ACEE – Meeting Berlin 27. May 2011 Overview about the German Taxation Income from Trade or...

ACEE – Meeting Berlin 27. May 2011ACEE – Meeting Berlin 27. May 2011

Overview about theOverview about theGerman TaxationGerman Taxation

Income fromIncome fromTrade or BusinessTrade or Business

andandSelf-EmploymentSelf-Employment

WP/StB Dipl.-Kfm. Hans-Dieter VietmeierWP/StB Dipl.-Kfm. Hans-Dieter Vietmeier

WP / StB Dipl.-Kfm. WP / StB Dipl.-Kfm. Hans-Dieter Vietmeier Hans-Dieter Vietmeier

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Income TaxIncome TaxRate structure (2010)Rate structure (2010) €€ % %Pers.exemptionPers.exemption < 8004< 8004 0 0Progressiv zoneProgressiv zone < 52.882 14 – 42< 52.882 14 – 421.Proportio.level1.Proportio.level > 52.882> 52.882 42 422.P.level „rich-tax“>250.7312.P.level „rich-tax“>250.731 45 45

(+ solidarity surcharge 5,5 %) (+ solidarity surcharge 5,5 %) Double levels „splitting-tarif“ Double levels „splitting-tarif“

(couple)(couple)



Income TaxIncome TaxSeparate tax rates for Income Separate tax rates for Income

from from capital investmentscapital investments (>2009)(>2009)

25,0%25,0%(+ solidarity surcharge 5,5 % = (+ solidarity surcharge 5,5 % =

26,375%)26,375%)Not: capital gains from trade or Not: capital gains from trade or

business, only business, only privatprivat cap.gainscap.gains



– ExamplesExamples IncomeIncome Inc.taxInc.tax sol.s.sol.s. totaltotal

– Singles (basic)Singles (basic) 50.00050.000 12.84712.847 707 13.554 707 13.554 100.000100.00033.82833.828 1.861 35.6891.861 35.689

– couples (splitting)couples (splitting) 50.00050.000 8.212 8.212 452 452

8.6648.664 100.000100.00025.69425.694 1.413 27.1071.413 27.107



„„Specials“Specials“ ““Solidarity-Surcharge“Solidarity-Surcharge“

=> tax x 5,5 % => tax x 5,5 % – max. 45,0 % x 5,5 % = 2,475%max. 45,0 % x 5,5 % = 2,475%

=> total: 45,0 + 2,475 = => total: 45,0 + 2,475 = 47,5 47,5 %%

„„Church Tax“Church Tax“=> tax * 9,0 % => tax * 9,0 % – max. 45,0 % * 9,0 % max. 45,0 % * 9,0 % = 4,05 %= 4,05 %

=> => deductible deductible tax 4,05 % - (45,0 % * tax 4,05 % - (45,0 % * 4,05 %)4,05 %) = 2,23%= 2,23%

– Total: 47,475 % + 2,23 % = Total: 47,475 % + 2,23 % = 49,7 %49,7 %



Income fromIncome from

Trade or BusinessTrade or Business+ Trade + Trade

TaxTax

Self-EmploymentSelf-Employmentnono trade tax trade tax



Trade TaxTrade Tax ExemptionsExemptions

– natural persons and partnershipsnatural persons and partnerships 24.500 24.500

– CorporatesCorporates no ex. 0 no ex. 0 Tax Basis: trade income (profit Tax Basis: trade income (profit

+/- modifications)+/- modifications) Tax rate: 3,5% x municipal Tax rate: 3,5% x municipal

faktor faktor (Berlin: 410% (Berlin: 410% 14,35%)14,35%)

reduces income tax (t.t. credit / reduces income tax (t.t. credit / indifferent faktor: 403%)indifferent faktor: 403%)



Corporation taxCorporation tax Exemptions: normaly 0Exemptions: normaly 0 Tax Basis: (trade-) income Tax Basis: (trade-) income

(profit +/- modifications)(profit +/- modifications) Tax rate (2008 ff): 15,0 % Tax rate (2008 ff): 15,0 % + solidarity surcharge + solidarity surcharge

5,5 % = 15,825% 5,5 % = 15,825% + trade tax + trade tax withoutwithout taxtax-

credit credit 15,825 + 14,35= 15,825 + 14,35= 30,175%30,175%



Profit distribution (rounded)Profit distribution (rounded) profit: profit: 100 100 Corporate taxCorporate tax - - 1616 Trade taxTrade tax - - 1414 Net-profitNet-profit 7070 Inc. tax f. cap. Inc. tax f. cap. - - 18,518,5

+ sol.s.+ sol.s. = 26,375%)= 26,375%) Net-incomeNet-income 51,551,5



Exemption: closing down business Exemption: closing down business („once in a life“ / not shares)(„once in a life“ / not shares)

Taxpayer > 55 years old (or disabled)Taxpayer > 55 years old (or disabled) Exemption (benefit)Exemption (benefit) 45.000 €45.000 €

- reduces when > 136.000 €- reduces when > 136.000 € Reduced tax rate: 56% of normal Reduced tax rate: 56% of normal

taxationtaxation



Exemption: capital gains on sales of Exemption: capital gains on sales of a shares of a corporationa shares of a corporation

Proportion: > 1% within the last 5 y. Proportion: > 1% within the last 5 y. Taxpayer > 55 years old (or disabled)Taxpayer > 55 years old (or disabled) Exemption (benefit)Exemption (benefit) 9.060 €9.060 €

- reduces when > 36.100 €- reduces when > 36.100 € Reduced tax rate: 56% of normal Reduced tax rate: 56% of normal

taxationtaxation



Exemption: formation of reserves Exemption: formation of reserves for sales of land, buildings for sales of land, buildings

Transferable amount: profit sales-Transferable amount: profit sales-price (+) book-value (-) sales-costs price (+) book-value (-) sales-costs (-)(-)

Transfer rate: 100% on re-Transfer rate: 100% on re-investmentinvestment

Re-investment period: 4 y. old / 6 y. Re-investment period: 4 y. old / 6 y. new real estatenew real estate



Exemption (?): depreciations Exemption (?): depreciations Goodwill: Goodwill:

– Business/trade Business/trade 15 years15 years– Self Employ. (practice) 3-5 y. / 6-10 y.Self Employ. (practice) 3-5 y. / 6-10 y.

Investment deduction for SME (net-Investment deduction for SME (net-capital < 235.000): capital < 235.000): – Investment deduction amount for the Investment deduction amount for the

future acquisition 40% / max. 200.000future acquisition 40% / max. 200.000– Transferable in follwing 3 yearsTransferable in follwing 3 years– Movable assetsMovable assets– Special depreciation: + 20% additionalSpecial depreciation: + 20% additional



Example: SME buys a mashine (2.y.)Example: SME buys a mashine (2.y.)Price / valuePrice / value 500.000 500.0001. Year1. Year (40%)(40%) -200.000-200.000

300.000300.0002. Year depr.sp.20%2. Year depr.sp.20%- 60.000- 60.000 depreciation, normal depreciation, normal - 30.000- 30.000 book value (42%)book value (42%) 210.000210.000 depreciation over all : depreciation over all : 58%58%



Exemption (?): loss deductionExemption (?): loss deduction Losses on trade or business (self.E.) Losses on trade or business (self.E.)

equalize other income 100%equalize other income 100% Loss carryback: deduction of negative Loss carryback: deduction of negative

income in Y1 adjustes gross income of income in Y1 adjustes gross income of previous Y0 (optional) – max. 511.500 previous Y0 (optional) – max. 511.500 (double 1.023.000 for couples)(double 1.023.000 for couples)

Carryforward: not time-limit Carryforward: not time-limit – Losses< 1 Mio: 100% / > 1 Mio. only 60%Losses< 1 Mio: 100% / > 1 Mio. only 60%

Also for „corporates“Also for „corporates“



Exemptions (?): expenses for cars, Exemptions (?): expenses for cars, travel etctravel etc

CarsCars > 50% business use > 50% business use „asset“ „asset“

Expenses: no real limit, all costs incl. Expenses: no real limit, all costs incl. depreciation (6 y. for new cars)depreciation (6 y. for new cars)

correction: personal usecorrection: personal use

a) 1% original list-price per month a) 1% original list-price per month oror

b) documentary evidence (properly b) documentary evidence (properly kept log book – real percentage of kept log book – real percentage of relation)relation)



Reimbursement business use by own Reimbursement business use by own car car – Documented costs (above)Documented costs (above) x,xx €/Kmx,xx €/Km– Or flat rateOr flat rate 0,30 €/Km0,30 €/Km

Entertainement (lunch)Entertainement (lunch) deduct.= deduct.= 70%70%

Gifts/advertising itemsGifts/advertising items < 35,-€ < 35,-€ p.p.y.p.p.y.

Bribes/kickbacks –disallowance (crime)Bribes/kickbacks –disallowance (crime)



Exemptions : inheritance/gift Exemptions : inheritance/gift tax for business assetstax for business assets

a) 85% privileged, whena) 85% privileged, when- 7 years keeping business in 7 years keeping business in

operation operation - > 650% total payroll in 7 y. > 650% total payroll in 7 y.

b) 100% privileged, whenb) 100% privileged, when- 10 years keeping business in 10 years keeping business in

operation operation - > 1000% total payroll 10 y. > 1000% total payroll 10 y.

(risk!!)(risk!!)



Tax allowance (bus.value)Tax allowance (bus.value) 150.000150.000– decreases 50%amount > 150.000decreases 50%amount > 150.000

Personal exemptions (tax classes 1-Personal exemptions (tax classes 1-3)3)– 1. Spouse1. Spouse 500.000500.000– 1. Children1. Children 400.000400.000– 1. Grand-children1. Grand-children 200.000200.000– 2. degree related2. degree related 20.000 20.000– 3. All others3. All others 2.000 2.000– 3. Regist. partn. same-sex3. Regist. partn. same-sex 500.000500.000



Special pension allowanceSpecial pension allowance– SpousesSpouses 256.000256.000– Children different age 52.000 – 10.300Children different age 52.000 – 10.300

Tax ratesTax rates % % cl.1cl.1 cl.2cl.2cl.3cl.3 75.000 75.000 7 7 1515 3030 300.000300.0001111 2020 3030 600.000600.0001515 2525 30306.000.0006.000.0001919 3030 3030

…… ……Above 26. MioAbove 26. Mio 3030 4343 5050



Conclusion: Germany is no tax haven,Conclusion: Germany is no tax haven,but „reasonable tax conditions“but „reasonable tax conditions“

work hard in reasonable German work hard in reasonable German economic conditions,economic conditions,

leave business profits in your cash box – leave business profits in your cash box – stay „poor“ personally,stay „poor“ personally,

be glad driving a beautiful - tax deductible be glad driving a beautiful - tax deductible -business car (so you look „rich“),-business car (so you look „rich“),

leave a real rich widow (because you leave a real rich widow (because you worked too hard!),worked too hard!),

so that SHE feels in Germany‘s „tax so that SHE feels in Germany‘s „tax haven“ haven“


Thanks to the Thanks to the audience for listeningaudience for listening

Questions and remarks?Questions and remarks?

Dipl.-Kfm. Hans-Dieter Vietmeier Dipl.-Kfm. Hans-Dieter Vietmeier Wirtschaftsprüfer / Steuerberater Wirtschaftsprüfer / Steuerberater Am Rutenwall 2 Am Rutenwall 2 46535 Dinslaken 46535 Dinslaken Tel. 02064 / 4321 - 00 Fax …- 01 Tel. 02064 / 4321 - 00 Fax …- 01

E-mail: [email protected]: [email protected]

ACEE – Meeting Berlin 27. May 2011 Overview about the German Taxation Income from Trade or...

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