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Opting a German partnership into corporation tax (§ 1a KStG)

On an IRREVOCABLE application, a German commercial partnership, professional partnership or REGISTERED civil-law partnership is treated like a corporation for income taxation purposes, and its partners like the non-personally-liable shareholders of a corporation (§ 1a(1) sentence 1 KStG). The application must be filed electronically, at the latest ONE MONTH BEFORE the start of the financial year from which the treatment is to apply (§ 1a(1) sentence 2 KStG) — so it never reaches back into a year already running, except in the two cases in sentence 7. The option is not a label: the transition counts as a change of legal form within § 1(3) no. 3 of the Reorganisation Tax Act (§ 1a(2) sentence 1 KStG).

Up to date for 2026 — verified on September 22, 2026Official procedure, no printed formGuide: about 30 min

Deadlines

Normal case: at the latest ONE MONTH BEFORE the start of the financial year
§ 1a(1) sentence 2 KStG — with a calendar financial year, therefore by the end of November for the following year
New formation: within one month of concluding the partnership agreement
§ 1a(1) sentence 7 no. 1 KStG — and then with effect for the financial year already running
Conversion of a corporation into a partnership: one month after filing with the register
§ 1a(1) sentence 7 no. 2 KStG, likewise with effect for the current financial year
Contribution date: the end of the PRECEDING financial year
§ 1a(2) sentence 3 KStG; § 9 sentence 3 of the Reorganisation Tax Act does not apply

Documents to prepare

  • ELSTER access with a certificate or an ELSTER business account
  • The legal form and, for a GbR, evidence of registration
  • The partnership agreement and the partners' resolution on the option
  • The start of the financial year from which the option is to apply
  • On a new formation: the date the partnership agreement was concluded
  • On a conversion: the date of filing with the competent register
  • The tax office competent for the separate and uniform determination
  • A balance sheet as at the end of the preceding financial year, the contribution date
See the procedure on the official site

No form is attached to this procedure: the link leads to the official page that describes it.

What this page gives you

The guide above and the link to the official site. ActioFin does not produce any document for this page: whatever you fill in or file is done on the official medium.

Who this applies to

  • Commercial partnerships — OHG and KG —, professional partnerships and REGISTERED civil-law partnerships (§ 1a(1) sentence 1 KStG); an unregistered GbR is not named
  • Newly formed partnerships, which may apply within one month of concluding the partnership agreement with effect for the financial year ALREADY RUNNING (§ 1a(1) sentence 7 no. 1 KStG)
  • Partnerships arising from the conversion of a corporation into a partnership: application within one month of the conversion being filed with the competent register (§ 1a(1) sentence 7 no. 2 KStG)
  • Partnerships that have already opted and want out: the REVERSE OPTION under § 1a(4) sentence 1 KStG runs through the same ELSTER form
  • NOT available to investment funds within the Investment Tax Act (§ 1a(1) sentence 6 no. 1 KStG)
  • NOT available to partnerships which, after exercising the option, are not subject in the state of their management to a liability comparable to unlimited German corporation tax liability (§ 1a(1) sentence 6 no. 2 KStG)

Worked example

Steinmetz & Vogt OHG is considering the option from the 2027 financial year

The OHG has a calendar financial year, currently computes its profit on a cash basis (Einnahmenüberschussrechnung) and pays its managing partner, Mr Vogt, a management fee. If the option is to apply from 1 January 2027, the application must be filed at the latest ONE MONTH BEFORE the start of that financial year (§ 1a(1) sentence 2 KStG) — that is, by the end of November 2026; an application filed in January 2027 takes effect no earlier than 2028. Three consequences change the arithmetic, and all three sit in the same subsection. First, Mr Vogt's management fee becomes genuine employment income: amounts a partner receives from the partnership for services in its employ become income within § 19 EStG (§ 1a(3) sentence 2 no. 2 KStG), and the opting partnership counts to that extent as the wage tax employer and the partner as an employee (§ 1a(3) sentence 7 KStG) — before the option the very same payment was commercial income under § 15(1) sentence 1 no. 2 EStG. Second, cash-basis accounting falls away: § 4(3) EStG does not apply to an opting partnership (§ 1a(3) sentence 6 KStG). Third, § 35 EStG no longer applies (§ 1a(3) sentence 3 KStG) — that is the relief through which trade tax was until now credited against the partners' income tax. Against that stands an advantage where profits are to stay in the business: profit shares are treated as distributed only once they are WITHDRAWN (§ 1a(3) sentence 5 KStG). And the application is irrevocable (§ 1a(1) sentence 1 KStG); the way back is the reverse option in subsection 4, which itself counts as a change of legal form.

How to fill it in, step by step

  1. Check the legal form first: only a commercial partnership, a professional partnership and a REGISTERED GbR are named in § 1a(1) sentence 1 KStG.
  2. Check the two exclusions in § 1a(1) sentence 6 KStG: investment funds, and partnerships without a comparable tax liability in the state of their management.
  3. Fix the cut-off by counting back from the financial year: the application is due at the latest one month BEFORE it begins (§ 1a(1) sentence 2 KStG), unless you fall within one of the two cases in sentence 7.
  4. Identify the competent tax office: in principle the one competent for the separate and uniform determination of income under § 180 AO (sentence 2); where no such determination is made, the one competent for the partner's income or corporation tax (sentence 3); where the partnership has its seat in Germany, the office of that seat instead (sentence 5).
  5. Work through the three consequences in subsection 3 BEFORE applying: management fee as employment income, loss of cash-basis accounting, loss of § 35 EStG.
  6. Secure the partners' resolutions and record that the application is irrevocable (§ 1a(1) sentence 1 KStG).
  7. Log in to Mein ELSTER and select the application for the corporation tax option under § 1a(1) KStG — the same form also carries the reverse option under subsection 4.
  8. Transmit the application electronically in the officially prescribed data format through the officially designated interface (§ 1a(1) sentence 2 KStG).
  9. Prepare the balance sheet as at the contribution date: the end of the financial year immediately preceding the option year (§ 1a(2) sentence 3 KStG); the equity shown there is recorded in the tax contribution account (sentence 4).

Good to know

  • The transition counts as a change of legal form within § 1(3) no. 3 of the Reorganisation Tax Act, and §§ 1 and 25 of that Act apply correspondingly (§ 1a(2) sentences 1 and 2 KStG). The option is a reorganisation, not a form-filling exercise.
  • Merely retaining the interest in a general partner of the opting partnership does not preclude the application of § 20(2) of the Reorganisation Tax Act (§ 1a(2) sentence 2 KStG).
  • The persons authorised to represent the partnership count as the legal representatives of the opting partnership (§ 1a(2) sentence 5 KStG).
  • §§ 13 to 16, 18 and 35 EStG do not apply, subject to sentence 4 (§ 1a(3) sentence 3 KStG) — which includes the relief for commercial income.
  • To the extent equivalent amounts would fall into other categories of income for a shareholder of a corporation, the partner's amounts likewise belong to those categories (§ 1a(3) sentence 4 KStG).
  • Amounts from loans granted become income within § 20(1) no. 7 or § 20(2) sentence 1 no. 7 EStG, and amounts from assets made available become income within § 21 or § 22 EStG (§ 1a(3) sentence 2 nos. 3 and 4 KStG).
  • The reverse option counts as a change of legal form under § 1(1) sentence 1 no. 2 of the Reorganisation Tax Act, with § 9 sentence 3 of that Act disapplied (§ 1a(4) sentence 2 KStG).
  • Sentences 1 and 2 of subsection 4 also apply WITHOUT any application where the conditions of subsection 1 cease to be met (§ 1a(4) sentence 4 KStG) — the option then ends without anyone ending it.
  • If the SECOND-TO-LAST partner leaves, the opting partnership is treated as dissolved immediately afterwards, with the consequences set out in detail in § 1a(4) sentences 5 and 6 KStG.

Common mistakes

  • Applying in January for the same year. The application is due at the latest one month BEFORE the start of the financial year (§ 1a(1) sentence 2 KStG); only on a new formation or a conversion does it reach the current year (sentence 7).
  • Planning the option for an unregistered GbR. § 1a(1) sentence 1 KStG names the REGISTERED civil-law partnership.
  • Considering it for a sole trader. The provision names partnerships only.
  • Overlooking the loss of § 35 EStG. It does not apply to an opting partnership (§ 1a(3) sentence 3 KStG), and with it goes the relief through which trade tax was credited at partner level.
  • Wanting to carry on with cash-basis accounting. § 4(3) EStG does not apply to an opting partnership (§ 1a(3) sentence 6 KStG).
  • Continuing to treat the management fee as commercial income. After the option it becomes income within § 19 EStG, and the partnership counts to that extent as the wage tax employer (§ 1a(3) sentence 2 no. 2 and sentence 7 KStG).
  • Treating the application as revocable. It is expressly IRREVOCABLE (§ 1a(1) sentence 1 KStG); the way back is the reverse option in subsection 4, which itself counts as a change of legal form.
  • Assuming retained profits are taxed at partner level straight away. Profit shares count as distributed only once they are withdrawn (§ 1a(3) sentence 5 KStG).

Frequently asked questions

Who can opt?

A commercial partnership, a professional partnership or a registered civil-law partnership (§ 1a(1) sentence 1 KStG). Excluded are investment funds within the Investment Tax Act and partnerships which, after exercising the option, are not subject in the state of their management to a liability comparable to unlimited German corporation tax liability (§ 1a(1) sentence 6 KStG).

By when must the application be filed?

At the latest one month before the start of the financial year from which taxation as a corporation is to apply (§ 1a(1) sentence 2 KStG). By way of derogation it may be filed, on a new formation, within one month of concluding the partnership agreement and, on the conversion of a corporation into a partnership, within one month of filing with the register — then with effect for the financial year already running (§ 1a(1) sentence 7 KStG).

What happens to the managing partner's salary?

It becomes genuine employment income. Amounts a partner receives from the partnership for services in its employ give rise to income within § 19 EStG (§ 1a(3) sentence 2 no. 2 KStG), and the opting partnership counts to that extent as the wage tax employer and the partner as an employee (§ 1a(3) sentence 7 KStG).

Can we keep using cash-basis accounting?

No. § 4(3) of the Income Tax Act does not apply to an opting partnership (§ 1a(3) sentence 6 KStG).

When do profits count as distributed?

Only once they are withdrawn (§ 1a(3) sentence 5 KStG). Leaving profits in the business does not to that extent trigger distribution taxation.

Can we get back out?

Only through the reverse option. A partnership that has opted under subsection 1 may apply no longer to be treated like a corporation (§ 1a(4) sentence 1 KStG); the reverse option counts as a change of legal form under § 1(1) sentence 1 no. 2 of the Reorganisation Tax Act (sentence 2). Where the conditions of subsection 1 cease to be met, those consequences follow even without an application (sentence 4).

Go further

Compute the related amounts

Understand this form: the related course

Related forms

Official sources

Read in German

Guide and document provided for information purposes only; they do not constitute personalised legal or tax advice. Check the recipient organisation's requirements and consult a professional if needed.