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Paculiarities of the tax system of Germany

Despite the fact that almost all European countries are committed to the unity of laws and integration in the areas of economic and social policies, tax systems of European countries do not differ by unity.

Russian analysts of the consulting company "Texart Group researched the tax system 38 European countries with developed market economies, and weak, still "wobbly" after the collapse of the socialist states.

Some of the investigated countries are already EU members, others are candidates for membership in the single currency area, but in the meantime, in most States, United Europe, you may encounter drastic differences in tax systems and the principles of taxation.

If you are going to live abroad and operate your business, you should carefully review the tax code of the country: what size of income tax in this country; the amount of tax "at the source"; VAT; what are the taxes levied on the income of individuals and their property, and more.

We offer to your attention an analytical report with detailed information about the economy, the characteristics of the market, as well as tax rates and the criteria for levying taxes in each country of Europe.

Germany is a country with a powerful (largest in EU) economy due to the developed infrastructure, highly skilled workforce and a number of other factors. The main features of the German economy is its focus on the industrial sector, exports, and the high role of the banking sector. it Is a member of the European Union.

The income tax

The subjects of income tax in Germany taxpayers are unlimited (taxation of worldwide income) and limited (with income derived from sources in Germany) the tax liability to pay tax. Foreign companies without a permanent establishment in Germany, as well as residents, nonprofit organizations and government agencies are limited obligations tax revenues.

A tax resident of Germany is considered to be the organization having in Germany registered office or place of effective management. Until 2008, all companies registered in Germany, admitted residents, however from 1 November 2008, these companies can determine (select) residency at the location of the control center, while remaining registered in Germany.

The basic rate of income tax is 15% (prior to 2008, the rate was 25%). The effective rate is an average of 30%, because in addition to the profit tax, the taxpayer shall pay a "solidarity contribution" ("Solidaritaetszuschlag") in the amount of 5.5% of the amount of tax and municipal taxes, ranging from 14% to 17%.

Income from capital gain is taxed in the composition of income tax at the General rate, excluding profit from the sale of shares (residents and nonresidents): in this case, subject to only 5% of the profit obtained by the total bet (the so-called 95% tax exemption).

In Germany there are rules relating to transfer pricing (as set in the law Foreign Tax Law): the relations between affiliates, "the rule applies arm's length". Interestingly since 2013, the relevant rules also apply to transactions between German companies and foreign permanent establishments.

Sets rules on taxation of controlled foreign companies (CFC). On the basis of these rules retained earnings of these companies can be attributed to Germany, and taxed as imputed dividend yield of the German company. However, these rules do not apply under certain criteria – for example, if the undistributed profits of controlled foreign company received in the framework of real economic activity (active income), and the country is resident in a EU country.

Withholding tax

Dividends and interest payments to tax residents are taxed at source at the rate of 25%, as well as "solidarity fee" at the rate of 5.5% of the amount of tax (thus, the effective rate is 26,38%). Dividends received directly by a nonresident is taxed at the rate 26.38 %, if a zero rate is not provided EU PSD (Parent-Subsidiary Directive 2011/96). Also establishes a mechanism for obtaining non-residents 40% refund, which reduces the effective rate of withholding tax with 26.38% to 15.82%.

Interest distributions to non-residents are not subject to withholding tax, except for interest on convertible bonds or bonds with the right to participate in profits (subject to a General rate 26.38%).

Royalties paid to the address of residents of Germany are not subject to tax withheld at source. Royalties to non-residents are taxed at source at the rate 15.83%.


In Germany, as in other EU countries, there are pan-European rules for the calculation and payment of indirect taxes, the established norms of the European Union (Directive 2006/112).

The basic rate of tax is 19%. You can use reduced rates of 7% (in respect of the profits from the sale of essential goods and hotel services), and 0% (in respect of profit from export or intra-Union supplies).

Taxation of incomes of physical persons

The tax to incomes of physical persons are taxed as a resident in respect of any income) and non-residents (in respect from sources in the country of Germany. In addition to income tax, taxpayers shall pay a "solidarity contribution" of 5.5% of the amount of tax, and persons engaged in business activities tax "on entrepreneurship" ("trade tax (gewerbesteuer)").

A resident of Germany for tax purposes are recognized as those persons having residence in the country or staying there for more than 6 months.

The legislation does not demand for payment of tax by household (family unit). In the General case, the tax is calculated separately for each taxpayer. However, couples can apply and pay the tax taken together.

Tax rates in Germany are 0% / 14% / 23,97% / 42% and 45%, but the threshold amount to which they apply, vary depending on the subject of taxation ("single taxpayer or a married couple). For single taxpayers, the threshold amount 8 354 €, 13 469 €, 52 881 € and 250 730€, respectively. For married couples who filed joint taxation of family income, the rates are 16 708 €, 26 939 €, 105 763 €, 501 461 € respectively.

The withholding tax payments on dividends, interest and royalties paid to the address of physical persons (regardless of residency status), apply the same rules and bets as to organizations.

The real estate tax of individuals

The real estate tax is charged in local budgets. The tax amount is calculated by multiplying the value of real estate and Federal tax rate (0.35%), and local factors, which may vary in the range from 280% to 810%. Thus, the effective tax rate may fluctuate from 0.98% to 2.84% of the property value.

The text prepared by the Russian consulting company TaxArt Group LLC specifically for Banki.ru



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