Taxation in Germany

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Taxes in Germany are levied by the federal government ( Bund ), state ( LÃÆ'¤nder ) as well as municipalities ( StÃÆ'¤dte/Gemeinden ). Many direct and indirect taxes exist in Germany; income tax and VAT is the most significant. The German word for tax is die Steuer which comes from the Old High German stiura which means help . The Financial Secrecy Index places Germany as the 8th safest tax haven in the world, above Jersey but behind Lebanon.

Video Taxation in Germany

Principles of taxation

The German Constitution ( Grundgesetz ) establishes the principles governing taxation in the following articles:

• Principle of ability to pay (Art. 3 para. 1 Grundgesetz)
• Equality in taxation (Article 3 point 1 of Grundgesetz).
• Validity of taxation (Article 2 paragraph 1 and Article 20 paragraph 3 Grundgesetz)
• The principle of the welfare state (Art. 20 Grundgesetz)

The right to decide taxes is shared:

• The federation is entitled to customs. (Art 105. 1 Grundgesetz)
• Federations and states decide jointly on most tax laws. Formally, the state can decide that there is no federal law. In practice, there are federal laws for all taxation issues. (Art 105. 2 Grundgesetz)
• Countries decide on local excise taxes. (Art 105. 2a Grundgesetz)
• Municipalities and districts ( Kreise ) may decide on some small local taxes such as dog hijacking ( Hundesteuer ).

So even if Germany is a federal state, 95% of all taxes are levied at the federal level. These tax revenues are allocated by the federation and the states as follows (Article 106 Grundgesetz):

• The federation receives exclusively income from:
  • Customs
  • Taxes in alcopop, cars, refilled drinks, coffee, mineral oil products, sparkling wine, electricity, tobacco, and insurance
  • Added to the income tax called the additional cost of solidarity ( SolidaritÃÆ'¤tszuschlag )
• Countries receive exclusively income from:
  • Inheritance tax, real property transfer tax
  • Taxes for beer and gambling
  • Fire protection tax
• The municipality and/or district receive exclusively income from:
  • Real property tax
  • Taxes on drinks, dogs and other lodgings.

Most of the revenue is derived from income tax and VAT. This tax revenue is distributed between federations and states with quotas. The municipality receives a share of the state income. In addition, there is compensation between rich and poor countries ( LÃÆ'¤nderfinanzausgleich , Art. 107 para. 2 Grundgesetz).

Maps Taxation in Germany

Structural organization of fiscal administration

The German fiscal administration is divided into federal tax authorities and state tax authorities. The local tax office ( FinanzÃÆ'¤mter ) belongs to the latter. They manage "revenue share tax" for the Federation and State and process tax returns. The number of tax offices in Germany totals about 650.

As a result of discussions between 2006 and 2009 between the Federation and the Federal Federation (FI), the Federation will further also regulate some taxes. The competent authority is the Federal Bundeszentralamt fÃÆ'¼r Steuern , which is also competent. authority for certain applications of tax refund from abroad. Since 2009, BZSt has allocated an identification number for tax purposes for each taxable person.

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Jurisdiction

There is usually at least one financial court in every state (Berlin and Brandenburg share a court, in Cottbus). An example of an appeal is the German Federal Financial Court ( Bundesfinanzhof ) in Munich.

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Fiscal Code

The general rules and procedures that apply to all taxes are listed in the fiscal code ( Abgabenordnung ) as so-called general tax laws. Individual tax law regulates where a tax case occurs.

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Tax identification number

Starting from 2009 onwards, every German resident receives a personal tax identification number. In the coming years, businesses will receive business identification numbers. The competent authority is the "Federal Central Tax Office" ( Bundeszentralamt fÃÆ'¼r Steuern ).

src: the-tma.org.uk

Tax revenue

In 2014, German tax revenues reached EUR593 billion.

Tax revenues are distributed to three levels of German government: federations, states, and municipalities. All of these are collectively entitled to the most important types of taxes (i.e., value added tax and income tax). For this reason, this tax is also known as a "revenue share tax". Tax receipts are distributed proportionally using the formula specified in the German constitution.

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Income tax for residents

Individuals who are residents of Germany or have their normal abode there have full income tax liability. All income received by these persons both at home and abroad is subject to German tax (the principle of world income).

Income type

For the purpose of collecting income taxes in Germany, income is divided into seven different types of income. Differences made between:

• Income from agriculture and forestry
• Earnings from business operations
• Income from self-employment jobs Earnings from employed jobs
• Earnings from capital
• Earnings from letting the property
• Miscellaneous Income.

If the income of the taxpayer is not included in any of these categories, then it is not subject to income tax. This includes victory in the lottery, for example.

Income tax

The income tax rate in Germany ranges from 0% to 45%. German income tax is a progressive tax, which means that the average tax rate (i.e., tax ratio and taxable income) increases monotonically with increased taxable income. In addition, the German tax system ensures that increased taxable income never results in a decrease in net income after tax. The last property is due to the fact that the marginal tax rate (ie, taxes paid on one euro additional taxable income) is always below 100%.

Income tax rate 2015

There is no income tax imposed on basic allowances, ie EUR8,354 for unmarried persons and EUR16,708 for couples assessed jointly. Beyond this limit, the marginal tax rate increases linearly from 14% to 24% for taxable income of EUR13,469 (EUR26,938 for married couples). In the next interval until taxable income of EUR52,881 (EUR105,762 for married couples), the marginal tax rate increased linearly from 24% to 42%. The latest price change occurred on a taxable income of EUR250,730 (EUR501,460 for married couples) when the marginal tax rate jumped from 42% to 45%. The course of the marginal tax rate and the resulting average tax rate are depicted in the graph to the right.

Additional cost of solidarity

Above the income tax, the so-called solidarity charge (SolidaritÃÆ'¤tszuschlag or " Soli ") is levied at a rate of 5.5% of income tax for higher income. The additional cost of solidarity was introduced in 1991 and, since 1995, has been used primarily to cover the cost of German reunification, which includes debt and pension obligations from the East German government, as well as the cost of improving infrastructure and environmental improvements in new German states.

Up to EUR972 (EUR1,944 for married couples) annual income tax, no additional fee for solidarity is charged. Above this limit, the additional cost of solidarity continues to increase to 5.5% when the annual income tax is EUR1,340.69 (EUR2,681.38 for married couples).

For example, if EUR10000 income tax returns from a certain annual taxable income, a surcharge of solidarity of EUR550 will be charged above. As a result, the taxpayer owes the tax office EUR10550.

Tax on benefits in the form

Each individual must pay any allowances or benefits they receive from the employer, which includes, for example, the use of a car. This applies to private car use as well if the car is owned by a company or individual working alone. In the case of a car, it is based on a log-book method or a flat-rate method, which depends on the gross price-the list of cars rounded down to the next 100 EUR. This means the original price-list without any deductions or discounts on the first real use, whether the car is in use or a few years old. VAT and any additional features (eg GPS, leather seats etc.) Must be included. Taxes paid on one percent of this basis are taxable amount each month.

Example: Gross-listing price: 45,000 EUR Additional taxable income: 450 EUR per month (e.g., 30% tax rate causes 125 EUR tax payable)

Withholding tax

Taxes on income from employed employment and taxes on capital income are both withheld by deductions from the source (your paying taxes, wage taxes, or withholding taxes). Here, some taxes are held directly by the employer or by the bank before the income is paid.

The taxation on job income sources will be made based on the tax class based on personal status. Employers are also responsible for reducing contributions to the social security system at the source.

Taxation class (tax group, Lohnsteuerklasse aka Steuerklassen)

• class I = single
• class II = single parent (live alone with child/children)
• class III = married and spouse have no income or lower income
• class IV = married income and similar to the spouse
• class V = the inverse of class III, that is this class, your spouse, if you have III
• class VI = for second job or for deduction without proper employee information

The tax on the source for capital income will be made at a fixed tax rate of 25% (add an additional 5.5% solidarity charge of the tax amount and, if applicable, the church tax).

Property sales tax

In addition to the standard annual property tax, known as Grundsteuer , On property sales in Germany there is a state-level sales tax at the number of purchases announced.

Transfer of German property is subject to transfer tax (Grunderwerbsteuer) - equivalent to UK stamp duty. Since 2007 this tax is no longer set at the federal level and is under the authority of the Lander (state) government. The current rate of property transfer taxes is the German state is Baden-WÃÆ'¼rttemberg 5% Bavaria: 3.5% Berlin: 6% Bremen: 5% Brandenburg: 5% Hamburg: 4.5% Hessen: 6% Mecklenburg-Vorpommern: 5% Lower Saxony: 5% North Rhine-Westphalia: 6.5% Rhineland-Palatinate: 5% Saarland: 5.5% Saxony: 3.5% Saxony-Anhalt: 5% Schleswig-Holstein: 6.5% Thuringia: 5%

The vendor's profit from the sale of real estate in Germany is considered a capital gain, if real estate has been held for less than 10 years.

Reductions

The German income tax law allows a large amount of taxpayers' fees to be deducted from income when calculating taxable income. This applies particularly to costs directly related to income. Apart from this, other costs can also be deducted, for example, certain insurance payments, expenses incurred by the illness, fees for housing assistance, and maintenance payments. In addition to the possibility of reduced costs, there are also many perks and lump-sum amounts that reduce taxable income, for example, the current allowance for capital earnings at EUR801 (EUR1,602 for married couples) and lump sums of EUR1000 (earnings in 2011 or so on) is deducted from the income from employed employment.

Tax allowance for children

Expenditures on child benefits and vocational training of children are calculated with special tax allowances, with allowances for expenses incurred for child supervision, education and training, and with child benefit payments.

Fixed rate tax on personal income from capital and capital gains ("Abgeltungsteuer")

Since 2009-01-01 Germany imposed a flat rate tax on personal income from capital and capital gains called Abgeltungsteuer . The tax rate is 25% plus 5.5% surcharge of solidarity. This tax is levied on German sources as a capital income tax. Tax returns are possible if the personal income tax rate is below 25%.

The Abgeltungsteuer replaces the previous half-earnings procedure that has been in force in Germany since 2001.

Tax refund

The obligation to file an income tax refund does not apply to everyone. For example, a single assessed taxpayer who exclusively receives tax-deductible income is exempt from this obligation, since their tax debt is deemed to be at least resolved by withholding tax. However, any person who has a full tax liability is allowed to file a tax refund, taking into account the withholding tax at the source and the likelihood of deductions. In many cases, this may result in a tax refund.

Married couples may apply for a joint assessment to be taxed at a more favorable rate. In this case, they must file an annual tax return because the tax may be paid through insufficient tax deductions.

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Income tax for non-residents

Non-German people also do not have a normal residence they are only responsible for paying taxes in Germany if they earn income there which has a close domestic (Germany) context. This includes in particular income from real estate in Germany or from a permanent establishment in Germany.

Double taxation agreement

Germany has reached tax treaties with about 90 countries to avoid double taxation. This Agreement is included in public international law and aims to avoid that one taxpayer be subject to the same tax more than once on the same income for the same period. The basic structure of the double taxation agreement signed by Germany follows the "Model Tax Convention" compiled by the OECD.

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Social Security Contribution

Employment income received in Germany is subject to different insurance contributions that include health insurance, pensions, nursing and unemployment. Contributions are levied as a percentage of income until a certain amount is shared equally between employee and employer. Contribution table for 2018:

see also Payroll tax/section Germany

src: the-tma.org.uk

Corporate tax

Corporate taxes are levied first and foremost on corporate corporations, particularly public and private limited companies, as well as other companies such as cooperatives, associations and foundations. Single ownership and partnership are not subject to corporate taxes: the profits derived from these arrangements are attributed to their individual partners and then taxed in the context of their personal income tax bill.

Corporations domiciled or managed in Germany are deemed to have full corporate tax liability. This means that their domestic and foreign revenues can all be taxed in Germany. Some corporate corporations are exempt from corporate taxes, such as charitable foundations, church institutions, and sports clubs.

On January 1, 2008, the German corporate tax rate was 15%. Counting both the additional cost of solidarity (5.5% of corporate taxes) and trade taxes (average 14% per year 2008), the corporate tax rate in Germany is just under 30%.

Assessment base

The assessment base for corporate taxes charged is revenues earned by the company during the calendar year. Taxable income is determined using the results posted on the annual account (balance sheet and income statement) prepared under the Commercial Code. What is considered an income under tax law sometimes deviates from the way income is determined under commercial law, where the tax law provisions apply.

Dividend

When dividends are paid to a person, a capital income tax rate of 25% is charged. From 1 January 2009, this tax is final to individuals who are German residents. The additional cost of solidarity is also levied on capital income tax.

When dividends are paid to companies with full corporate tax liability, the recipient business is largely exempt from paying taxes on this income. In its tax assessment, only 5% of the dividend is added to profit as an operating expense that is not deductible. The same is true if a taxable corporation sells shares in another company.

Tax deductions from dividends paid by subsidiaries with full tax liability to foreign parents domiciled in the EU are exempt under certain conditions, for example, the parent company must have direct ownership in the subsidiary of at least 15%.

Integrated fiscal unit (group tax)

Under German tax law, a separate company may be treated as an integrated fiscal unit for tax purposes (Organschaft). Within an integrated fiscal unit, a legally-independent company (controlled company) agrees to a profit and loss combination agreement to become dependent on other businesses (controlling companies) in financial, economic and organizational terms. The controlled company is responsible for paying all its profits to the controlling company. Another requirement is that the controlling company must hold the majority of the voting rights in the controlled company.

In terms of taxes, the recognition of the fiscal unit means that the controlled company's earnings are allocated to the controlling company. This provides an opportunity to balance earnings and losses in integrated fiscal units.

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Trading tax

Entrepreneurs engaged in business operations are subject to trade tax ( Gewerbesteuer ) as well as income tax/corporate tax. Unlike the latter, trade taxes are charged by local authorities or municipalities, which are entitled to the whole amount. The fees charged are set by each local authority separately within the tariff range determined by the central government. From 1 January 2008, an average rate of 14% of earnings is subject to trade tax.

Assessment procedure

The business entity must file a tax return on trade with the tax office, such as any other tax returns. Taking into account any allowances, the local tax office ( Finanzamt ) calculates trade revenues and then provides the prevailing figures for the assessment of trade taxes to local authorities collecting taxes. The underlying profit base, as well as book-tax differences for local trade tax jurisdictions, may differ from those used for corporate taxes. On the basis of the level of collection ( Hebesatz ) prevailing in its territory, the local authorities calculate trade tax debt.

Unrelated company

A one-person business and a partnership member can reduce most of the trade taxes from their personal income tax bills.

Companies listed

Since January 1, 2008, entity companies are no longer able to withhold trade tax from their taxable profits.

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Value added tax

As a matter of principle, all services and products produced in Germany by business entities are subject to value added tax (VAT). German VAT is part of the EU value-added tax system.

Exceptions

Certain goods and services are exempt from value added tax by law; this applies to German and foreign business alike.

For example, the following items are exempt from German value added tax:

• export delivery
• Intra-Community goods supply
• services provided by certain professional groups (eg doctors)
• financial services (eg lending)
• let real estate in the long run
• cultural services provided publicly (eg by public theater, museums, zoos, etc.),
• value added by a particular institution providing general education or vocational training
• services provided in an honor or voluntary capacity.

Tax rate

The general rate of value added tax rate in Germany is 19%. A 7% tax rate reduction applies for example on the sale of certain foods, books and magazines, interest and transportation.

Tax Payment

Within 10 days of the end of each calendar quarter, the business entity shall send the refund tax return office where it shall provide its own tax calculation for the preceding calendar quarter. The amount to be paid is the value-added tax that has been charged, minus the amount of a deductible input tax. The imputable input tax is the value added tax that the entrepreneur has invoiced by another business entity.

The calculated amount should be paid to the tax office using the down payment. By this means that the amount to be paid in full before the next fiscal quarter. Larger businesses should apply for an advance refund each month. For entrepreneurs who have recently undertaken professional or commercial operations, the monthly reporting period also applies during the first calendar year and in the following year.

At the end of the calendar year, the employer must file an annual tax return that once again calculates the tax.

Small business

Entrepreneurs whose turnover (plus value added tax) does not exceed EUR 17,500 in the previous calendar year and is not expected to exceed EUR 50,000 this year (small business), no need to pay value added tax. However, these small companies are not allowed to reduce the input taxes they have collected.

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Actual property tax

Municipal levies tax on real property ( Grundsteuern ). Tax rates vary because they depend on local parliamentary decisions. Taxes are payable quarterly.

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Real property transfer tax

Transfer of real property may be taxed ( Grunderwerbsteuer ). Vendà © e and the vendor are the general debtor of the tax. In general, the buyer must pay taxes. The tax rate is determined by each country. In general, the tax rate is 3.5%, but all the countries except Bavaria and Saxony have increased it since 2011. Most countries now have 4.5% or 5% tax rate, the highest being North Rhine-Westphalia, Saarland and Schleswig- Holstein with 6.5%.

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Inheritance and gift tax

Inheritance tax and gift tax are regulated under one law. Taxable is a transfer by reason of death or reward between life. There is depreciation, for example for family home, family, and for entrepreneur (up to 100%). Tax rate from 7% to 50%.

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Capital gains tax

In Germany there is no special capital gains tax. Only under certain circumstances the benefits of personal disposal may be taxed. Since 2009-01-01 Germany imposes a final tax (Abgeltungsteuer) which may apply as a capital gains tax to residents eg. disposal of shares.

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Flight Tax

From 2011-01-01, all passenger flights departing from Germany will be subject to a flight tax. The amount of tax to be paid depends on the distance to the final destination. Flights to destinations up to 2,500 km will be taxed EUR8 per passenger. The amount increases up to EUR25 for distances up to 6,000 km and EUR45 for this outer distance. The calculated distance is for all trips booked. For flights involving transfers or short stops, this means taxes will only be imposed on early departures.

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Motor vehicle tax

Taxes imposed on motor vehicle owners. It is levied depending on the type of vehicle (car, motorcycle, commercial truck, trailer, motorcycle, etc.). This tax must be paid annually after the registration of the vehicle By car, different taxes for gasoline and diesel engines. Diesel-powered cars are taxed higher. The tax amount also depends on the emission class (Euro 1 - Euro 6), whether the diesel car has a particulate soot filter, and the start date of the vehicle registration.

Pure electric vehicles are exempt from tax at least for five years after initial registration.

Financial crisis of 2009

Existing depreciation for example of certain private household expenditures and for small and medium-sized businesses has been enhanced. Decrease in depreciation for movable assets has been reintroduced for two years (2009-2010). Businesses are allowed to bear losses and claim refunds from paid companies/income taxes. As a result, they get an increase in liquidity. Start 2010-01-01 on VAT tax rate on hotel accommodation is reduced from 19% to 7%.

See also

• German Tax Payers Federation
• Monthly report from the Federal Ministry of Finance (partly English)

Note

External links

• German Constitution (Grundgesetz)
• German Fiscal Code (Abgabenordnung)
• German Income Tax Act (Einkommensteuergesetz)
• German Corporate Tax Law (Koerperschafsteuergesetz)
• German Trade Tax Act (Gewerbuueberesetz)
• German Value Added Tax Act (Umsatzsteuergesetz)
• Double German Taxation Agreement
• OECD Model Tax Convention
• Federal Ministry of Finance: Information on inheritance and gift tax (Germany)
• Federal Ministry of Finance: Flight Taxes - new charges for airlines (UK)
• Federal Ministry of Finance: Germany's finance, budget and fiscal policy (UK)
• Federal Ministry of Finance: Bund/LÃÆ'¤nder (UK) financial relationship
• Wage Calculator for Germany (UK/Germany)
• Tax Information Center: Information on most important German taxes (English/German)
• VATLive German VAT Refund
• Tax Information Center (UK/Germany)
• Tax calculator from Federal Ministry of Finance (Germany)
• Federal Central Tax Office (Germany)
• Customs Information Desk (English/German)
• Federal Statistical Office/Tax (UK/Germany)
• Central Bank (UK/Germany)
• Federal Fiscal Court (UK)
• Room Search Engine Accounting Tax (Germany)
• City Tax (Accommodation Tax) in Germany and how to get an exception on business trip (English)

Source of the article : Wikipedia