ACCOUNTANCY AND TAX SERVICES
We offer the following services:
- Book-keeping
- Preparation and submission of VAT returns
- Preparation of accounts
- Completion and filing of online company tax returns
- Tax advice for small/medium sized businesses and individuals
- Tax advice for large sized and international businesses
- Payroll and Social Taxes completion and filling
- Resident and non-resident tax advice
BUSINESS SET UP
In Germany you can set up the following types of business:
- GESELLSCHAFT MIT BESCHRÄNKTER HAFTUNG (GmbH) Private Limited Company
- AKTIENGESELLSCHAFT (AG) Public Limited company.
- OFFENE HANDELSGESELLSCHAFT (OHG) General Partnership
All businesses have a legal requirement to keep full and complete books and records.
PRIVATE LIMITED COMPANIES / GMBH
A GmbH is the most common form of company within Germany. All Limited Companies (GMBH) must file accounts to the end of the calendar year with the German Tax Authorities. These accounts should be prepared by a Registered Accountancy Firm. The minimum share capital for a GMBH is €25,000.
PUBLIC LIMITED COMPANIES/AG
This type of company is the best option for floatation on the stock market in Germany. It has imited liability and requires a mandatory supervisory board as well as a larger minimum capital amount of €50,000.
GENERAL PARTNERSHIP/OHG
In Germany the most common legal form of partnership is the General Partnership (“Offene Handelsgesellschaft”, “OHG) and has unlimited liability.
A General Partnership may be created by individuals or a coming together of two separate businesses pursuing the same interest.
The minimum share capital for an OHG is €50,000. It must have a board of directors and a supervisory body, and must hold regular shareholders’ meetings.
All partners are required to play an active part in the partnership unless otherwise specified in the partnership contract
This is covered by the Handelsgesetzbuch (“Commercial Code”, “HGB”) and the Bürgerliches Gesetzbuch (“Civil Code”, “BGB”).
MAIN TAXES IN GERMANY
There are four main types of tax in Germany:
- Turnover or Input Tax (Umsatz- bzw. Vorsteuer)
- Income Tax (Einkommensteuer)
- Trade Tax (Gewerbesteuer)
- Corporation Tax (Körperschaftsteuer)
Taxes will depend on:
- The company’s size
- The legal form of the company
- The business sector
Additionally other taxes may be applicable to your particular case for certain types of income such as Capital Gains Tax and Inheritance Tax.
CORPORATION TAX
This is based on the profits of the business. The German tax year is the calendar year. Companies need to submit tax on account based on the previous year’s income. Corporation Tax returns should be submitted by May 31st of the following year. Returns prepared by a tax consultant can trigger an automatic extension of seven months.
The Corporation Tax rate is 15%. An additional surcharge is levied at a rate of 5.5% of the Corporation Tax.
VAT
All German businesses must charge customers VAT on the sale of all goods and services at a general Value-Added Tax rate of 19%. For certain products such as groceries or books, a reduced rate of 7% applies. Certain services such as medical treatment and banking services are not subject to this tax.
Fees for deliveries and other services carried out by the company in a foreign country are taxable. This fee is the entire sum paid by the receiver or a third party in order to obtain the service, but without any VAT included.
Foreign companies may be required to pay VAT in Germany if they deliver goods to German companies or provide services in Germany. Companies importing goods to the European Union via Germany must pay import VAT, which means they would have to register in Germany for VAT purposes.
German VAT rules are extremely complex and must be discussed with an Accountant before a business commences. Please call us on +44 (0)208 421 7474
PERSONAL INCOME TAX
All individuals based in Germany receive a Personal Allowance which is an amount that they can earn with paying tax up to € 8,004 within the taxable calendar year.
There are progressive rates of Personal Income Tax up to 45% as follows:
- €8,354 – €13,469 there are progressive rates between 14% and 24%
- € 52,881 – €250,730 there are progressive rates between 24% and 42%
- For more than €250,730 the rate is 45% (€501,460 for married couples)
Income Tax is payable by German residents on their worldwide income and non-resident individuals are required to pay tax on German-sourced income.
CAPITAL GAINS TAX
There are several types of Capital Gains Tax in Germany:
- Privately held shares attract a flat Withholding Tax of 25% plus surcharge of 5.5% of the due if participation is below 1%
- Corporate held shares (foreign or German) are tax free if related to sales of shares held in a company
- Capital gains from business assets are taxed at the normal tax rate.
- Profits on sale of private land and buildings are not taxed unless the assets are sold within 10 years
This is only a very brief overview of Capital Gains Tax in Germany. If you need advice on your corporate or personal Capital Gains Tax issues, please call us and we will put you in touch with a German tax advisor who will be able to assist.
INHERITANCE TAX
German Inheritance Tax law is related to the heir’s family link to the deceased. There are three classes of heir. Members of a lower numbers class have rights over any member of a higher class and tax is based on the class of the heir.
Therefore, lower class heir’s pay taxes at a lower rate and have larger tax free exemptions than those in the higher class rate.
Inheritance Taxes consist of a percentage of the inherited property above the exempted amount. Rates vary by class, and according to the value of property inherited.
- All Class One heirs pay 7% on amounts up to € 75,000 , 11% up to € 300,000, 15% up to € 600,000, 19% to € 6 million, 23% up to € 13 million, 27% up to €26 million, and 30% for all amounts greater than € 26 million.
- Members of both Class Two and Three pay 30% tax on amounts up to € 6 million, and 50% above that amount.
If you find that you need assistance and are due Inheritance Tax in Germany, it would be advisable to contact a specialist expert immediately. Please contact us on +44 (0)203 114 5111 and we will put you in contact with a professional who will give you a quote for this service.
Useful Links
https://www.abgabenrechner.de/bl2008/index.jsp