Ecovis German Tax for founders 101
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Transcript of Ecovis German Tax for founders 101
www.ecovis.com 0
Open Session 10.07.2013
Tax and Legal 101
Tax Services Accounting Auditing Legal Services
www.ecovis.com
Personal advice and interdisciplinary
solutions
global consulting firm
particular strength of
ECOVIS
core competencies
clients
tax consulting
accounting
Auditing *1
legal advice *1
*1 In cooperation with Members of the ECOVIS Group
combination of personal advice at a local level
with the general expertise of an international
and interdisciplinary network of professionals
it has over 4,000 people operating in over 50
countries
Ecovis concentrates mainly on mid-sized firms
both nationally and internationally, its one-stop-
shop concept ensures all-round support in
legal, fiscal, managerial and administrative
issues
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Contact person
Person
Daniel Frischkorn, certified tax advisor, Partner
E-Mail: [email protected]
Head of ECOVIS WWS Steuerberatungsges. mbH,
Berlin
Vita
Certified Tax Advisor since 2006
Previously engaged as
• Tax advisor/Manager with a leading international
advisory firm
• Tax Manager with an international media concern
joined Ecovis in 2011
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Agenda
Timeline - What a startup needs to know
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Timeline - What a start-up needs to know
Set up process
1. Understanding of the German tax system
2. Structuring
3. Establishment process
4. Registration
5. Set up of the accountancy process/system
Current compliance
Tax obligations, financial statements
Hiring employees
Financing, Exit
short-term
mid-term
long-term
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Reasons why you need to know it?
Extract of various reasons:
taxes (and mistakes) can be very expensive
VAT mistakes can kill your margin
German tax authority is one of the most formal one
Various tax compliance obligation exist (monthly, quarterly, annually)
CEO and CFO are fully responsible, can lead to personal liability of the managing directors
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Agenda
Timeline - What a startup needs to know
Set up process – German tax system
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Set up process - German tax system
Most relevant taxes: taxation at three levels
Taxation at company level – business taxes
• Corporate income Tax (CiT)
• Trade income Tax (TiT)
Taxation at shareholder level
• personal income taxes on dividends or exit gain
• personal income taxes on income from partnerships
Additionally, sales tax system at consumer level
• EU VAT (European Value Added Tax)
• common VAT system for all members of the European Union
• Real Estate Transfer Tax (RETT)
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Set up process - German tax system
Corporate income Tax (CiT)
Taxable Person
• Corporate entities, e.g Unternehmergesellschaft haftungsbeschränkt (UG), GmbH, public
limited company
Tax Rate
• CiT 15 % plus solidarity surcharge 5,5 % = 15,8 %
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Set up process - German tax system
Trade income Tax (TiT)
Taxable Person
• Corporate entities, Partnerships, one-man business (in opposite to liberal professions)
Tax Rate
• Trade income Tax rate is set by each municipality individually
• Berlin: 14,35 % ( bases amount 3,5% x multiplier Berlin 410 %)
Particularities
• partners of a Partnership and entrepreneurs maybe able to credit the TiT against the
personal income tax liability
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Set up process - German tax system
Personal income Tax
Taxable Person
• private person
Tax Base:
• income, e.g. from:
• rent and lease
• income from employment
• income from Partnerships, one-man business, trading activities
• income from capital, profit distributions, dividends, exist gains etc.
Tax Rate
• individuell with regard to the personal circumstances (progressiv 0-45 %)
• special withholding taxes 25 % on gross dividends contributed by corporate entities
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Set up process - German tax system
Value Added Tax (VAT)
Consumption tax
• EU VAT taxes the consumption of goods and services in the EU VAT area
• key issue is where the supply and consumption occurs, thereby determining which member
state will collect the VAT and which VAT rate will be charged
• a business is generally able to recover input VAT up to the extent the expense is used to
make taxable outputs
• each member state's national VAT legislation must comply with the provisions of EU VAT
law as set out in directive 2006/112/EC, but does allow member states some degree of
flexibility in implementation of VAT legislation
Particularities
• very formal
• very complex in cross border transactions
• various tax exemptions in place, e.g “small business owner” rule
• mistakes in the VAT treatment (input and output) can kill your margin
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Set up process - legal forms of business
Legal forms of business ->Corporate entity
Main forms in Germany: AG, GmbH, UG haftungsbeschränkt
(For tax purposes) similar to ….
• Italy Società per azioni (S.P.A.), Società a responsabilità (S.R.L.)
• United Kingdom Public company limited by shares (Plc), Private company limited by
shares (Ltd.)
• Greece Anonynos Etairia (A.E.), Etairia periorismenis evthinis (E.P.E.)
• Poland Spólka akcyjna (S.A.), Spólka z ograniczona odp… (Sp.z.zo.o.)
• France Société anonyme (SA), Société de responsabilité limitée (SARL)
• USA (Public) Corporation (Corp, Inc.), Closed Corporation(Corp. Inc.)
• Czech Republic Akiová spulecnost (a.s.), Spolecnost s rucen im (spol.s.r.o.)
• Portugal sociedade anonima (S.A.), sociedade com respons. Limitada (L.da)
• Denmark Aktieslskb (A/S), Anpartsselskab (Aps)
• Spain Sociedad Anonima (S.A.), Sociedad de Respons. Limitada (SRL)
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Set up process - German tax system
Taxation of a corporate entity
Income taxes at company level
• CiT, TiT --- combined tax rate in Berlin approx. 31 %
Income taxes at shareholder level on profit contributions and exit gains
• for corporations: tax exemption (5 % have to be treated as non deductible expenses)
• for private persons: 25% flat rate withholding tax or partially private income tax
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Set up process - legal forms of business
Legal forms of business ->Partnerships
Main forms in Germany: GbR, KG, OHG
(For tax purposes) similar to ….
• Italy Società a accommandita (S.a.)
• United Kingdom Limited Partnership, Partnership
• Greece Eterrorrythmos (EE), Omorrorrythmos (O.E.)
• Poland Spólka cywilna) (S.c.), Spólka komandytowa (Sp.K.)
• France Société en commandite simple
• USA Limited Partnership (LP, LLP), General Partnership
• Czech Republic Komanditi spolecnost (kom.spol.),
• Portugal sociedade civil, sociedade em comandita
• Denmark Kommanditselskab (K/S), Interessentskab (I/S)
• Spain Sociedad en Comandita (SC), Sociedad regular Colectiva Compania
(SrC)
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Set up process - German tax system
Partnership
General Rule: In Germany treated as a transparent entity
Income taxes at company level
• (Only) Trade income Tax (excemption of the transparency principle)
Income taxes at shareholder level
• personal income tax on the income of the partnership to be allocated to each shareholder
• paid Trade income Tax might be credited against the personal income tax relating to the
partnerships income
In international comparison:
• Transparent : (company itself is no own tax subject but the shareholders)
• Germany, Denmark, Ireland, Italy, Luxembourg, Netherlands, Poland, UK
• Intransparent (own tax subject)
• Greece, Portugal, Hungary, Belgium
• Hybrid (it depends)
• USA, France
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Agenda
Timeline - What a startup needs to know
Set up process – Structuring
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Set up process - structuring
1. Single company vs. Holding structure
2. Legal entity vs. (mere) Permanent Establishment
3. Corporation or limited Partnership
4. Cross border structures
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Agenda
Timeline - What a startup needs to know
Set up process – registration
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Set up process - registration
Registration requirement
• registration with the trade register (notary)
• registration with the trade office
• own company registration number / employment office
• registration for tax purposes with the German tax office
Further registration obligations, for instance:
• employers' liability insurance association
• registration of the employees
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Agenda
Timeline - What a startup needs to know
Set up process – set up of the accountancy process/system
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Set up process – accountancy process/system
Who is doing your accountancy
service provider
tax advisor
you
Software
Datev
Unternehmen Online
ECOVIS Onlinekasse
COLLMEX
other solutions, SaaS, shared software, cloud solutions
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Agenda
Timeline - What a startup needs to know
Set up process – set up of the accountancy process/system
Current compliance obligations
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Current compliance obligations
Financial Statements
• annual financial statement according to the rules of the German HGB
• publishing the financial statement in the electronic ‘Bundesanzeiger’
Tax Returns
• annual tax returns for TiT, CiT and VAT
Preliminary Returns and self assessment
• advance VAT declarations on a monthly/quarterly basis
• self-assessment wage tax return to be filed by the employer on a monthly basis
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Agenda
Timeline - What a startup needs to know
Set up process – set up of the accountancy process/system
Current compliance obligations
Hiring employees
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Hiring employees
Various possibilities
„ordinary“ employee
marginal or small-scale employment
• students
• trainee
• temporary employment (Aushilfe)
• marginal employment (Minijobber <450 €)
freelancer/ service Provider
• payed fees are deductible business expenses
• precaution: risk of treatment as „quasi-self-employment person“
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