Germany is the richest country in the European Union. Every year, it attracts a large number of investors. One of the main reasons for Germany's investment attractiveness is its tax system. Taking into account which taxes in Germany must be paid, as well as all their features, investors from all over the world are expanding their business activities in the Federal Republic of Germany. There are three types of taxes that are available in Germany:
- income taxes;
- taxes are not deals;
- real estate taxes.
Transaction taxes
This category of German taxes deserves much attention. There are two types of transaction taxes. The first type is the value added tax, and the second is the property tax.
VAT in Germany cannot be called neither low nor high. In Europe there are those countries in which the value added tax is lower than in Germany, and those in which its rate exceeds German.
Tax rates for the purchase of property are differentiated. Their average size is from four to five percent on average, depending on the territory. Berlin has the highest tax rate of six percent.
Value added tax
VAT in Germany, as in most countries of the European Union, involves three rates:
- Lowered.
- Zero.
- Basic.
The base rate is 19 percent, while the lowered rate is 7 percent.
At a zero rate, export value added tax is calculated. In cases where the seller on the invoice and invoice indicates the value of the goods, taking into account value added tax, the buyer can refund VAT upon return to his country. Doctors who practice in the Federal Republic of Germany and insurance agents are also exempt from paying value added taxes.
The reduced VAT rate in Germany applies to essential goods, food (except drinks), which are imported into the customs territory of Germany. In addition, value added tax in the amount of seven percent of the total value of the goods is paid by hotels and catering establishments. The basic rate of value added tax applies in all other cases. German VAT on real estate is also charged at a nineteen percent rate.
The process of paying indirect taxes, which is the value added tax, and their size in Germany, as well as in other countries of the European Union, are regulated by EU norms adopted in Directive 112 of 2006.
Income Taxes
In Germany there is a limited and unlimited obligation to pay income tax. The first category includes income from sources in Germany, and the second includes income earned worldwide. Limited liability taxpayers include German residents who are non-profit organizations, state-owned institutions, and foreign enterprises without a permanent establishment in the Federal Republic of Germany.
Since 2008, the tax rate has significantly decreased - from 25 to 15 percent. Now the effective rate is approximately 30 percent, since the taxpayer is forced to pay another five and a half percent contribution to the state budget, as well as municipal taxes, which in different lands can range from fourteen to seventeen percent.
How is value added tax paid in the Federal Republic of Germany
This type of indirect tax must be paid monthly. The seller must transfer the necessary amount of money to the budget on the same day that he sent the invoice to the buyer.
After the company has been entered in the register, it must send preliminary declarations regarding the amount of value added tax to the tax authorities of the country within two years. The state has the right to extend the deadline for filing declarations by thirty days. The company is also required to provide all data on the payment of value added tax at the end of each year.
Import Value Added Tax
There are companies that legally may not pay VAT in Germany. The amount of VAT in Germany upon import depends on the applied rate. At the time when the imported goods crossed the German border, they cannot be returned. The buyer can pick up the goods only after he has paid all the necessary customs payments :
- value added tax;
- customs duty;
- excise tax (if necessary).
Calculation of import VAT
The amount of VAT in Germany upon import depends on the customs value of the goods, as well as all duties and excise taxes that were paid at the border. VAT can be calculated using the following formula:
P VAT = (TS + P + A) / 100 * With VAT , where
- R VAT - the amount of value added tax;
- TS - the customs value of the goods;
- P - the amount of customs duties;
- A is the amount of excise duty;
- With VAT - value added tax rate.
Example of calculating import value added tax
The price of one unit of production is 100 euros. A total of 50 thousand units were imported. The amount of duty is 0.15% of the total value of all products. This product is not excisable.
Depending on what rate is applied, the amount of VAT can be calculated in two ways.
At the basic rate, the amount of VAT in Germany is 951 thousand 425 euros:
P VAT = (100 * 50 000 + 100 * 50 000 * 0.0015) * 0.19 = 951 425 euros.
If a reduced rate is applied to goods, then the amount of value added tax will be 350 thousand 525 euros:
P VAT = (100 * 50 000 + 100 * 50 000 * 0.0015) * 0.07 = 350 525 euros.
Export Value Added Tax
Value added tax for the export of goods from the country in 99% of cases is carried out when applying a zero interest tax rate. However, there are cases when the buyer is required to pay tax. For example, when buying goods through an online auction.
It is possible to negotiate with the seller that he sells the goods cheaper - without VAT. But this will have to be done bypassing the auction. In this situation, the buyer assumes all risks of the transaction.
VAT in Germany for export is calculated according to the same formula as the value added tax when importing products.
VAT refund
A non-resident of Germany has the right to return the money spent on the payment of value added tax. The seller of the goods is responsible for the refund. In order to reduce the number of problems, sellers in Germany stopped adding value added tax to the total value of the goods they sell. Thus, the buyer does not have to return the money. He just pays less right away. But there is one exception - the purchase of a vehicle in Germany.
If there is a need to return the tax, it must be remembered that this can be done by a non-resident of the European Union or an EU citizen, if he has an internal VAT number.
In addition, mention should be made of restrictions on the duty-free amount of funds that can be received as a return on value added tax. If you have to return a lot of money, then the buyer must pay customs duties.
Income tax
This type of tax is paid by both residents and non-residents of Germany. In addition to the tax itself, they all pay a contribution of 5.5 percent of its amount.
Residents of Germany are considered to be individuals who have real estate in the state or have lived in the country for six months or longer.
The rate may be:
But the amount of tax may vary depending on the subject to which it applies (single payer or a married couple).
If one person pays tax, the threshold amounts are 13 thousand 469 euros, 52 thousand 881 euros and 250 thousand 730 euros for tax rates of 14 percent, 23.97 percent and 42 percent, respectively. If the income exceeds the mark of 250 thousand 730 euros, then a 45 percent rate is applied. Income up to 8 thousand 354 euros is not taxed. For couples, the threshold amount is twice as much.
Source tax
The effective dividend rate for residents is 26.36 percent, but keep in mind that the rate is 25 percent, and another 5.5 percent is a joint contribution.
The rate of 26.38 percent is applied directly to non-residents of Germany. A zero tax rate may also be provided. In addition, non-residents are reimbursed 40 percent of the tax they paid.
The royalties of non-residents are taxed at 15.83 percent. Royalties for residents of the Federal Republic of Germany are not taxed.