TAX ADVICE IN GERMANY

Business taxes in Germany

• VAT (Umsatzsteuer) is charged for the sale of goods, performance of works, provision of services based on their value. VAT is indirect tax because it is ultimately paid by consumers. Types of rates:
• total – 19%;
• reduced – 7% (for certain types of goods/services, for example, passenger transportation, food products, etc.);
• 0 % – on export operations.
• Corporate tax (Körperschaftssteuer) – 15% of the annual profit and additionally a solidarity surcharge of 5.5% of the calculated amount. The solidarity surcharge is a special levy introduced in 1995 to finance German reunification. The size of the solidarity allowance is 5.5% of the 15% corporate tax, i.e. 0.83% of the annual profit. The total cost of the corporate tax and solidarity surcharge is 15.83%. The tax period is 1 calendar year.
• Industrial tax (Gewerbesteuer). The sales tax rate depends on two components:
• tax index (statewide in the amount of 3.5%)
• the sales tax rate (depends on the location, cannot be less than 200% of the tax index).

The company’s taxable profit is multiplied by the tax base (3.5%). This tax amount is then multiplied by the applicable municipal sales tax rate to produce the sales tax amount. The minimum rate of Industrial tax is 7%. There is no upper limit, but the average sales tax rate is 14-18%.

Capital gains tax (Kapitalertragsteuer). Interest, dividends from deposits and profit from the sale of securities are subject to capital gains tax. Capital gains tax is withheld directly when capital gains are credited to the source – usually a bank – and remitted to the tax authorities. The tax rate is 25% and an additional solidarity surcharge of 5.5%.

Basic taxes for individuals

• Income tax (Einkommenssteuer). This tax is paid by both self-employed persons and employees. Taxable income from:
• freelance;
• hired labor. Taxation of income from work under an employment contract is a special form of income tax, which is called Lohnsteuer and is withheld by the employer;
• activities of individual entrepreneurs;
• agriculture and forestry;
• fixed assets;
• rent and leasing;
• other incomes defined by the Income Tax Law, in particular, pensions.

The tax rate depends on

• amount of income;
• the class to which the person belongs.

Depending on the amount of income, the Einkommenssteuer tax rate ranges from 14 to 45%. If the annual income does not exceed the tax-free minimum income of citizens (about 11,000 euros for the year 2022) Einkommenssteuer is not paid. A maximum rate of 45% applies to individuals whose annual income exceeds EUR 270,000.

The following categories of persons are distinguished by class:

• The first class of taxation is given to unmarried and divorced persons.
• The second class of taxation is assigned to single parents, if they live together with their child, are not married, do not share a household with another adult.
• The third class of taxation is assigned to persons who are married, if one of the spouses has a significantly higher income.
• The fourth class of taxation is assigned to spouses who have approximately the same level of income.
• The fifth tax class is assigned to one of the spouses, if the other spouse with a higher income level belongs to the third tax class.
• The sixth class of taxation is chosen by persons who work at several part-time jobs.

1. Church tax (Kirchensteuer) – 9%. In Bavaria and Baden-Württemberg – 8%.
2. Solidarity tax (Solidaritätszuschlag) – 5.5% (for everyone who earns more than 9,300 euros per month).
3. Pet tax (Hundesteuer) – 150 – 300 euros. Depending on the size and breed of the dog.

Optimization of taxation in Germany

Any business, and even more so a newly created company, needs the professional help of lawyers in matters of tax optimization. Legal tax optimization solutions are what we specialize in. We will help you save money so that your business develops quickly and brings profit. A tax lawyer (lawyer) in Germany will help you choose the optimal tax system for your business in Germany.

What are the duties of a tax lawyer of Prykhodko and Partners law firm:

• Consulting on taxes in Germany;
• Calculation of taxes in Germany;
• Preparation of tax documents in Germany;
• Tax representation in Germany;
• Settlement of tax disputes in Germany.

Representation in the tax authorities in Germany by Prykhodko and Partners law firm includes consulting, preparation of all necessary documentation, relations with German and EU tax authorities on Umsatzsteuer, Körperschaftssteuer, Gewersteuer, Kapitalertragsteuer, etc.