Tax and social security contributions in Bavaria

Bavaria offers a competitive system of corporate taxation. The average total tax burden for Germany as a whole is less than 30 per cent – lower than in other large industrialised nations such as France, Spain, Italy and the United Kingdom. In fact, the tax burden for companies is even lower in some parts of Bavaria, as towns and districts often grant their companies more favourable conditions when it comes to local business tax.
Companies in Germany are taxed in two different ways, depending on the legal form.

In contrast to other industrial nations, Germany's social security system is principally financed by a pay-as-you-go system. All employees are obligated to pay social security contributions. In principle, half of ongoing social security spending (pension payments, treatment of the sick, nursing care fees and unemployment benefits) is paid for by the employer and the other half by the employee. Only the contributions to accident insurance are paid by the employer alone. Social security contributions are deducted directly by the social security provider. When choosing a location, it is important to consider not only nominal tax rates, but also additional wage costs and fee models, such as those for waste disposal. When all effective costs are compared, Bavaria often proves to be a better value location that can compete with comparable locations in Central Europe.