Germany is known for its economic strength, technological innovation and social security. However, one of the most discussed issues among entrepreneurs and the self-employed is the high tax burden they have to bear. On the other hand, there is the United Arab Emirates (UAE), especially Dubai, which is considered a tax-free paradise for companies. Is it justified for companies to pay such high taxes in Germany while enjoying tax advantages in the UAE?

In this article, we take a look at the tax structure in Germany, which places a significant burden on companies, and compare it with the tax advantages that entrepreneurs enjoy in the UAE. We will also examine whether these differences are justified or whether it is time to consider relocation.

1. the tax burden in Germany: What remains of the turnover?

Germany is one of the countries with the highest tax burden in the world, both for companies and private individuals. The German tax structure is complex and includes various types of tax that significantly reduce company profits. Here is an overview of the most important taxes that a company has to pay in Germany:

a) Corporate income tax

Corporation tax is levied on the profits of corporations such as GmbHs and AGs. The corporation tax rate is 15 %. Compared to other countries, this does not seem particularly high at first glance, but when combined with other taxes, the actual tax burden increases.

b) Trade tax

In addition to corporation tax, trade tax is also payable in Germany. The tax rate varies depending on the municipality and is generally between 7 % and 17 %. In cities such as Munich or Frankfurt, companies can expect trade tax rates of 16 % or more. This means that the effective tax rate for companies quickly rises above 30 %.

c) Solidarity surcharge

Although the solidarity surcharge has been reduced for many taxpayers in recent years, it remains in place for companies. The surcharge amounts to 5.5 % of corporation tax and further increases the tax burden.

d) Value added tax

Companies in Germany must also collect and pay VAT. The standard rate is 19 %, the reduced rate is 7 %. This places a particular burden on small and medium-sized enterprises (SMEs), which have to go to great lengths to declare and pay VAT correctly.

e) Wage tax and social security contributions

In addition to the corporate tax burden, employers in Germany have to pay high social security contributions. Employers and employees share the contributions to pension insurance, health insurance, long-term care insurance and unemployment insurance. The total non-wage labor costs for employers can amount to more than 20 % of their employees' gross salary.

f) Capital gains tax

Dividends that are distributed to shareholders are also subject to capital gains tax in Germany. This amounts to 25 % plus solidarity surcharge and possibly church tax. This means that only a fraction of the profit received by a shareholder remains after tax.

2. the tax situation in the United Arab Emirates (UAE)

In stark contrast to Germany are the United Arab Emirates (UAE), which have been considered a tax-friendly location for companies for years. Dubai in particular has established itself as a business metropolis where companies from all over the world operate in order to benefit from the tax advantages. Here are the key points of the UAE's tax system:

a) No income tax

One of the biggest advantages for entrepreneurs and the self-employed in the UAE is the fact that there is no income tax. No matter how high the income is - no tax is levied on personal income. This applies to employees as well as the self-employed and entrepreneurs.

b) No corporation tax

There is also no general corporate income tax for companies in the UAE. This means that profits made by companies do not have to be taxed, with a few exceptions (such as in the oil industry and certain foreign banks). This is a huge advantage for companies operating in the UAE that wish to fully reinvest or distribute their profits.

c) Value added tax (VAT)

VAT was introduced in the UAE in 2018 and is only 5 %. Compared to Germany, where the VAT rate is 19 %, this is a considerable relief for consumers and businesses.

d) Free trade zones

Another important feature of the UAE are the numerous free trade zones. In these zones, foreign entrepreneurs can own 100 % of their business without the need for a local partner. In addition, companies in the free zones benefit from tax advantages, such as exemption from customs duties and full tax exemption on profits.

e) Capital gains and dividends

There is no tax on capital gains or dividends in the UAE. This means that entrepreneurs can receive their profits in full without any deductions. This is particularly attractive for investors and shareholders who want to maximize their profits.

3. comparison of the tax burden: Germany vs. UAE

If we compare the tax burden for companies in Germany and the UAE, it becomes clear that the UAE offers a much more favorable environment for companies. Here is a simplified comparison:Tax typeGermanyUAE Income tax Up to 45 % No corporation tax 15 % (plus trade tax) No trade tax 7 % to 17 % No VAT/VAT 19 % 5 % Capital gains tax on dividends 25 % plus solidarity surcharge None

4. are the high taxes in Germany justified?

The question that now arises is: are the high taxes that companies have to pay in Germany justified? Compared to the UAE, Germany naturally offers an extensive social system that is financed by tax revenues. Here are some points that are often cited as justification for the tax burden:

• Social securityGermany offers a solid social security system that includes unemployment insurance, health insurance and pension insurance. These social securities are lacking in the UAE, where employees are responsible for their own health insurance and pensions.
• Education and infrastructureGermany invests heavily in public infrastructure and educational institutions, which are financed by taxes paid by companies and citizens. In the UAE, many services are private and companies bear the costs for their employees.
• Legal certaintyGermany offers a high degree of legal security and labor rights, while labor rights are regulated differently in the UAE.

However, the question is whether these are enough reasons to justify the high tax burden in Germany, especially for entrepreneurs and the self-employed, who are often the backbone of the economy. More and more entrepreneurs are asking themselves whether it makes sense to stay in a system that deducts over % of their profits, while other countries, such as the UAE, offer more incentives to set up businesses and succeed in the long term.

5. does relocation to the UAE make sense?

For many entrepreneurs, the question is whether it is worth relocating their business to the UAE to take advantage of the significant tax benefits. Here are some of the key reasons why more and more entrepreneurs are making this decision:

• Tax exemptionNo income tax, no corporate tax and low VAT - these are unbeatable arguments for relocating a company to the UAE.
• International networksDubai is a global trade center that offers companies access to new markets and business opportunities.
• Quality of lifeDubai offers not only tax advantages, but also a high quality of life, modern infrastructure and a stable political environment.

Entrepreneurs interested in relocating to the UAE can count on professional support. SetupCo is an experienced service provider that assists entrepreneurs in every step of the process - from choosing the right corporate structure to obtaining the necessary licenses. SetupCo knows the local conditions and ensures that setting up a company in the UAE runs smoothly and efficiently.

A decision worth considering

While the high taxes in Germany fund many social securities and public services, the question remains as to whether the tax burden on companies is justified in today's globalized world. Entrepreneurs who want to maximize their profits and operate in a business-friendly environment.