Germany

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TAXES - ACCOUNTING

 

 

Corporate tax

Tax rate for resident companies

The corporate tax (Körperschaftssteuer) rate is 25% on retained and distributed earnings. A surcharge at the rate of 5.5% is imposed on corporate income tax, yielding the effective corporate tax rate to 26.37%.
Trade tax (Gewerbesteuer) is also assessed on companies. This tax is discharged by any person (physical or moral) carrying on a commercial activity or industrial in Germany. Trade tax is a deductible expense as a running cost 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 12% to 20% depending on the municipality.

   
Tax rate on long-term capital gains The capital gains on asset disposal are taxed at the tax rate of 25% (+ a surtax of 5,5%).
   
System governing groups of companies and dividends paid by subsidiaries to their parent companies Dividends paid to non-residents companies:
Withholding tax rate of 20% (+ a surtax of 5.5%)
Exemption within the context of international conventions.
Dividends paid to resident companies:
Withholding tax rate of 0%.
   
Tax rate on branches A non-resident corporation, whose corporate seat and place of management are located outside Germany, is subject to a corporate branch tax at a rate of 25% (+ a surtax of 5.5%).




Income tax

Fiscal year The financial year begins on 1st January and ends on 31st December of each year.
   
Income tax rate Income tax (Einkommenssteuer) rate:
From 0 to 7.664 EUR: 0%
From 7.664 EUR to 12.739 EUR: 15% to 23.9%
From 12.740 EUR to 52.151 EUR: 23.9% to 42%
Beyond 52.152 EUR: 42%
A surcharge must be added ; it concerns a solidarity contribution of 5.5% of the amount of the taxable income.
   



VAT rates

Standard rates 19% since January 1st, 2007.
   
Reduced rates A 7% tax rate applies to food, public transport, books and newspapers, and other items.
A 0% tax rate applies to exports.
Transactions including certain financial transactions and services, medical and educational services, etc. are VAT exempt.



Other important taxes


Name of tax
Rate
Land tax  
1 to 2%  
Gifts and inheritance tax  
7% to 50%  


 

Accounting

Introduction
The legislation which regulates German accounting rules, except the commercial law, is 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.


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.



Useful links
German Ministry of finance
The tax office
The federal office for finance

Last modified in January 2007
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