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Germany - TAXES ACCOUNTING |
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Corporate tax
Tax rate for resident companies |
The corporate tax (Korperschaftssteuer) rate is 25% on retained and distributed earnings. A surcharge at the rate of 5.5% is imposed on corporate income tax. The effective corporate tax rate is therfore 26.37%.
Also deductible are:
- Provision for depreciation
- Interests
- Payments to the members of board of directors are generally deductible,
-The municipal tax, the irrecoverable VAT.
Business rate:
A municipal tax on commercial activities generally called trade tax (Gewerbesteuer) is also imposed . Trade tax is a deductible expense for corporate income tax purposes. The trade tax amount depends on the rate voted by the concerned municipality, multiplied by a coefficient. The effective rate varies from 15% to 25.75% depending on the municipality.
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Taxe rate on long-term capital gains |
Capital gains of corporations, except those derived from sales of shares of both foreign & resident corporations, are treated as ordinary income and taxed accordingly.
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System governing groups of companies and dividends paid by subsidiaries to their parent companies |
The recent (2001) German tax reform abolished the corporate imputation system.Under the new regime, dividends received by German companies and branches of non-resident companies from their German & foreign subsidiaries are exempt from tax. This results from the introduction of a participation exemption (comparable to a full dividend received deduction) for intracorporate domestic or foreign devidends.The law imposes neither a minimum share-holding requirement nor a minimum holding period requirement for the participation exemption.The new participation exemption system applies to dividends declared after 31st Dec'2001, subject to certain conditions.
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Tax rate on branches |
A non-resident corporation, whose corporate seat and place of management are located outside Germany, is subject to corporate branch tax at the rate of 25%.
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Income tax
Fiscal year |
The financial year begins on 1st January and ends on 31st December of each year.
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Income tax rate |
Income tax (Einkommenssteuer) rate for 2005:
From 0 to 7.664 EUR: 0%
From 7.664 EUR to 12.739 EUR: 16% to 24.05%
From 12.739 EUR to 52.151 EUR: 24.05% to 45%
Beyond 52.151 EUR: 45%
There is no wealth tax.
For 2006, minimum income tax rate will be 15% from 7,665 EUR and maximum 42% beyond 52,152 EUR. A surchage must be added (contribution of solidarity) by a rate of 5.5% to the amount of the income tax payable.
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VAT rates
Standard rates |
The standard VAT rate is 16%.
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Reduced rates |
Reduced rate of 7% (foodstuffs, books, craft .).
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Accounting
Introduction
The legislation which regulates German accounting rules, except the commercial law, are almost non-existent. It is the same for the intervention of representative bodies and normalization which is extremely rare. By consequence, the doctrine plays a considerable role in the accounting practice.
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Obligations and publications
In Germany, there is no compulsory general accounting schema. The company may choose the form, the language and the currency, which are not imposed.
Certification and auditing
The external control of accounts must be given to a body of auditors recognized as such (Beeidete Wirschaftspruefer) and chosen by the company.
Professionals and representative organizations
The Chartered Accountants Board is an independent body which represents the profession.
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Last modified in
March 2005
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