Crediting procedure

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The imputation process is a corporation tax system in which the burden at the corporation level is taken into account by fully crediting the corporation tax paid by the corporation . It was valid in Germany from 1977 to 2000 and was widely regarded as a systematically very clean system.


In order to solve the problem of the double burden of corporate taxation, the crediting procedure based on the French avoir fiscal was introduced in 1977 .

The corporation as a taxable person

In this system, taxation at the corporation level was only viewed as a preliminary survey; the final charge should take place with the shareholder according to his or her personal circumstances. This was due to the fact that, in the end, only natural persons were viewed as having tax capacity .

However, since one could not wait to register the profits of a company for tax purposes until they were finally distributed (for example through dividends ), an advance tax had to be ensured at the level of the corporation . As a result of the crediting procedure, the undistributed profits ( accumulation ) were taxed at the level of the corporation, while the distributed profits were only taxed at the level of the respective shareholder (for example, the shareholder ).

Technical design of the crediting procedure

In the crediting procedure, corporation tax (KSt) was treated like an advance payment on the income tax of the shareholder. The final taxation of the distributed profit took place with the shareholder according to his personal circumstances:

  • If the corporation does not distribute its profit , then the corporation tax should be approximately as high as the top income tax rate. In 1977 the dividend rate of the corporation was 56%, from 1990 only 50%, from 1994 45% and finally in 1999 and 2000 40%.
  • If, on the other hand, the corporation distributed the profit, the corporation tax was reduced by 10 percentage points (in the last two years 1999 and 2000, previously 15 percentage points) to 30%. The shareholder was able to offset this 30% corporation tax on his income tax .
  • In the case of the shareholder, the profit distributed by the corporation (after trade tax) was then taxed according to its personal tax rate. The profit share retained by the corporation or paid as corporation tax was offset against income tax like an advance income tax payment.
  • The profit distributed by the corporation was then taxed as if the shareholder had made the profit himself.


Case A: top earners Case B: Low wage earners
Profit of the corporation according to trade tax 100 100
Corporation tax on withholding Profit −40 −40
Distribution burden reduction +10 +10
Cash dividend / distribution 70 70
KSt on distributed profit 30th 30th
Income from capital 100 100
Income tax (A: 50%, B: 20%) −50 −20
remain after taxes 50 80

The corresponding application of this system for distributions to other corporations guaranteed that there would be no accumulation effects.

Usable equity

In Germany, the so-called breakdown calculation ensured that the previous debit at the corporation level was actually correctly taken into account in the distribution. For this purpose, different groups of taxable equity were formed ( usable equity ), which were grouped according to the tax burden. After changes in the tax rate (for example from 45% to 40% in 1999), the usable equity had to be adjusted through reconciliations.

The most important partial amounts of usable equity were:

  • unmitigated equity capital components : The part of equity capital that was formed from taxed profits, i.e. the last part charged with 40%: the so-called EK 40 . In the case of a distribution, the scheme shown above applies.
  • unencumbered equity shares : The proportion of the capital of any taxation in the country subject: The so-called EK0 , with sub-groups were distinguished, depending on whether upon distribution, a high smuggling to the control level of the shareholder took place (with tax-free foreign income shares) or whether the payment completely tax free remained (with repayment of deposits).

System change to the half-income method

The crediting of corporation tax with the domestic shareholders ensured that the company profit was only taxed once in Germany. Therefore, concerns were raised from many sides that this procedure was not suitable for Europe , as cross-border crediting was not provided (and would have been difficult to implement). A German shareholder could neither credit foreign corporation tax if he held shares in a foreign corporation, nor could a foreign shareholder credit German corporation tax in his home country.

The concerns that these problems could lead to the imputation procedure being illegal under European law have at least been confirmed for the Finnish imputation system. On September 7, 2004, the ECJ declared the Finnish credit system to be contrary to European law ( Manninen decision ) because a Finn who held a stake in a Swedish company was not allowed to credit foreign corporation tax in Finland.

Germany has u. a. For this reason, too, changed to the half-income method in 2001 (from 2009 withholding tax or partial income method ).

In the meantime, the European Court of Justice in the context of the "Meilicke" case (C-292/04) has also established that German tax authorities' practice of retroactive effect is illegal. The tax authorities had continued to apply the corporation tax credit procedure to the old cases, ie the procedures that had accrued up to the decision in Rs. Manninen. The decision is viewed critically in legal literature because the ECJ attached a so-called "erga omnes effect" to its own Manninen decision, ie binding force on everyone, whereas it was previously considered certain that the decisions of the ECJ were basically. only "inter-partes effect", ie binding force between the parties to the legal dispute, applies (Steinberg / Bark in EuZW 2007, 245).

Transitional provisions and moratorium

Since the corporation tax paid only had the function of an advance income tax payment during the crediting process, it was not possible to switch without transitional provisions. This would in fact have been equivalent to expropriation , since the 40% tax (in the years 1977–2000) would have become a definitive tax in one fell swoop . There is therefore an 18-year transition period for corporations . At the end of the crediting process, a corporation tax credit was determined that was 1/6 of the former EK40 . During the transition period, the corporations receive 1/6 of the dividends paid back by the tax office until the corporation tax credit has been used up. This corresponds to a definitive charge of 30% (instead of 25% for current profits) of the equity capital previously charged with 40%. This regulation was also the reason for the negative or very low corporation tax revenue in the years after the system changeover, as the companies made high distributions and thus used their corporation tax credits.

The “Tax Reduction Reduction Act” of May 2003 also limited the crediting of corporation tax credits between April 11, 2003 and December 31, 2005 to € 0. After this “moratorium” had expired, the credit was limited annually to the fraction of the credit which, if distributed linearly up to the end of 2019, would arithmetically account for this year. Before this change came into force, the SEStEG introduced the current regulation on corporate income tax credits. This ensures that between 2008 and 2017 one tenth of the corporation tax credit is paid out to the corporation, even without distributions being made ( Section 37 (5) KStG).


  • Pezzer, in: Tipke / Lang, Steuerrecht, 17th edition, Cologne: Otto Schmidt, § 11: Corporation tax, with further references