47 Per Cent Top Tax Rate: What the 2027 Income Tax Reform Leaves of Your Sale Proceeds

Under the government draft of the Income Tax Reform Act 2027, Germany's top income tax rate rises from 45 to 47 per cent on taxable income above 280,000 euros, and the 45 per cent band starts as early as 250,000 euros. On a capital gain of 2 million euros, that means roughly 20,000 euros more tax for sellers of GmbH shares held privately, and roughly 21,000 euros for a sole proprietorship or partnership interest taxed at the reduced rate. Anyone selling through a holding company is not affected. The law has not yet been passed.

How selling your company works in practice is described on our services page. This article only works through the tax element: as of 08.10.2026, based on Bundestag printed paper 21/8235. It is an overview, not tax advice.

What does the draft provide?

The draft shifts only the tariff above 250,000 euros. The rules on taxing capital gains remain as they are.

Point	Draft (as of October 2026)
Reference	BT-Drs. 21/8235, BR-Drs. 507/26
Cabinet	02.09.2026
Tariff 2027	42 % up to 249,999 euros, 45 % from 250,000 to 279,999 euros, 47 % from 280,000 euros (§ 32a(1) EStG)
Previously (tariff 2026)	42 % from 69,879 to 277,825 euros, 45 % from 277,826 euros
Entry into force	01.01.2027
Solidarity surcharge	not changed in the draft, 5.5 % of income tax
Offsetting measures	higher top rate, plus a cut to the craftsman bonus and a rise in the mini-job flat tax

With the surcharge, the marginal burden will be 49.6 per cent instead of 47.5 per cent. For married couples assessed jointly, our derivation from the unchanged splitting procedure gives thresholds of 500,000 and 560,000 euros; the draft contains no separate splitting table.

Who is affected when selling a business?

Everyone whose capital gain is taxed as the income of a natural person. Whether that is the case depends on the structure.

What is sold	Taxation	Affected?
Sole proprietorship, partnership interest (§ 16 EStG)	Income tax; reduced rate under § 34(3) EStG possible	Yes, via the average tax rate
GmbH shares held privately, stake of 1 per cent or more (§ 17 EStG)	Partial income method: 60 % of the gain taxable, at the normal tariff	Yes, directly
GmbH shares via a holding company (§ 8b KStG)	95 % tax-exempt, 5 % treated as non-deductible expenses	No

The reduced rate under § 34(3) EStG is 56 per cent of the average tax rate, at least 14 per cent. It applies once in a lifetime for gains up to five million euros, from age 55 or in case of permanent incapacity. The draft leaves § 34 unchanged; because the average rate results from the new tariff, the reform nevertheless has an effect. Gains under § 17 EStG, by contrast, do not benefit from § 34 and are taxed fully at the normal tariff.

What does it cost in euros?

On a 2 million euro gain it is about 20,000 to 21,000 euros, on 5 million euros about 56,000 to 58,000 euros. The calculation applies to an individual with no other income, no church tax and no allowances, with a solidarity surcharge of 5.5 per cent.

Case	Income tax 2026	Income tax 2027	Additional burden	with surcharge
§ 16, gain 2 m euros, reduced rate	493,097 euros	512,769 euros	19,672 euros	20,754 euros
§ 16, gain 5 m euros, reduced rate	1,249,097 euros	1,302,369 euros	53,272 euros	56,202 euros
§ 17, gain 1 m euros (taxable income 600,000 euros)	250,530 euros	257,658 euros	7,129 euros	7,521 euros
§ 17, gain 2 m euros (taxable income 1.2 m euros)	–	–	19,129 euros	20,181 euros
§ 17, gain 5 m euros (taxable income 3 m euros)	–	–	55,129 euros	58,160 euros

Above 280,000 euros, the additional income tax can be calculated as 2 per cent of taxable income minus 4,871 euros. The deduction arises because the 45 per cent band will start earlier. This is our own calculation based on the tariff formulas of the draft and the current § 32a EStG, rounded down to full euros.

Put in perspective: at a sale price in the millions, the reform is an item of one to two per cent of the gain. It does not justify a rushed sale.

Why is a holding company not affected?

Because the gain does not arise there as the income of a natural person. If a holding GmbH sells the shares in the target company, 95 per cent of the gain is tax-exempt (§ 8b KStG). Corporate and trade tax apply to the remaining 5 per cent, in total about 1.5 per cent of the gain (assumption: municipal multiplier 400 per cent, corporate tax 15 per cent). Income tax only takes effect when the holding distributes to you.

We found no change to § 8b KStG in the draft. Whether a holding makes sense depends on purpose and timing: a holding interposed after the fact is reviewed critically for tax purposes. How the structure works is shown in our article on selling through a holding company.

Do allowances and special rules fall away?

Not in the government draft. According to media reports, earlier draft versions provided for abolishing the allowance for business disposals (§ 16(4) EStG, 45,000 euros, tapering from 136,000 euros of gain) and the allowance under § 17(3) EStG from 2027. In the ministry draft of 18.08.2026 and in the government draft this is no longer included. Whether it reappears in the procedure is open.

When does the new tariff apply to my sale?

What counts is the year in which the gain arises for tax purposes. As a rule that is when beneficial ownership passes, not the day of signing. For a process that begins today, closing is highly likely to fall in 2027 or later; a sale with transfer still in 2026 is hardly achievable for new processes. Whether and how instalments of the purchase price or an earn-out are spread for tax purposes should be clarified with your tax advisor before signing.

How does the legislative procedure continue?

The law is in the procedure but not passed. The Bundestag debated the draft in first reading on 08.10.2026, together with the Annual Tax Act. The Bundesrat gives its opinion on 16.10.2026. According to several observers the law requires the Bundesrat's consent. According to reports, the CDU/CSU ties its consent to progress on pensions and the labour market, while the SPD supports higher taxation of high incomes. The DIHK and specialist authors criticise the burden on non-corporate businesses. Dates for the hearing and final vote are not known.

There is a counter-move for corporations: corporate income tax falls in steps from 2028, and non-corporate businesses do not benefit.

What can sellers do now?

Review the structure, do not chase the date. Four points are worthwhile:

First: clarify the form of the sale. Share sale or asset sale, private or via a holding, results in very different tax burdens.

Second: determine the gain reliably. Purchase price less acquisition costs and selling costs determines the tax base. The company value is only the starting point.

Third: check age and the conditions for the reduced rate. It applies once in a lifetime and only under the conditions mentioned.

Fourth: involve your tax advisor early. Which structure holds up depends on your individual case.

An overview of all changes is in the article on tax changes in 2027 for business sellers. How a sale in Germany is taxed in detail is shown in the article selling a GmbH: taxes.

Does this also apply in Austria?

No. The draft concerns German income tax. Different rules apply to capital gains in Austria; an overview is given in the article on taxes on a company sale.

FAQ

Is the 47 per cent top rate already in force?

No. It is part of the government draft of 02.09.2026. Bundestag and Bundesrat still have to approve it; changes are possible. The planned start is 01.01.2027.

From what income does the 47 per cent rate apply?

From 280,000 euros of taxable income for individual assessment. The 45 per cent band will start at 250,000 euros, previously 277,826 euros. For joint assessment our derivation gives 500,000 and 560,000 euros.

How much more tax arises on a 2 million euro gain?

For GmbH shares held privately (60 per cent taxable) about 19,100 euros of income tax, about 20,200 euros with the surcharge. For a sole proprietorship at the reduced rate under § 34(3) EStG about 19,700 euros, about 20,800 euros with the surcharge. Assumptions: no other income, no allowances, no church tax.

Does the reform affect a sale through a holding company?

No. If the holding sells, 95 per cent of the gain is tax-exempt. Income tax only takes effect when it distributes to you.

Does the reduced tax rate under § 34 EStG change?

The draft does not change § 34 EStG. Because the average tax rate results from the new tariff, the burden nevertheless rises slightly.

Should I sell earlier because of the reform?

No, not only because of it. The additional burden is one to two per cent of the gain. For a new sale process, closing in 2026 is hardly achievable anyway.

Sources: Draft Income Tax Reform Act 2027, BT-Drs. 21/8235 of 28.09.2026 and BR-Drs. 507/26 (dserver.bundestag.de); § 32a, § 34 EStG (lxgesetze.de); German Bundestag, text archive on the first reading (08.10.2026); Bundesrat, Plenum kompakt on the 1069th session (16.10.2026); NWB 35/2026, article on the government draft; DIHK, statement on the draft; PwC, blog post of 05.10.2026; dhz.net (02.10.2026). Calculations: own calculation based on the tariff formulas. As of 08.10.2026. Overview, not legal or tax advice.

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