The German Trade Tax in Inbound Cases

This article describes the German Trade Tax Act and its impact on investment into Germany. Recent developments have highlighted the importance of this issue. The German corporate tax burden, at 15%, is quite low but trade tax can easily add a 15%-18% tax burden on investment returns. In inbound cases, a German domestic permanent establishment is typically avoided. In particular, in situations in which foreign taxpayers rent out or lease real estate in Germany, trade tax has become a significant burden. In some instances, a trade-off with the ability to rollover capital gains may have to be made.