Corporate taxation in Germany

The corporation tax has a tradition of 100 years in Germany, and its roots date back even further to the age of industrial revolution. During this period, the tax was repeatedly undergoing ideological and conceptual transformations. The academic discourse on the justification of a separate tax for corporations and similar entities, and the implications for the taxation of shareholder income, is as old as the tax itself. This is reflected in infrequent but tectonic shifts in the system of corporate-shareholder tax integration. While those changes reflected broad international trends, there exist also several peculiarities of the German corporation tax environment. Constitutional law exerts a considerable influence on questions of tax design. The municipal trade tax has de facto mutated into a second corporation tax that does, however, not fully converge with the latter. Finally, the German Mittelstand as the backbone of the economy consists mostly of family-owned businesses that can be organised either as pass-through entities or as corporations, so that neutrality of legal form is a crucial tax policy concern. This also explains why Germany introduced a check-the-box regime in 2022.