax. And Switzerland proves to be particularly attractive with their tax burden of merely 32.8 %.

However, when taking into account the tax burden for shareholders of incorporated companies, it becomes obvious that the tax situation in Switzerland is not all that favourable and that Germany does not come off that bad in international comparison. When it comes to the profit distribution of the company, it is important to know the additional taxation of the shareholder for the sake of an exact calculation of the tax burden. In the event of a full profit distribution, the tax burden is 64.7 % in Germany, 73.9 % in France and 60.02 % in Switzerland. With that said, it becomes obvious now that the highest tax burden is in France. Besides, the considerable difference between the German company and the Swiss one has been reduced to a moderate 4.7 %.

The reason for this shift lies on the one hand in the different corporate tax systems and on the other hand in the differing rates of the different country-specific tax types. In contrast to the referenced countries, in Germany there is a disburdening reduction of the corporate income tax rate from 45 % to 30 % in the case of profit distribution. A further issue is the German full imputation system of the corporation tax which allows the deduction of the income tax from the income tax liability on the side of the shareholder. The French corporation tax system is regulated in a similar manner and allows a deduction of about 95 %. In Switzerland, however, company profits are additionally burdened with the income tax of the shareholder apart from the corporation tax. In the case of distribution, income taxes of the shareholders plus additional taxes if applicable have to be added. Especially for that reason, the tax advantage for the Swiss company almost completely disappears.

A comparison of the different tax structures also paints Germany in a quite favourable light. Indeed, the clearest tax structure can be found – contrary to expectations, one is tempted to say – in Germany. After the abolition of the trade tax on the capital as from January 1, 1998, the only direct taxes which remain – apart from the negligible property tax – are the trade tax on earnings and the corporate income tax plus solidarity surcharge. In Switzerland, by contrast, the current profits of the companies are burdened with a great number of taxes. Here it becomes apparent, that especially the Cantons possess considerable tax-raising powers, which allow them to levy taxes on the profit (cantonal corporate profit tax) as well as on the company assets (cantonal capital tax). Taxes on the level of municipalities often come in addition. Finally, in the case of France, taxes which do not dependent on earnings are due to a high extent. The disadvantage of such taxes for companies is that, even in case of loss, they arise for the same amount. Especially young and research intensive companies which regularly experience start-up losses are severely affected by this. If this situation is to last for several years, the company’s assets will be consumed as a result.

In due consideration of the structural requirements of a tax system, the newly created structure introduced in Germany on January 1, 1998, which comprises the abolition of the tax on business capital and the reduction of the solidarity surcharge from 7.5 % to 5.5 %, marks a first step for creating an investment-friendly environment in Germany. Nevertheless, these measures alone will by no means suffice. Instead, a tax reform which includes a considerable reduction of tax rates has to come into effect. This is the only way to make a genuine contribution to ensuring Germany as a business location.

For further information please contact

Gunter Grittmann, Phone: +49 (0)621/1235-132, E-mail:





Press Officer

Phone: +49 0621 1235-133