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German choice of legal form — sole trader or GmbH? Tax on the same profit

A sole trader's profit bears trade tax after a EUR 24,500 allowance and income tax at the scale rates; the trade tax is credited against income tax up to four times the base amount. In a GmbH the profit bears trade tax, corporation tax and solidarity surcharge, and the dividend then bears flat-rate withholding tax. Without retaining profits, a GmbH that pays everything out is rarely cheaper.

2027 rules — verified on September 28, 2026Free, no account

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Sources and assumptions

Calculation assumptions

  • No social security contributions in any variant — neither the sole trader's nor those on the director's salary. They can reverse the result.
  • The GmbH pays out its whole after-tax profit in the same year; retaining profits is not modelled.
  • A single owner earns the whole profit; sharing among several partners (EStG s. 35(2)) is not modelled. The profit is both the trade income and the GmbH's taxable income.
  • Other income is entered as taxable income and treated as positive income; only the extra tax caused by the profit is shown.
  • Church tax is not included.
  • Income tax, allowances and flat-rate tax as they stand in 2026; only the corporation tax rate follows the chosen tax year.

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This result is provided for information purposes only and does not constitute personalised tax advice. Check your situation with the tax authorities or a professional.