Germany
Scope of Income Tax
All
resident companies and permanent establishments
of non-resident companies are subject to corporate
income tax. Resident companies are liable
for tax on their worldwide income. Non-resident
businesses are taxed on their German-sourced
income only.
The scope of taxation encompasses the corporate
income tax, trade tax and value added tax.
A solidarity surcharge is payable in addition
to the corporate income tax.
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Germany Income Tax Rates
The
corporate income tax rate for 2010 is 15%
plus a solidarity surcharge of 5.5%, making
the total corporate income tax burden 15.825%.
Trade
tax (Gewerbesteuer) is a local corporate income
tax and has an assessment rate of 3.5% for
2010. The rate is multiplied by a local factor
of between 200% and 490%, depending on location.
This makes the trade tax range between 7%
and 17.5%.
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Germany
Calculation of Taxable Base
Taxable
income includes all trading profits, passive
income and capital gains. Dividends are also
included.
There
is no time restriction on the carry forward
of federal or local losses; however, the amount
is limited to 60% above EUR1m.
There is no alternative minimum tax.
Normal business expenses are deductible from
income. Tax credits are available for a number
of investments in countries with which Germany
has double taxation treaties and up to the
level at which German tax would have been
payable.
Germany Filing Requirements and Payment of
Tax
The
standard tax year is the calendar year and
tax returns must be filed by May 31 of the
year following the end of the tax year. Unauthorised
late filing may incur a maximum penalty of
either 10% of the tax due, or EUR25,000.
Quarterly
payments are due on March 10, June 10, September
10 and December 10 and are based on the previous
years’ figures.
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Germany Withholding Taxes
Withholding
tax of 25%, plus a 5.5% solidarity surcharge,
is generally payable on domestic dividend
payments. However, dividend payments made
to corporations are usually withholding tax
free, while those paid to partnerships are
subject to withholding tax on 60% of the dividend
payment. Dividends paid to connected corporate
companies in EU countries are exempt, subject
to a 10% shareholding requirement. Dividend
payments made to non-treaty countries are
generally subject to 15% withholding tax.
Withholding
tax of 25%, plus 5.5% solidarity surcharge,
is generally payable on domestic interest
payments; however, domestic interest paid
on private investments, and interest paid
to foreign incorporated companies, is not
usually subject to withholding tax. Royalties
paid to non-resident corporations are subject
to withholding tax of 15%, plus 5.5% solidarity
surcharge; for royalties paid to non-resident,
non-corporate recipients, the rate is 20%
plus 5.5% solidarity surcharge. Domestic royalty
payments are not subject to withholding tax.
The EU directive on interest and royalty payments
applies to payments made within the EU. In
most cases, the withholding tax on dividends,
interest and royalties can be offset against
the recipient’s tax liability or is
wholly or partly refundable.
Germany Sales Taxes and VAT
The
standard VAT rate is 19%, and a reduced rate
of 7% applies to food, books, periodicals
and medicines. Exports are zero-rated. The
area of Büsingen and the island of Helgoland
are exempt from VAT.
Small businesses are exempt from VAT if the
turnover in the previous calendar year did
not exceed EUR17,500 and is unlikely to exceed
EUR50,000 in the following year.
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