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Analysis - Germany - Individual Taxation - IBFD
Analysis - Germany - Individual Taxation - IBFD
Individual Taxation
Germany
Author
Andreas Perdelwitz
IBFD Headquarters, Amsterdam, Netherlands
Latest Information
This chapter is based on information available up to 15 October 2022. Please find below the main changes made to
this chapter up to that date:
Employee inflation premium tax exempt up to EUR 3,000 until 31 December 2024.
Abbreviations
Abbreviation English definition German definition
AG Stock company Aktiengesellschaft
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Terms
Term English definition
Erlass Decree
Genussrechte Jouissance rights
Gesamthandsbilanz Joint balance sheet
Gewerbesteuer Business tax
Lohnsteuerrichtlinien Wage Tax Regulations
Partiarische Darlehen Participating loans
Solidaritätszuschlag Solidarity surcharge
Sonderbilanz Special-purpose balance
Teileinkünfteverfahren Partial-income system
Verfügung Ordinance
Wandelanleihen Convertible bonds
References
* Business Tax Law: Gewerbesteuergesetz, version of 15 October 2002, BGBl. I 2002 at 4167, last amended 19 June 2022,
BGBl. I 2022 at 911
* Commercial Code: Handelsgesetzbuch of 10 May 1897, RGBl 1897 at 219, last amended 15 July 2022, BGBl. I 2022 at 1146
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* Decree on the tax treatment of employment income in the case of performance abroad: Auslandstätigkeitserlass of 31
October 1983, BStBl. I 1983 at 470
* Foreign Tax Law: Außensteuergesetz of 8 September 1972, BGBl. I 1972 at 1713, last amended 25 June 2021, BGBl. I 2021
at 2035
* General Tax Code: Abgabenordnung, version of 1 October 2002, BGBl. I 2002 at 3866 and BGBl. I 2003 at 61, last amended
12 July 2022, BGBl. I 2022 at 1142
* Income Tax Implementation Ordinance: Einkommensteuer-Durchführungsverordnung, version of 10 May 2000, BGBl. I 2000
at 717, last amended 2 June 2021, BGBl. I 2021 at 1259
* Income Tax Law: Einkommensteuergesetz, version of 19 October 2002, BGBl. I 2002 at 4210, last amended 19 June 2022,
BGBl. I 2022 at 911
* Income Tax Regulations: Einkommensteuer-Richtlinien 2005, BStBl. I 2005, Sondernummer 1, version of 18 December 2008,
BStBl. I 2008 at 1017
* Inheritance and Gift Tax Law; Erbschaftsteuer- und Schenkungsteuergesetz, version of 27 February 1997, BGBl. I 1997 I at
378, last amended 16 July 2021, BGBl. I 2021 at 2947
* Land Tax Law: Grundsteuergesetz of 7 August 1973, BGBl. I 1973 at 965, last amended 16 July 2021, BGBl. I 2020 at 2931
* Law governing allowances and moving costs for civil servants: Bundesumzugskostengesetz of 11 December 1990, BGBl. I
1990 at 2682, last amended 9 December 2019, BGBl. I 2019 at 2053
* Law on Promotion of Home Ownership: Eigenheimzulagengesetz, version of 26 March 1997, BGBl. I 1997 at 734, last
amended 22 December 2005, BGBl. I 2005 at 3680
* Ordinance governing allowances, etc., for civil servants who move abroad: Auslandsumzugskostenverordnung of 26
November 2012, BGBl. I 2012 at 2349, last amended 27 June 2018, BGBl. I 2018 at 891
* Real Property Acquisition Tax Law: Grunderwerbsteuergesetz, version of 26 February 1997, BGBl. I 1997 at 418 and 1804,
last amended 25 June 2021, BGBl. I 2021 at 2056
* Social Security Law VI: Sozialgesetzbuch VI, version of 18 December 1989, BGBl. I 1989 at 2261 and 1990 at 1337, last
amended 28 June 2022, BGBl. I 2022 at 975
* Solidarity Surcharge Law: Solidaritätszuschlaggesetz, version of 15 October 2002, BGBl. I 2002 at 4130, last amended 1
December 2021, BGBl. I 2021 at 5162
* Law on Fiscal Court Procedures: Finanzgerichtsordnung of 6 October 1965, BGBl. I 1965 at 1477, version of 28 March 2001,
BGBl. I 2001 at 442, 2262, BGBl. I 2002 at 679, last amended 5 October 2021, BGBl. I 2021 at 4607
* Valuation Law: Bewertungsgesetz, version of 1 February 1991, BGBl. I 1991 at 230, last amended 12 October 2021, BGBl. I
2021 at 4831
* VAT Act 2005, as amended: Umsatzsteuergesetz 2005, version of 21 February 2005, BGBl. I 2005 at 386, last amended 19
October 2022, BGBl. I 2022 at 1743
* Wage Tax Regulations: Lohnsteuer-Richtlinien 2008, version of 10 December 2007, BStBl. I 2007, Sondernummer 1
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- has been subject to unlimited German taxation for at least 5 of the 10 years preceding his departure;
- has moved to a country which imposes no or low taxes on income (this is assumed if the income tax imposed is more than
one third lower than it would be in Germany for a single person with an annual income of EUR 77,000 or if the individual
is subject to a preferential taxation which diminishes his tax burden considerably in comparison to other taxpayers in that
particular country); and
- has retained essential economic ties with Germany. Essential economic ties with Germany are presumed if, inter alia:
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- payments from health insurance, accident insurance and insurance for disability and old age;
- a number of social distributions;
- lump-sum payments under the statutory pension scheme; and
- scholarships for research activities, scientific or artistic education and training.
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1.3.1. Salary
General
Employment income is any amount, in cash or in kind, received by an employee with respect to his employment (section 19(1) of
the EStG). The employer must withhold the employee’s income tax, increased by the solidarity surcharge, and the social security
contributions and transfer them to the authorities (see section 1.10.3.1.).
The employer may, subject to certain conditions, apply special flat rates of tax to employees with low income. For income up to
EUR 450 per month the rate is:
- 2% (this percentage includes the solidarity surcharge and the church tax, if any) if the employer pays social security
contributions for the employee;
- 20% plus 5.5% solidarity surcharge and church tax in other cases.
For income up to EUR 120 per day (EUR 72 before 1 January 2020) and not more than 18 consecutive days of employment, the
rate is 25% plus solidarity surcharge and church tax, if any.
Special rules apply to employees in agriculture and forestry enterprises. In the case of flat-rate taxation, the employer is liable to
pay the tax (sections 40 and 40a of the EStG).
Overtime premiums
Overtime premiums for work performed on Sundays, bank holidays and at night are not taxable, provided they are paid in addition
to basic wages and do not exceed a certain percentage of the basic wages (section 3b of the EStG). The exemption is only
available if the basic wages do not exceed EUR 50 per hour. The rates vary for each period (e.g. Sundays, statutory holidays,
Christmas, work performed occasionally at night). Overtime premiums must be computed for each employee individually in
addition to the basic wages and may never be considered part of the basic wage. Therefore, employment contracts should
always state expressly that wages are based on a 40-hour work week (or less) and overtime will be paid in addition. Reasonable
assurance must be given that the overtime work has actually been performed. Overtime premiums exceeding EUR 25 per hour are
subject to social security contributions.
The Ministry of Finance issued official guidance, of 9 April 2020, clarifying that bonuses (for years 2020 and 2021) of up to EUR
1,500 in cash or in kind received by employees during the period from 1 March 2020 to 31 March 2022 (previously only until 30
June 2021) are exempt from tax under section 3, number 11 of the EStG. The only requirement is that the bonus must be granted
by the employer as a reward for special efforts due to the COVID-19 pandemic. Any additional payments granted by the employer
in addition to the reduced hours compensation benefit are not covered by the exemption for bonuses under section 3, number 11 of
the EStG.
With effect from 1 October 2022, employers are able to pay employees a tax-exempt inflation premium in cash or in kind up to a
total amount of EUR 3,000 until 31 December 2024 (section 3, number 11c of the EStG).
Accumulated earnings
If an employer pays a one-time bonus in respect of a number of years of service by the employee (e.g. 25 years’ service), a special
tax provision may apply upon request. To mitigate the effect of extraordinarily high progressive rates on that payment, the EStG
allows the following: the bonus must be taxed in the year of payment, but the tax rate that applies to one fifth of the bonus is applied
to the whole bonus for purposes of the progression. This relief is only applicable to resident employees subject to unlimited taxation
(section 34 of the EStG). The relief applies to the whole amount of income deemed “extraordinary income” that the taxpayer
receives in 1 tax year. Extraordinary income includes, apart from accumulated earnings, gains from the disposal of the whole or
a part of a business or the assets serving professional income, gains from the disposal of a privately held substantial interest in a
company and severance payments (see below).
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Section 8(2) of the EStG refers to benefits in kind generally as accommodation, food, goods, services and other benefits provided
by the employer. Benefits in kind received by employees are included in the employment income and taxed accordingly. If the
employer grants the benefit at a reduced price, the benefit is valued at the difference between the amount paid by the employee
and market price. However, no income tax is assessed if the difference does not exceed EUR 50 per month (EUR 44 before 1
January 2021) for all benefits received. If the employer provides the employee with accommodation and free meals, the value of
the benefit in kind is determined according to special rules and fixed amounts provided for by an ordinance. In this case, the market
value does not apply.
The value for the private use of a company car is determined in a different way (section 6(1), number 4 and section 8(2) of the
EStG). The value of the fringe benefit is the expenditure which the employee would have incurred in owning a private car of the
same type. There are two ways of determining the value of that fringe benefit.
First, the total expense for the year is allocated on the basis of the ratio of private to total kilometres as shown in a logbook.
The resulting value of the fringe benefit is then reduced by any expenses borne by the employee (e.g. petrol, garage, cleaning).
Commuting between home and work is allocated to private kilometres.
Second, the monthly benefit may alternatively be valued at a flat 1% of the dealer’s list price on first registration plus the cost of
such accessories as radio, special tyres, etc., plus VAT. For electrically powered vehicles purchased before 1 January 2023,
a reduction of the dealer’s list price of up to EUR 10,000 is available depending on the vehicle's battery capacity. For fully
electrically powered vehicles purchased between 1 January 2019 and 31 December 2031, only 25% of the dealer’s list price
is taken into account for calculation purposes provided that the dealer’s list price is below EUR 60,000 (EUR 40,000 before
2020). The maximum benefit for the 1% rule is limited to the actual running costs of the company car. For company cars provided
to independent professionals, sole entrepreneurs and executives, only this second method is available if the use of the car for
business purposes exceeds 50% of the total use.
If the car is not used for private purposes for a whole month, the related benefit (i.e. the 1%) does not apply to that month. If a
company car is used for private purposes for up to 5 days per month, the imputed income is 0.001% of the list price for each
privately driven kilometre instead of 1% of the list price. In addition, a taxable benefit in kind of 0.03% of the list price per kilometre
of the distance between home and work (one way) per month is subject to wage tax withholding (or must be declared in the
absence of wage tax withholding, e.g. if the employee is employed by a foreign employer without a branch office or permanent
agent in Germany) in respect of commuting between home and work. In addition, a flat rate of 0.002% of the list price per kilometre
between home and work is used to evaluate the benefit of using the company car for home leave purposes in the framework of
maintaining a double household in excess of one home leave per week. The employee is entitled to claim a lump-sum deduction
per kilometre if flat-rate taxation does not apply (see reimbursement of commuting expenses above).
On certain benefits in kind, the employer may take over the liability to pay the income tax due at a lump-sum rate. Thus, the
net salary attributed to such benefits is not taken into account for the purposes of the employee’s taxable income. The lump-
sum taxation is allowed, inter alia, with respect to cheaper or free food and cheaper or free transport between home and work.
Reimbursement of costs for the use of the employee’s own car in commuting can be subject to a flat tax rate of 15%. If an
employee uses his own car, the maximum amount that may be reimbursed and taxed according to the flat-rate regulation is the one
deductible for an employee as income-related expenses (see above). Special rates apply for disabled persons (section 40 of the
EStG).
Further, employers may pay income tax due at a lump-sum rate of 30% for benefits in kind granted in addition to the regular salary
to their employees or gifts in kind if the value of the benefit (i) per recipient and tax year, or (ii) per benefit does not exceed EUR
10,000 (section 37b of the EStG).
Income which is taxed by flat rates (e.g. the 20% provision, as described above) is not taken into account in the determination
of income for assessment purposes. The flat-rate levy satisfies the tax liability of the taxpayer (sections 40(3) and 40a(5) of the
EStG).
If an employee receives goods or services as part of his salary, which are produced, sold or provided by the employer not only for
the needs of the employees, the respective benefits in kind are tax exempt up to EUR 1,080 per year if they are not taxed at a flat
rate. The value of such benefits in kind is determined by reducing the market price by 4% (section 8(3) of the EStG).
For stock options, see section 1.3.5.1.
Childcare
The fee paid by an employer to an employee for a nursery (Kindergarten) is tax exempt if this is in addition to the salary normally
agreed. It is not possible to change parts of the existing salary into the Kindergarten reimbursement or for a direct payment to be
made by the employer (section 3(33) of the EStG).
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Pensions derived by former employees from certified private pension plans (Altersvorsorgeverträge) are subject to tax if the
contributions were deductible or the subject of a cash grant (see section 1.8.1.3.).
Taxpayers over 64 years of age and deriving income other than the above-mentioned pension, etc., are granted a tax-free
allowance. In 2022, the allowance is 14.4% of the gross employment income (excluding the pensions) plus the aggregate income
of other categories (excluding statutory pension payments and similar pension payments), subject to an annual maximum of EUR
684 (section 24a of the EStG).
1.3.5. Other
1.3.5.1. Stock options
If a company offers its employees the right to subscribe for its shares at preferential rates, the difference between the purchase
price and the market value is normally taxable as a benefit in kind. Under certain conditions, the discount remains exempt from
income tax. Accordingly, if (i) the respective offer is available to all employees who have been employed uninterruptedly for at least
1 year and (ii) the total discount on the shares for each employee does not exceed EUR 1,440 per calendar year (EUR 360 for
stock options granted before 1 July 2021), the benefit is exempt from tax (section 3 number 39 of the EStG).
If one of the conditions is not met, the benefit is taxed when the option is exercised. The amount taxable is the difference between
the fair market value of the shares at the time the option is exercised and the actual purchase price paid by the employee and
guaranteed by the employer when the option was granted.
With effect from 1 July 2021, employees have the option to agree with their employer on a preliminary non-taxation of a benefit in
kind, granted in the form of a right to subscribe for shares at preferential rates (section 19a of the EStG). When determining the
benefit in kind, the allowance in the amount of EUR 1,440 must be deducted. The fair market value serves as acquisition costs.
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The option of preliminary non-taxation is only available if the employer qualifies (or qualified in the preceding year) as a micro, small
or medium-sized enterprise (SME) with fewer than 250 employees, with an annual turnover not exceeding EUR 50 million, and/or
an annual balance sheet total not exceeding EUR 43 million and the enterprise is not older than 12 years.
The preliminary non-taxed benefit becomes taxable if:
- the shares are wholly or partially transferred for free or against payment or are contributed to a business;
- more than 12 years have elapsed since the initial grant of the shares; or
- the employment relationship is terminated. If in this case, the employer takes over the liability to pay the tax on the benefit in
kind, there is no further benefit in kind arising to the employee.
1.3.5.2. Termination payments
Severance payments are generally taxed.
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sheet. The only exception is for buildings, for which the EStG prescribes depreciation rates that may be higher than those used in
the commercial balance sheet.
When a business is acquired or disposed of during the calendar year, the net worth at acquisition becomes the beginning balance
sheet and the net worth on disposal becomes the final balance sheet for the determination of taxable income.
Depreciation
Depreciation is mandatory and, for tax purposes, is deductible for all assets used in carrying on a business or profession if
experience indicates that the useful life of the assets will exceed 1 year.
Buildings must be depreciated on a straight-line basis at a general rate of 2% of cost (2.5% on buildings completed before 1
January 1925), or at special rates used only for tax purposes. These rates are prescribed in the Income Tax Law (EStG), even
though lower rates may be used in the commercial balance sheet. The EStG provides a depreciation rate of 3% per year for
certain commercial buildings not used as dwellings; in the case of buildings for which the building permit was applied for, or
the acquisition contract was concluded before 1 January 2001, the former rate of 4% per year is still applicable. Furthermore,
degressive depreciation (special declining-balance method) at various rates is possible (in the case of acquisition it is required that
the taxpayer bought the building before the end of the year during which it was completed):
- buildings for which the building permit was applied or the acquisition contract was concluded before 1 January 1994: 10%
for 4 years, 5% for the next 3 years and 2.5% for the following 18 years; and
- no degressive depreciation for new buildings;
- buildings not used in a business or used in a business as dwellings:
- buildings for which the building permit was applied or the acquisition contract was concluded before 1 January 1995: 5%
for 8 years, 2.5% for the next 6 years and 1.25% for the following 36 years; and
- no degressive depreciation for new buildings; and
- buildings used as dwellings whether or not in a business:
- buildings for which the building permit was applied or the acquisition contract was concluded after 28 February 1989 and
before 1 January 1996: 7% for 4 years, 5% for the next 6 years, 2% the following 6 years and 1.25% for the following 24
years;
- buildings for which the building permit was applied or the acquisition contract was concluded after 31 December 1995
and before 1 January 2004: 5% for 8 years, 2.5% for the next 6 years and 1.25% for the following 36 years;
- buildings for which the building permit was applied or the acquisition contract was concluded after 31 December 2003
and before 1 January 2006: 4% for 10 years, 2.5% for the following 8 years and 1.25% for the following 32 years; and
- no degressive depreciation for new buildings (i.e. if the building permit was applied for or the acquisition contract was
concluded after 31 December 2005).
For movable fixed assets, with effect from 1 January 2008, only the straight-line depreciation and the production method are
permitted. However, in order to stimulate the economy and to mitigate the COVID-19 pandemic impact, the declining-balance
method has been temporarily reintroduced for movable fixed assets acquired or produced from 1 January 2020 until 31 December
2022. The annual rate of depreciation is limited to two and a half times the allowable straight-line rate with an overall maximum of
25%.
Before 1 January 2008, the normal methods of depreciation were the straight-line method, the declining-balance method and
the production method (section 7 of the EStG). These could be used alternatively, provided the required conditions were met. A
change from the declining-balance method to the straight-line method was permitted, but not vice versa.
Under the straight-line method, the taxpayer must estimate the economic useful life of the fixed asset. The Federal Minister of
Finance has issued a list which gives an overview of the normal economic useful life and the depreciation rate of many assets.
The taxpayer may deviate from the list if he can give reasons for the deviation. The following straight-line rates are applicable:
machinery 6% to 16%; office equipment 7% to 14%; office furniture 8%; computers 33.3% (until 2021); cars, trucks, etc. 8% to
16%.
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The Ministry of Finance published official guidance in the form of a letter of 26 February 2021 (IV C 3-S 2190/21/10002:013)
regarding the depreciation period for computer equipment and software. With effect from 1 January 2021, computer hardware and
standard business software may be depreciated over a period of 1 year. This allows taxpayers to write off computer equipment and
software in the year of acquisition instead of over their depreciable lifetime. Previously, taxpayers could only depreciate such items
over a period of 3 years. The guidance notes that the term “computer hardware” encompasses computers, desktop computers,
notebooks, desktop-thin-clients, workstations, docking stations, small-scale-servers, external power adapters and peripherals.
If the movable assets acquired or manufactured were previously depreciated according to the declining-balance method,
the annual rate of depreciation was limited to three times the allowable straight-line rate with an overall maximum of 30%.
The taxpayer could use the declining-balance method if he maintained the required information to support the computation
of depreciation. Such details could be recorded in the taxpayer’s books or separate records. For movable assets acquired or
manufactured after 31 December 2000 but before 1 January 2006, the maximum depreciation rate was reduced to the lower of
twice the straight-line rate and 20% per year.
For movable assets, the potential depreciation in the year of acquisition or production is reduced by 1/12 of the acquisition or
production costs for each full month preceding the month of acquisition or production. Salvage value may be ignored at the
taxpayer’s election and is generally not taken into account.
Accelerated depreciation is available for:
- buildings in designated development areas: for restoration measures up to 9% per year in the first 8 years and up to 7% per
year in the following 4 years (section 7h of the EStG); and
- monuments and memorials: for maintenance measures up to 9% per year in the first 8 years and up to 7% per year in the
following 4 years (section 7i of the EStG).
For businesses with taxable income of less than EUR 200,000 according to the net income method, an additional depreciation of
up to 20% of the cost of acquisition or manufacturing of new movable assets is granted in the year of acquisition or manufacturing
and in the following 4 years (20% for all years together). The depreciation only applies if the new assets remain in a domestic
permanent establishment for at least 1 year or are rented out and if they are used exclusively or mainly for business purposes
in the years of the additional depreciation. In addition, the taxpayer may deduct up to 50% of the prospective acquisition or
production costs of future depreciable assets, with a maximum of EUR 200,000. In the case the assets are not acquired or
produced within the following 3 tax years, the previously made deduction must be added back retrospectively to the taxable
income of the tax year for which the deduction was claimed. The depreciation deduction is not available if a taxpayer benefits from
regional incentives. The additional depreciation or deduction under the aforementioned thresholds is available for assets acquired
or manufactured from 1 January 2020.
Previously, the additional depreciation was available for businesses with net assets of not more than EUR 235,000 (EUR 125,000
in the case of an agriculture and forestry business) and a taxable income of less than EUR 100,000 according to the net income
method. The taxpayer was allowed to deduct up to 40% of the prospective acquisition or production costs of future depreciable
assets, with a maximum of EUR 200,000. To mitigate the impact of the COVID-19 pandemic, the reinvestment period of 3 years
has been extended by 2 years, for taxpayers who claimed an investment deduction in 2018, but did not yet acquire or manufacture
new assets and otherwise would be forced to add back the amount of the previously taken investment deduction in 2022.
For newly constructed rental houses, based on building permissions granted between 1 September 2019 and 31 December 2021,
a temporary additional depreciation of 5% of the acquisition or production cost was available in addition to the regular straight-
line depreciation. The additional depreciation was only available if the acquisition or production costs did not exceed EUR 3,000
per square metre and the rental property was rented out in the year of acquisition or production and subsequent 9 years. The
depreciation basis was the acquisition or production cost with a maximum limit of EUR 2,000 per square metre (section 7b of the
EStG).
For newly acquired electric utility vehicles, purchased between 1 January 2020 and 31 December 2030, an additional depreciation
of 50% of the acquisition cost is available in the year of acquisition.
Where additional depreciation is used, the declining-balance method is not allowed In the case of accumulation of accelerated and
additional depreciation, only one type of depreciation may be chosen (per asset).
An extraordinary special depreciation deduction is allowed when the value of an asset is reduced because of economic or
technical obsolescence, but not for assets depreciated under the declining-balance method (section 7(1) and (2) of the EStG).
Movable assets that cost not more than EUR 800 (EUR 410 before 1 January 2018) (excluding VAT) and that may be separately
used may be written off in the year of purchase (section 6(2) of the EStG). Separate records must be kept for such assets if their
value is less than EUR 250 (EUR 150 before 1 January 2018) (excluding VAT), unless the value is apparent from the bookkeeping.
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Alternatively, movable business assets, which may be used individually, with a value between EUR 250 (EUR 150 before 1
January 2018) and EUR 1,000, may be depreciated on a pool basis under the straight-line method at 20% per year over 5 years.
If single assets from the pool are sold or put out of use, the book value of the pool may not be changed (section 6(2a) of the EStG).
Under this alternative, qualifying assets with a value of less than EUR 250 (EUR 150 before 1 January 2018) (excluding VAT) may
be depreciated in the year of acquisition. Before 2010, depreciation on a pool basis was obligatory.
The taxpayer must opt for one of the above alternatives per tax year.
Intangible assets are generally amortized over their useful life, which need not always coincide with the legally established life.
However, intangible assets are only depreciable if they are acquired (see section 5(2) of the EStG). Patents are legally protected
for 18 years (design patents for 3 years with one renewal possible). In practice, however, the useful life of a patent may not exceed
5 years. Goodwill that develops in the course of doing business may not be capitalized; acquired goodwill, however, may be
reported in the balance sheet and depreciated over at least 15 years (section 7(1) of the EStG). Start-up costs are not treated as
assets for income tax purposes and therefore cannot be capitalized and must be deducted when incurred.
Valuation
Assets must be valued at the balance sheet date – the end of the fiscal or calendar year. Assets are carried at cost, less
depreciation, or lower going-concern value, defined as the total purchase price which a third party would allot to a specific asset if
he were to continue the business (section 6(1) of the EStG).
Valuation of inventory is usually the lower of cost or market value, following generally accepted accounting principles. A weighted
average is acceptable for similar goods. The taxpayer may also choose to use the LIFO method to value current inventory items of
the same kind.
Cost includes expenses incurred in acquiring inventory, such as freight and insurance. Manufacturing costs consist of material,
labour and depreciation of assets, and may also include any overhead and a portion of administrative expenses relating to
research and development. Selling expenses may not, however, be included. To determine the cost, the annual cost of inventory
items must be used, if available. If such amount is not available, the average cost is generally used. Market value means
replacement cost for raw materials and other purchasable items. It also means realizable value for finished goods and for unusable
or obsolete materials. If both replacement cost and realizable value could apply to certain goods, the method yielding the lower
value must be used.
The inventory may be reported in the balance sheet at the going-concern value if it is lower than the cost and the market value.
If the going-concern value is higher than the market price, in the tax balance sheet the inventory must be reported at the going-
concern value.
The write-down to a lower going-concern value for fixed assets as well as for inventory is allowed only if the decrease in value
is permanent. The taxpayer must prove the lower going-concern value each business year. Otherwise, the asset is revalued the
following year at its cost of acquisition or manufacture, less depreciation, rollover relief, etc. (section 6(1) of the EStG).
Liabilities may be valued at cost or going-concern value. The requirements for valuation at going-concern value and the potential
step-up are the same as for fixed assets and inventory (see above) (section 6(1), number 3 of the EStG).
Reserves and provisions
Provisions may be set up for certain liabilities, thereby reducing taxable income in the year of creation. Provisions may be made for
expenses incurred at the balance date, but whose exact amount cannot be determined, such as certain future pension payments to
employees (section 6a of the EStG), liabilities on surety obligations, warranties, damage claims, litigation expenses and deductible
taxes for corporate income tax purposes. Provisions are also allowed for repairs and maintenance that will be undertaken during
the first 3 months (section 249 of the HGB and section 5 of the EStG).
Provisions for grants to employees to mark the occasion of their completing a round number of years of service may be made,
subject to certain conditions (section 5(4) of the EStG).
Tax-deductible provisions for reserves are often based on the taxpayer’s estimates. These are normally accepted by the tax
authorities if they can be substantiated as being in accordance with prior experience and are reasonably necessary. The related
expenditures are charged to the reserve when incurred. If reserves are no longer necessary, they must be added back to income.
Tax-free reserves are possible with respect to capital gains on the alienation of an asset if the intention is to replace the asset
(section 6b of the EStG).
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Retained profits
A special tax treatment is available for retained income of sole entrepreneurs and partnerships. Upon request, the taxpayer may
retain income from business activities, agriculture and forestry and independent professional services, which income has been
computed using the net worth comparison method. The retained income is initially taxed at a reduced income tax rate of 29.804%
(28.25% plus the solidarity surcharge). Any income that has been taxed at the reduced rate is subject to subsequent taxation at
26.375% (25% plus the solidarity surcharge) in the year in which it is withdrawn from the business.
Retained income is the taxable income calculated under the net worth comparison method minus the excess of all withdrawals
over capital contributions. The retained income minus the paid amount of income tax and solidarity surcharge gives the amount
of income subject to subsequent taxation, when withdrawn. This amount is to be separately documented each tax year for each
partnership interest, including a carry-forward of last tax year’s retained income subject to subsequent taxation. If positive net
withdrawals in the following tax year do not exceed the tax year’s taxable income, no subsequent taxation is triggered. Otherwise,
a positive difference between the positive net withdrawals and the tax year’s taxable income triggers the subsequent taxation of a
respective amount of the retained income that is carried forward and subject to subsequent taxation (section 34a(1) of the EStG).
Subsequent taxation of retained income takes also place if the taxpayer:
- sells his enterprise or a separate unit thereof, an agricultural and forestry enterprise or unit thereof, a partnership interest or
the assets previously used to generate income from independent professional services or separate parts thereof;
- contributes the enterprise or partnership interest to a company or cooperative or reorganizes the partnership into a
cooperative;
- changes from the net worth comparison method to the net income method; or
- applies for subsequent taxation.
The request must be filed separately by each partner for each partnership interest in each tax year. The request can be withdrawn
until the tax assessment for the following tax year becomes final, i.e. after the grace period of the tax return concerning the
following tax year expires (section 34a(1) of the EStG). A co-entrepreneur of a partnership may file a request if his or her
partnership interest is greater than 10% or EUR 10,000. Capital gains may only be retained if the allowances under sections 16(4)
and 34(3) of the EStG have not been claimed. Losses may not be offset against retained income taxed at the reduced rate.
- activities of:
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1.4.4. Other
Income from agriculture and forestry (Category 1) includes income from various sources, such as farming, fishing or viniculture,
as well as profits from the sale of wine. An allowance of EUR 900 for a single taxpayer is granted annually, provided that the
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aggregate of all types of income (see section 1.2.1.) does not exceed EUR 30,700 (for jointly assessed spouses or civil partners
both amounts are doubled, i.e. EUR 1,800 and EUR 61,400) (section 13(3) of the EStG).
Agricultural and forestry income is determined by net worth comparison if the law prescribes an obligation to keep books and
prepare annual accounts, which is the case when:
- the turnover exceeds EUR 600,000 per year (EUR 500,000 before 1 January 2016) (section 141 of the AO);
- the value according to the Valuation Law (section 46 of the BewG) of the self-managed farm land exceeds EUR 25,000; or
- the profit exceeds EUR 60,000 per year (EUR 50,000 before 1 January 2016) (section 141 of the AO).
If there is no such bookkeeping obligation, agricultural and forestry income may be determined according to an average for small
agricultural and forestry enterprises (section 13a of the EStG) or according to the net income method.
Agricultural and forestry income includes gains derived from the sale of the whole or a part of the agricultural or forestry enterprise
(section 14 of the EStG). The gains are taxed in the same way as gains from the disposal of a business enterprise or a part of it
(see section 1.4.1.).
The tax year for agricultural and forestry income runs from 1 July to 30 June. The profits of a tax year are allocated to the calendar
year proportionally. Gains from the sale of the whole or a part of the agricultural or forestry enterprise are allocated to the calendar
year in which they occur. Apart from the above specific provisions, the rules applying to other types of business income apply (see
section 1.4.1.).
- the basic allowance has not been fully taken into account; or
- foreign taxes are still to be taken into account.
If the individual receives dividends and other profit distributions from shares held as business assets, the income is taxed under
a partial-income system, under which 60% of the dividend income is taxable. Correspondingly, only 60% of the economically
connected expenses are deductible (section 3, number 40 of the EStG). With effect from tax year 2014, the 40% exemption is
only applicable if the dividends and other profit distributions were not deducted when determining the profits of the distributing
company.
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1.5.1. Dividends
General
Dividends in cash or in kind are subject to income tax according to the rules pertaining to income from capital investment
(Category 5) (section 20(1) of the EStG).
Former system
Before the current rules took effect, economic double taxation was mitigated for individual shareholders for both income from
private and business investments, by means of the “half-income system”, under which only one half of the dividends received was
included in the individual’s taxable income. Correspondingly, only 50% of expenses related to dividend income were deductible.
1.5.2. Interest
Interest, including interest from participating loans (partiarische Darlehen), derived by an individual is also subject to tax according
to the rules pertaining to income from capital investment (Category 5), i.e. subject to the final flat withholding tax. However, interest
is taxed at normal progressive rates in the following circumstances:
1.5.3. Royalties
There is no definition of royalties in the Income Tax Law (EStG).
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If royalties are received by a resident individual in the course of a business or profession, they are taxed as income from business
(see section 1.4.1.).
If the royalties are received from private operations which are not part of a business or profession, they are considered rental
income under Category 6.
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Where gains on shares benefit from the 40% exemption under the partial-income system (see above), no relief is available on
the exempt part. However, where the alienated shares are replaced by other shares, their acquisition price is reduced by the full
amount of the gain.
If the taxpayer does not acquire or manufacture the replacement assets in the financial year in which the gain was realized, a
reserve may be set up and kept for a maximum of 4 years. If the reserve is not used in time to reduce the acquisition cost of
replacement assets, it must be dissolved, and 60% of the gain must be added to the taxable income in that financial year. In
addition, the taxable amount is increased by 6% for each full financial year during which the reserve existed. In order to mitigate
the economic impact of the COVID-19 pandemic, the reinvestment periods for replacing assets have been extended by 1 year for
reinvestment reserves that would have to be dissolved in 2022. Previously, the reinvestment periods were only extended for 1 year
for reinvestment reserves that would have to be dissolved in 2021.
Private assets
Capital gains derived from private transactions are generally not subject to tax. However, capital gains realized by an individual
from private transactions are taxable, if the total gains are at least EUR 600 during the tax year, and arise from the disposal of:
- immovable property, including rights thereon, within 10 years of the date of acquisition; or
- movable property, excluding shares and bonds, within 1 year of the date of acquisition. The speculative period is increased to
10 years, if the use of such assets generates positive income within 1 calendar year.
Gains from the disposal of immovable property are not taxable if it has been used as a personal dwelling in the year of the disposal
and the 2 preceding years.
Final flat withholding tax. The scope of capital investment income under Category 5 includes capital gains from the sale of shares
and financial instruments, i.e. capital gains from derivative transactions and short sales. Such gains, accruing after 31 December
2008, are subject to a final flat withholding tax at a rate of 25% (26.375%, including the solidarity surcharge).
Capital gains on the disposal of privately held shares relating to a substantial interest in a company are, however, always taxable
as business income. Gains from the disposal of the shares in a company, resident or non-resident, in which the individual seller
has owned a substantial interest of at least 1% of the capital, directly or indirectly, at any time during the preceding 5 years, are
taxable under this provision. If the shares were acquired by gift or inheritance, the acquisition and additional costs of the previous
owner are taken into account. If the sale comprises the entire capital of a corporation, or if the corporation is liquidated, the taxable
gain is reduced by EUR 9,060, provided the gain is not more than EUR 36,100. The allowance is reduced by any excess of the
gain over EUR 36,100.
If only a part of the total shares in the company are sold, the allowance is reduced proportionally. The upper limit for the total gain
is also reduced proportionally, and if the gain exceeds this revised limit, the allowance is reduced by the excess. The losses from
such substantial interests are generally deductible, subject to some restrictions (section 17(1)-(4) of the EStG).
Other
Upon request, the income tax computed under the general rates (see section 1.9.1.) is reduced with respect to income classified
as “extraordinary income”, as follows: the difference between (i) the tax levied on the income, including only one fifth of the
extraordinary income and (ii) the tax levied on the income excluding the extraordinary income, is multiplied by five and added to
total income (i.e. the normal taxable income, excluding the extraordinary income) (section 34 of the EStG).
Extraordinary income includes:
- capital gains realized from the sale of an agricultural or forestry business, or of a part of that business, or a participation in
such a business;
- capital gains realized from the sale of a business, or of a part of a business, or from the sale of a participation held by a
partner, or by a general partner of a limited partnership with shares;
- capital gains realized from the sale of assets, or part thereof, which are used to render independent personal services; and
- remuneration for several years’ activity (accumulated earnings).
Alternatively, a different reduced tax rate may, upon request, be applied in these cases (except for the sale of a substantial
interest). This reduced tax rate is 56% of the average tax rate which would be applicable if the capital gain was included in taxable
income as ordinary income, with a minimum of 14%. Only taxpayers who have reached the age of 55, or permanently unable to
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work, qualify for this rate reduction. Furthermore, it is only granted once in a taxpayer’s lifetime, and the maximum capital gain for
which this rate reduction is available is EUR 5 million (section 34(3) of the EStG).
Neither of the rate reductions is available to the extent that the gains are realized on shares and are taxed under the partial-income
system (see section 1.5.1.).
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where employer pays part of the contributions). The maximum amounts available for deduction to each of the jointly assessed
spouses or civil partners are summed up. However, if the amount of mandatory contributions to the health, disability and old age
insurances exceeds the limit of EUR 2,800 or EUR 1,900, it is fully deductible. In that case, no other contributions and premiums
are deductible.
A lump sum (Vorsorgepauschale) is taken into account for the purposes of the quarterly tax prepayments in respect of payments
to insurance for health, for disability and old age as well as to pension schemes (section 39b of the EStG) (see section 1.11.4.). In
2022, the lump-sum deduction generally must be computed as follows:
- 88% of 50% of the total contribution to the statutory pension scheme (see above); plus
- 12% of the employee’s gross salary, with a maximum of EUR 1,900 (EUR 3,000 for jointly assessed spouses or civil
partners).
Until 2020, the EStG provided for an obligatory evaluation as to whether the old maximum annual deductions for the above-
mentioned contributions and premiums to the pension insurance, health insurance, etc., would be more favourable for the taxpayer.
If that was the case, the old maximum annual deduction applied (section 10(4a) of the EStG). The maximum deduction generally
was EUR 1,334 (double if jointly assessed). Individuals deriving income other than income from employment could qualify for an
additional deduction of EUR 300 in 2019 (double if jointly assessed). Any remaining expenses were deductible up to half of their
amount, with a maximum of EUR 667 (double if jointly assessed). A lump-sum deduction was granted to employees who did not
substantiate higher contributions.
Contributions by employees to certified private pension plans (Altersvorsorgeverträge) (section 10a of the EStG). The annual
maximum deduction is EUR 2,100. Each spouse is entitled to the deduction provided the prescribed requirements are fulfilled.
In certain circumstances, jointly assessed spouses or civil partners may claim a double deduction even if only one spouse fulfils
the requirements. The deduction is not available if the taxpayer has received a cash grant for contributions to a certified private
pension plan (Altersvorsorgezulage) and the grant exceeds or equals the relief given by the deduction (section 79 et seq. of
the EStG). The cash grant consists of a basic grant (Grundzulage) and, if the taxpayer has one or more dependent children, an
additional child-related grant (Kinderzulage). The basic grant is EUR 175 (EUR 154 before 2018) per year. The additional child-
related grant is EUR 185 per child per year. The amount of EUR 185 is increased to EUR 300 per child born after 31 December
2007.
1.8.1.4. Donations
Gifts and donations to third parties are not deductible, unless made for charitable, religious, scientific, or public-benefit purposes
(sections 52 to 54 of the AO). The deduction is limited to 20% of total income before deduction of special expenses (see section
1.8.1.), exceptional expenditure (see section 1.8.1.) and personal allowances (see section 1.8.2.), or 0.4% of the total sum of
turnover and salaries. If a single donation exceeds the above-mentioned maximum amounts in the year of the donation, the excess
may be deducted from the income of the preceding years, up to the maximum amount for each year. Carry-forward is available
upon application (section 10b(1) of the EStG).
Donations made to non-profit organizations established in other EU Member States/EEA countries are also deductible, provided
(i) the Directive on Administrative Cooperation (2011/16) (DAC) and the Recovery Directive (2010/24) are applicable between
Germany and the respective EU Member State/EEA country; (ii) the donations would be deductible if made to a resident non-profit
organization; and (iii) the activities of the receiving non-resident organization benefit resident individuals or Germany’s general
reputation.
Further, expenses for gifts and donations of up to EUR 1 million to newly established qualifying foundations are deductible once
every 10 years. A foundation qualifies as newly established during the first 12 months of its incorporation. Qualifying foundations
are public-law foundations and those private-law foundations that are exempt from corporate income tax because their objects
are charitable or religious, support a church, or benefit the public. The deduction may be taken entirely in the year in which the
donation is made, or spread over the following 9 years (section 10b(1a) of the EStG).
Donations to political parties are deductible up to EUR 1,650, and for jointly assessed spouses or civil partners up to EUR 3,300
(section 10b(2) of the EStG). This applies only to donations for which the taxpayer did not get an income tax credit: 50% of the
donations are deductible from the income tax assessed with a maximum amount of EUR 825 per taxpayer, and EUR 1,650 for
jointly assessed spouses or civil partners (section 34g of the EStG).
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- Two thirds of childcare services costs (Kinderbetreuungskosten), up to a maximum of EUR 4,000 per child, if the child lives
in the parents’ household and is 14 years old or younger (an age limit of 25 years applies to certain handicapped children)
(section 10(1), number 5 of the EStG).
- Expenses for a taxpayer’s first professional education or his first studies (e.g. school and university fees, manuals and
accommodation costs) up to a maximum of EUR 6,000 per calendar year. For jointly assessed spouses or civil partners, each
individual is entitled to EUR 6,000 (section 10(1), number 7 of the EStG).
- Maintenance payments of up to EUR 13,805 for a divorced or separated resident spouse, provided the payment is taxed in
the hands of the recipient as income (see below). Both spouses must be subject to unlimited German taxation as residents,
or the recipient spouse must live in, and be a citizen of, an EU Member State (section 10(1), number 1 of the EStG). The
ECJ upheld the non-availability of the deduction in a case where the maintenance payments were not taxable in the hands of
the recipient in the EU Member State of which the recipient was resident being compatible with articles 12 and 18 of the EC
Treaty (Case C-403/03, Schempp).
If the deduction as special expenses is not applicable or not chosen by the taxpayer, alimony may be deducted as exceptional
expenditure even if the recipient does not report the payments. This exceptional expenditure deduction is, however, limited to
EUR 10,347 per year if the wife’s own income is EUR 624 or less. If her income exceeds that amount, the deductible alimony
is reduced by the excess (section 33a(1) of the EStG).
- Thirty per cent (maximum EUR 5,000) of contributions to private schools and supplementary schools situated in an EU
Member State/EEA country (on certain conditions) (section 10(1), number 9 of the EStG).
In addition to special expenses (see above and section 1.8.1.), resident taxpayers are entitled to tax relief in respect of exceptional
expenditure (aussergewöhnliche Belastungen) which is unavoidable. If the expenditure exceeds that incurred by the majority of
taxpayers with similar income, net worth and family status, the taxpayer may apply for permission to deduct a portion of those
expenses. Medical costs may be deductible as exceptional expenditure (see section 1.8.1.2.). Other deductible items are listed
below (sections 33 and 33a-b of the EStG):
- maintenance and training expenses of dependent persons with no or less than EUR 15,500 net worth, for whom child
allowances and child grants are not available and if there is a legal obligation of support (limited to EUR 10,347, reduced by
the amount of the dependent person’s own income exceeding EUR 624 per calendar year; the own income is reduced by
actual business expenses of the dependent person or by a minimum lump-sum deduction of EUR 180);
- training expenses (Ausbildungsfreibetrag) of a dependent child for whom child allowance or child tax credit is available if the
child is 18 years or older and living away from home (up to 25 years of age if certain conditions are satisfied). The maximum
amount of deduction is EUR 924;
- expenses for domestic help up to EUR 624 if the taxpayer or his or her spouse is 60 years or older, or if the help is necessary
because of illness of the taxpayer or his or her spouse or a dependent child living in their household (on certain conditions);
the maximum amount is EUR 924 if one of the persons is handicapped; and
- expenses for living in a nursing home if the taxpayer or his or her spouse live there permanently if the costs are comparable to
those of a domestic help; the maximum amount is EUR 924 if permanent nursing is necessary.
For the disability of the taxpayer or of his child, certain graduated deductions between EUR 384 (EUR 310 before 2021) and EUR
7,400 (EUR 3,700 before 2021) are granted, depending on the degree of disability (section 33(b) of the EStG).
Exceptional expenditure is deductible within certain limits depending on the family status of the taxpayer, his total income before
special expenses, exceptional expenditure and personal allowances and the number of dependent children. Each taxpayer must
bear a personal burden, not deductible according to the appropriate schedule. The excess of the expenses is deductible as
exceptional expenditure (section 33(1) of the EStG). The non-deductible portion is:
Family status Number of children Total amount of income (before special expenses, etc.)
Up to Up to More than
EUR 15,340 EUR 51,130 EUR 51,130
(%) (%) (%)
Single none 5 6 7
Married none 4 5 6
Single 1–2 2 3 4
Married 1–2 2 3 4
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Family status Number of children Total amount of income (before special expenses, etc.)
Up to Up to More than
EUR 15,340 EUR 51,130 EUR 51,130
(%) (%) (%)
Single over 2 1 1 2
Married over 2 1 1 2
Only those children for whom the taxpayer receives a child allowance (Kinderfreibetrag) (see section 1.8.2.) and childcare
allowance (Betreuungsfreibetrag) (see section 1.8.2.) or child tax credit (Kindergeld) (see section 1.8.3.) are relevant for this
calculation (section 33(1)-(3) of the EStG).
1.8.2. Allowances
A basic allowance (Grundfreibetrag) is granted to every taxpayer. It is EUR 10,347 for a single person and EUR 20,694 for jointly
assessed spouses or civil partners. Before 1 January 2022, the basic allowance for a single person was EUR 9,744 (EUR 19,488
for jointly assessed spouses or civil partners). The basic allowance is reflected in the tax rate table as income taxed at 0% (see
section 1.10.1.).
In principle, two lump-sum deductions are available for each dependent child of the taxpayer:
- child deduction (Kinderfreibetrag): EUR 2,730 (EUR 5,460 for jointly assessed spouses or civil partners) per child per year;
and
- deduction for childcare, upbringing and education (Freibetrag für den Betreuungs- und Erziehungs- oder Ausbildungsbedarf):
EUR 1,464 (EUR 2,928 for jointly assessed spouses or civil partners) per child per year.
These deductions do not apply if the child tax credit (Kindergeld) (see section 1.8.3.) received during the year (see above) exceeds
or equals the benefit of the lump-sum deductions. If, however, the actual relief offered by the lump-sum deductions is higher than
that of the child relief, the deductions apply and the child tax credit is reversed (sections 31 and 32 of the EStG).
Single persons who are heads of one-parent families may deduct an additional amount of EUR 4,008 per year (EUR 1,908 before
1 January 2020) if at least one child in respect of which the taxpayer is entitled to the child tax credit/deductions mentioned
above lives in the taxpayer’s household, and if both child and taxpayer are registered in that household (Entlastungsbetrag für
Alleinerziehende; section 24b of the EStG). The amount is increased by EUR 240 for each additional child. The deduction is
generally not available if another adult with whom the taxpayer jointly maintains the house and in respect of which the taxpayer is
not entitled to the child tax credit/deductions lives in the taxpayer’s household.
For children born from 1 January 2007 onwards, spouses who stop working in order to take care of the child in its first year after
birth receive parent support. Parent support amounts to 65% of the previous net income (67% if previous net income did not
exceed EUR 1,240) up to a maximum of EUR 1,800. The minimum parent support granted is EUR 300. Parents with no income
and parents with income exceeding EUR 250,000 are excluded from the grant. Parent support is paid for 12 months and may be
prolonged for 2 “father months”, if the father stays at home for this time to take care of the child. If work is given up only partly,
parent support will be paid pro rata; however, where the work time exceeds 30 hours per week, parent support is not granted.
Taxpayers over 64 years of age and deriving income other than pensions from the statutory pension scheme and pensions taxed
as income from (prior) employment (see section 1.3.) are granted a tax-free allowance. The allowance is 14.4% of gross salary
(excluding the pensions taxed as income from employment) plus 14.4% of the aggregate income of other categories (excluding
statutory pension payments and similar pension payments), subject to an annual maximum of EUR 684 (section 24a of the EStG).
For the allowance for pensions taxed as income from prior employment, see section 1.3.
1.8.3. Credits
Tax credits are available for domestic help provided by certain employed and self-employed persons (section 35a of the EStG).
The maximum credit is the lower of 20% of expenses and EUR 4,000. Only non-deductible expenses qualify for the tax credits.
The limits apply per household. The credits cannot result in a refund.
Further, a monthly child relief (Kindergeld) in the form of a tax credit (with refund of any excess) is granted for resident children
under 18 years who are maintained by the taxpayer. The child tax credit also applies to children between 18 and 25 years inclusive
if the child is a full-time student or in military or community service (Wehrdienst, Ersatzdienst) or – in certain circumstances –
unemployed. Children in this respect are the taxpayer’s own children and adopted children as well as stepchildren, foster children
and grandchildren, but the latter only if they live in the taxpayer’s household. The tax credit is EUR 219 (EUR 204 before 1 January
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2021) for the first and second child. For the third child, the tax credit is EUR 225 (EUR 210 before 1 January 2021). For the fourth
and any further child, a tax credit of EUR 250 (EUR 235 before 1 January 2021) is available. The child relief is granted only once
per child; it is not doubled for jointly assessed spouses or civil partners. The child tax credit is available to resident taxpayers,
but generally only with respect to their children resident in Germany or an EEA country (EU Member States and Iceland, Norway
and Liechtenstein). Non-resident taxpayers are entitled to a child tax credit on certain conditions if they are employed in Germany
(section 62 et seq. of the EStG).
In order to mitigate the economic impact of the COVID-19 pandemic, a one-time child bonus of EUR 300 per child, for children who
were entitled to monthly child relief in 2020, was paid in September (EUR 200) and October (EUR 100) 2020. In 2021, taxpayers
received a one-time child bonus of EUR 150 per child for children who were entitled to monthly child relief. In 2022, taxpayers will
receive a one-off child bonus of EUR 100 per child for children who were entitled to monthly child relief in July.
For the child allowance, see section 1.8.2. For credits on municipal business tax, see section 2.2.
1.9. Losses
1.9.1. Ordinary losses
Losses may generally be set off against income arising in the same tax year. As a first step, losses are set off against income from
the same category (see section 1.2.1.). As a second step, the remaining losses are set off against income from all other categories
(section 2(3) of the EStG). However, the setting-off or deduction of certain losses is either limited or not allowed, e.g.:
- losses from animal husbandry and from derivative transactions may only be set off and carried over against income of the
same kind (section 15(4) of the EStG);
- losses from silent partnerships, indirect holdings or other internal partnerships within incorporated companies, in which
the partner or participant is to be regarded as co-entrepreneur, may only reduce the profits which the partner or participant
received in the directly preceding fiscal year or receives in the following fiscal years from the same silent partnership, indirect
holding or other internal partnership (section 15(4) of the EStG);
- on the precondition that a negative capital account will arise or an existing one will be increased, the share of the losses
assigned to a limited partner of a limited partnership may not be set off by him against income deriving from other categories
or other business income. If the losses cannot be set off in the current assessment period, they will diminish the profits of the
limited partner in later assessment periods, insofar as they derive from his participation in the limited partnership (section
15(a) of the EStG);
- losses from prefabricated tax deferral schemes that exceed 10% of the invested capital in the initial investment phase may
only be offset against future income from the same source (section 15b of the EStG);
- capital losses from private transactions (see section 1.7.) may only be carried over to be offset against capital gains from
private transactions in the previous year or in following years (section 23(3)of the EStG); and
- foreign losses from a foreign permanent establishment whose income is not from active business activities, or from the
participation of a silent partner in trading business or from a participating loan if the debtor has his residence, seat or place
of management abroad, or from leasing out immovable or movable property situated abroad, may only be set off against
foreign profits of the same category from the same country in the current year or in the following years (section 2(a) of the
EStG). The limitation does not apply to losses stemming from operations in a EU Member State/EEA country if the Directive
on Administrative Cooperation (2011/16) (DAC) or a similar agreement is applicable between Germany and that state.
Remaining losses generally must be carried back to the preceding year before carrying the remainder forward. With effect from
2022, the loss carry-back period is increased from 1 to 2 years. Upon the taxpayer’s application, however, losses may be carried
forward without having carried them back (section 10d(1) of the EStG). The loss carry-back is restricted to EUR 1 million (double
for jointly assessed spouses or civil partners). In order to mitigate the economic impact of the COVID-19 pandemic, the maximum
amount for a loss carry-back has been increased to EUR 10 million (double if jointly assessed) for the tax years 2020, 2021 and
2022. Previously, the maximum amount for a loss carry-back was capped at EUR 5 million for the tax years 2020, 2021 and 2022.
Further, losses may be carried forward for an indefinite period of time. The amount of the loss carry-forward is limited to EUR 1
million (double for jointly assessed spouses or civil partners) of net income in a given year without restriction. Any remaining loss
can only be set off against up to 60% of the net income exceeding this limit (section 10d(2) of the EStG).
In both cases, the loss carry-over is applied before the tax base has been reduced by special expenses and extraordinary
expenses (see section 1.7.), with the result that the deduction of such expenses is reduced or even totally cancelled in years in
which a loss carry-over is available.
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Casual losses caused by theft, fire, storm, etc. are deductible for income tax purposes and must be claimed in the year incurred or
discovered. In the case of taxpayers who compute taxable income by the net worth comparison method, the deduction is reflected
in the final balance sheet either by eliminating the assets or writing them down to going-concern value. However, if an insurance
payment exceeds the net book value of assets destroyed by a fire or similar cause, the resulting gain may be credited against the
cost of the replacement asset or placed in a special replacement reserve (Rücklage für Ersatzbeschaffung) which may be used
to reduce the base cost of the replacement assets bought within the next year in the case of fixed (movable) assets and within the
next 2 years in the case of land or buildings (R 6.6(4) and (5) of the EStR).
1.10. Rates
1.10.1. Income
Individual income tax is imposed at progressive rates under complex tables (section 32a of the EStG). Abbreviated tables are
presented below (for 2022).
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A 5.5% solidarity surcharge is levied on the amount of tax computed according to the above tables. The solidarity surcharge of
5.5% is levied on the income tax due (section 1 of the SolzG). It is computed on the total tax due after deducting tax credits. In
addition, the solidarity surcharge increases the withholding taxes imposed on payments to both residents and non-residents. If a
non-resident benefits from a tax treaty, the total withholding tax, including the surcharge, may not exceed the maximum treaty rate.
With effect from tax year 2021, the solidarity surcharge is reduced by the introduction of an exemption limit of EUR 16,956 (EUR
33,912 for jointly assessed spouses or civil partners). For higher income earners, the solidarity surcharge is limited to 11.9% of
the difference between the total tax due, i.e. the assessment basis, and the exemption limit. The solidarity surcharge levied on
withholding taxes imposed on payments to resident or non-resident recipients remains unchanged.
1.10.3.2. Dividends
Dividends are subject to a withholding tax (Kapitalertragsteuer) of 25%, increased to 26.375% by the 5.5% solidarity surcharge.
The same applies to income from jouissance rights (Genussrechte) that entitle the owner to participation in the liquidation surplus.
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1.10.3.3. Interest
Interest is normally not subject to withholding tax. However, withholding tax (Kapitalertragsteuer) is imposed on interest from
convertible bonds (Wandelanleihen), from profit-sharing bonds (Gewinnobligationen), from participating loans (partiarische
Darlehen), on interest paid by banks and interest paid on certain bonds, including corporate and government bonds and on
anonymous over-the-counter transactions (anonyme Tafelgeschäfte). The rate is 25%, increased to 26.375% by the 5.5%
solidarity surcharge (for income from jouissance rights, see section 1.5.1.). Anonymous over-the-counter transactions mean that
interest is paid on coupons from bearer bonds (e.g. corporate and government bonds), the interest is not credited to an account of
a foreign bank or another foreign financial institution and the custody of the bond is not retained by the debtor, the German bank or
another German financial institution. If the interest received is not taxed under the final flat withholding tax see section 1.5., the tax
withheld is credited against the income tax assessed at the end of the year (section 36 of the EStG).
1.10.3.4. Royalties
There is no withholding tax on royalties paid to residents.
1.11. Administration
1.11.1. Tax returns
All persons subject to German income tax must file an income tax return annually with the appropriate local tax office (depending
on the place of residence). Employees who are subject to the wage tax withholding system are not required to file an annual
income tax return unless they have income from more than one employment or from sources other than employment amounting to
more than EUR 410 (sections 25 and 46(2) of the EStG; section 56 of the EStDV and section 19 of the AO).
1.11.2. Assessment
Income tax is assessed on a calendar year basis.
Upon receiving the tax return, the tax inspector reviews it. He may require the taxpayer to furnish information and supporting
documentation. Preliminary assessments are possible, based on the taxpayer’s information, without a final review on the date the
assessment notice is issued. A final review will follow in later years. If the taxpayer does not provide the tax office with all requested
information, arbitrary assessments may be made if there is no possibility of determining the taxpayer’s true and correct income.
After reviewing the tax return the tax office assesses the taxes and issues an official assessment notice which can, if necessary, be
contested within 1 month. The filing date for the annual income tax return is 31 May of the year following the tax year. For tax years
beginning on or after 1 January 2018, the filing date for the annual income tax return is 31 July of the year following the tax year.
Extensions are possible up to 30 September, and are automatically granted by the tax authorities if the return is prepared by a
tax adviser or accountant (sections 149(2), 162, 164 and 348 of the AO). For tax years beginning on or after 1 January 2018,
extensions are possible until the end of February of the second subsequent year (e.g. 28 February 2022 for tax year 2020). Due
to the COVID-19 pandemic, the deadline for submitting tax returns for tax year 2019 prepared by a tax adviser or accountant was
initially extended to 31 March 2021; subsequently, the deadline for tax returns for tax year 2019 has been extended until 31 August
2021. For the same reason, the deadline for submitting tax returns for tax year 2020 has been set at 31 October 2022. In light of
the ongoing COVID-19 pandemic, the deadlines for submitting tax returns in general and tax returns prepared with the help of tax
advisers or accountants have been further extended for the tax years 2020 to 2024. With effect from 23 June 2022, the general
deadline for submitting tax returns for tax year 2020 was 31 October 2021, for tax year 2021 it is 31 October 2022, for tax year
2022 it is 30 September 2023 and for tax year 2023 it is 31 August 2024. Accordingly, the deadline for submitting tax returns
prepared by a tax adviser or accountant for tax year 2020 is 31 August 2022, for tax year 2021 it is 31 August 2023, for tax year
2022 it is 31 July 2024, for tax year 2023 it is 31 May 2025 and for tax year 2024 it is 30 April 2026.
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Tax Court is possible on certain conditions. The taxpayer must be represented by a lawyer, chartered accountant or tax adviser,
before the Federal Tax Court. The appeals do not suspend the tax payment. The tax office or the tax court may, however, in certain
circumstances suspend the tax payment upon request. If the taxpayer’s appeal was not successful, he must pay 0.5% interest per
month on the tax that was suspended (sections 237, 238, 348, 355 and 361 of the AO; sections 40, 47, 69, 115 and 120 of the
FGO).
- payment of tax was postponed due to an appeal and the appeal is rejected (section 237 of the AO);
- payment of tax was postponed because the payment would cause extreme hardship for the taxpayer (section 234 of the AO);
or
- taxes were reduced fraudulently; interest is due from the date on which the tax was reduced (section 235 of the AO).
Previously, the interest rate incurred on outstanding taxes was also 0.5% per month. In a decision of 25 April 2018 (IX B 21/18),
the Federal Financial Court (Bundesfinanzhof) expressed doubts as to the compatibility of the interest of 0.5% per month for
outstanding taxes with the Constitution because it does not reflect the market interest rate for periods after 1 April 2015. In
response to this development, the Ministry of Finance issued official guidance providing that decisions concerning late payment
interest relating to tax obligations starting on or after 1 April 2015 shall be suspended upon request of taxpayers who appealed
against an underlying decision. Further, in its decision (1 BvR 2237/14, 1 BvR 2422/17) of 8 July 2021, the Federal Constitutional
Court found that late payment interest levied at a rate of 0.5% per month (6% per year) on excess payments and refunds of tax
relating to interest periods from 1 January 2014 is unconstitutional. The Court held that the rules contained in sections 233a and
238 of the AO continue to apply for interest periods up to and including 2018, but the rules are inapplicable for interest periods
beginning in 2019. Therefore, the legislature is obliged to amend the rules on late payment interest with retroactive effect from
1 January 2019 in order to comply with Constitutional law by 31 July 2022. Per legislative change effective 22 July 2022, the
legislature amended the rules on late payment interest on additional outstanding taxes, on excess payments and refunds of tax by
reducing the applicable rate from 0.5% to 0.15% per month with retroactive effect from 1 January 2019.
Penalty interest is not deductible in calculating taxable income.
On 19 March 2020, the Ministry of Finance issued official guidance stating that enforcement measures and late payment penalties
will be waived until 31 December 2020 if the debtor of a pending tax payment is directly affected by the COVID-19 pandemic.
These measures were initially prolonged until 31 March 2021; subsequently, these measures have been prolonged until 30 June
2022, if the penalties related to late payments in the period between 1 January 2021 and 31 March 2022.
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(1) a fine of up to EUR 1.8 million or imprisonment for up to 5 years – for tax fraud through incomplete or incorrect returns or by
failing to inform the tax authorities of relevant facts in violation of a specific duty to do so;
(2) imprisonment for 6 months to 10 years – for serious tax fraud (the seriousness of tax fraud may concern either the amount of
tax due or repetition of violation) and tax fraud through forged documents or through inducing an official to abuse his position;
and
(3) a fine up to EUR 50,000 – for negligence leading to a reduction of tax as in (1).
Taxpayers may avoid criminal penalties if they correct or supplement incorrect or incomplete data filed or furnish previously omitted
data in respect of such incorrect, incomplete or omitted data. In order to successfully avoid any legal consequences, taxpayers
must commence a voluntary disclosure before a public official of the tax authorities has already announced an investigation or
has already appeared at the taxpayer’s premises for the purpose of carrying out a tax audit or of investigating a tax crime or a tax
offence. A voluntary disclosure must be commenced by the taxpayer, before he receives a written notification regarding a future tax
audit.
A successful voluntary disclosure, resulting in an avoidance of legal consequences, requires that a taxpayer comprehensively
submits all relevant data on every instance of tax evasion that is not subject to the statute of limitation yet (see section 1.11.6.) and
repays the evaded amount of tax. Partial voluntary disclosure is not valid for the purposes of the avoidance of legal consequences.
In addition, in order to avoid legal consequences, in the case the evaded tax exceeds an amount of EUR 25,000, the taxpayer is
required to pay an additional penalty. With effect from 1 January 2015, the penalty payment amounts to 10% of the evaded tax
if the amount of evaded tax exceeds EUR 25,000. The penalty payment is 15% of the evaded tax if the amount of evaded tax
exceeds EUR 100,000 and 20% if the amount of evaded tax exceeds EUR 1 million.
1.11.7. Rulings
In principle, a taxpayer is entitled to an advance ruling on the basis of precisely described facts if the tax treatment of the facts
would affect his business decisions for the future. The advance ruling becomes ineffective if there is a change in the tax law on
which it is based. Advance rulings cannot be granted in tax planning matters, for instance, in the case of potential abuse of law
(section 89(2) of the AO).
The ruling is binding on the taxpayer and the competent tax authorities. The taxpayer may appeal against the ruling (see section
1.11.3.). The fee for the ruling depends on the value for the taxpayer (Gegenstandswert) (section 89(4) of the AO). The value
is determined by comparing the tax consequences of the scenario based on the facts described by the taxpayer and following
his legal opinion with the tax consequences of the same scenario under the application of the tax authorities’ legal opinion. The
value as determined is applied to the official table in the Court Fees Act. If the value cannot be determined at all, not even by
assessment, a time fee with a minimum of EUR 50 per half hour of handling time is charged (section 89(4), (5) and (6) of the AO).
No fee is levied if the value for the taxpayer is below EUR 10,000 or the handling time is less than 2 hours.
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the church tax is the income tax notionally assessed using the child deduction (EUR 2,730 per year per child per parent) and
the deduction for childcare, upbringing and education (EUR 1,464 per year per child per parent), whether or not for income tax
purposes the child deduction and deduction for childcare, etc., apply (see section 1.8.1.5.) (section 51a of the EStG).
Under certain conditions it is possible to claim a reduction in church tax to 2.75% (Baden-Württemberg), 3% (Berlin, Brandenburg,
Hamburg, Mecklenburg-Vorpommern, Schleswig-Holstein) or 3.5% (Bremen, Hessen, Niedersachsen, Nordrhein-Westfalen,
Rheinland-Pfalz, Saarland, Sachsen, Sachsen-Anhalt, Thüringen) of taxable income (net income after deduction of business
expenses, special expenses, social security contributions, extraordinary expenses, child allowance and childcare allowance,
foreign tax credits and other credits). The application must be filed with the relevant church’s administration within one year after
the final German income tax assessment of the relevant tax year was issued, including a copy of that tax assessment.
Bayern does not allow a reduction in church taxes. Some states provide a minimum church tax, church taxes from net wealth, real
estate, or special church contributions.
2.2. Other
Municipal business tax is levied on all business enterprises in Germany, regardless of their legal form. Individuals are thus also
liable for municipal business tax on their business. The business tax is levied on a taxpayer’s business income. The municipal
business tax is not deductible from its own base and for income tax purposes, but a lump-sum tax credit is available against
income tax (see section 1.8.3.).
The taxable income for the business tax is generally determined in the same manner as for income tax purposes, subject to certain
adjustments. These adjustments refer to certain expenses which may be deducted for income tax purposes but not for business
tax purposes and vice versa. A personal exemption of EUR 24,500 is granted to individuals and partnerships (sections 1, 2, 7 et
seq. and 11 of the GewStG).
The effective rate of business tax depends on a federal rate (Steuermesszahl) and a municipal coefficient (Hebesatz). The amount
of the business tax is determined by applying first the basic federal rate to the taxable business income, which results in a basic tax
amount. The coefficient is then applied to this basic tax amount to determine the actual tax burden. The coefficient is fixed by the
municipalities and may vary according to their financial needs from 200% to 490%. In 2013, the coefficient was 410% for Berlin,
460% for Frankfurt am Main, 470% for Hamburg, and 490% for Munich.
From 1 January 2008, the previous progressive rates, ranging from 1% to 5%, are replaced with a uniform federal rate of 3.5% and
the local consumption taxes.
The municipal business tax is not deductible for income tax purposes, but the taxpayer is entitled to a credit calculated as 4 times
(before 2020: 3.8 times) the basic amount for this municipal business tax. The credit is subject to a maximum which is determined
by the proportion business income bears to all taxable income.
For example, if a taxpayer earns 55% of his taxable income from employment, runs a business which provides the remaining 45%
of his taxable income and has an income tax liability of EUR 50,000, the maximum business tax credit is EUR 22,500 (45% of
50,000).
Any excess credit cannot result in a refund of income tax, nor may the excess be carried over to be set against income tax of
another year. Despite this limitation, the municipal business tax credit may result in overcompensation depending on the municipal
coefficient when the tax credit is greater than the municipal business tax and the taxpayer can use the credit fully against his
income tax liability for the year.
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3.1. Employed
Employees are subject to the compulsory social security system. The employee’s share is withheld from wage and salary
payments by the employer. The monthly rates from 1 January 2022 are applied on the actual monthly income with a maximum
annual income basis of EUR 84,600 (EUR 85,200 in 2021) in former West Germany and EUR 81,000 (EUR 80,400 in 2021) in
the states of Brandenburg, Mecklenburg-Vorpommern, Sachsen, Sachsen-Anhalt and Thüringen for the purposes of the pension
and unemployment insurance. The maximum income base for health insurance and nursing insurance for disability and old age is
for both former West and East Germany EUR 58,050 (EUR 58,050 in 2021). The effective contributions to the compulsory social
insurances are as follows:
The rate of the contribution to the insurance for disability and old age is increased by an additional 0.35% (0.25% before 1 January
2022) for childless employees, which must be borne exclusively by the employee.
Employees whose income exceeds the monthly ceiling for health insurance are entitled to elect whether to be insured by public
or private health insurance. The employer’s contribution in such a case is limited to the maximum that would be payable under
the state health insurance scheme. This contribution is paid to the employee if he bears the cost of the premiums for the private
insurance. The reimbursement to the employee is exempt from wage tax if the insurance company provides a certificate to the
effect that section 257(2a) of Book V of the German Social Security Law has been complied with.
Members of the board of directors of a resident company (stock company or, under certain circumstances, limited liability
company) are not employees for the purposes of the social security legislation.
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3.2. Self-employed
Self-employed persons (i.e. persons with income from agriculture and forestry, business or independent personal services) are not
subject to the compulsory German social security scheme. If they pay on a voluntary basis, they must pay both the employer’s and
the employee’s part. For the deductibility of the contributions, see section 1.8.1.
3.3. Expatriates
Foreign citizens employed in Germany are also covered by the compulsory social security system. Therefore, foreign workers are
required to pay contributions to the statutory pension insurance, the health insurance, the unemployment insurance and the nursing
insurance for disability and old age. They are not required to pay contributions to the accident insurance; contributions are payable
by the employer only. Generally, the foreign worker is not entitled to a refund of the contributions he paid upon returning to his
native country. There is only one exception: if a person has been covered for less than 5 years by the statutory pension insurance,
he is entitled to apply for a refund of the contributions he paid to the pension insurance, provided he is not entitled to pay voluntary
contributions to the German pension insurance. The exception derives from the fact that according the German Social Security
Law (Book VI, section 50) a person is entitled to receive pension payments only if he was covered by the pension insurance for
at least 5 years. “Not entitled” means that the person does not have a right of affiliation. The exception applies to “not entitled”
persons whether they actually use that right or not. However, the EU Regulations (see below) and most of the social security
agreements provide such a right of affiliation. Thus, a refund of the pension contributions is only available for citizens of countries
with which Germany has no social security agreement or to which the EU Regulations do not apply.
Foreign employees seconded for a fixed period of time to Germany but working for the foreign employer are able to claim the
coverage of their residence countries’ social security insurances according to EU Regulations, social security agreements as well
as special provisions of the German Social Security Law (Book IV, sections 4 and 5). According to section 14 of Social Security
Regulation (71/1408), a stay in Germany of up to 1 year, which might be prolonged for 1 further year under certain conditions,
will normally allow these employees to remain members of their residence country systems; after that period they will become
members of the host country system if they are not covered by special provisions of the related agreements (e.g. article 17 of
Social Security Regulation (71/1408)). The German Social Security Law (Book IV, section 4 and 5) only requires that at the
moment the work in the foreign country starts the stay is expected to be limited in time. The law does not mention a certain number
of years. The same rules apply to a German person working abroad for a German employer.
The EU Social Security Regulations (Social Security Regulation (71/1408) and Social Security Regulation (72/574)) provide for
a common social security territory covering all EEA countries (EU Member States and Iceland, Norway and Liechtenstein). The
applicability of the Regulations was extended to Switzerland with effect from 1 June 2002. The EU rules override German social
security agreements with the relevant countries but do not make these agreements inapplicable (e.g. for non-EU citizens assigned
to Luxembourg or an assignment to the Isle of Man). Apart from the countries to which the EU Social Security Regulations apply,
Germany has concluded social security agreements with Albania, Australia, Brazil, Canada, Chile, China (People’s Rep.), Croatia,
India, Israel, Japan, Korea (Rep.), Macedonia (FYR), Moldova, Morocco, the Philippines, Quebec, Tunisia, Türkiye, Ukraine, the
United States, Uruguay and former Yugoslavia (applicable with respect to Bosnia and Herzegovina, Montenegro and Serbia).
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(EUR) (EUR)
– charitable gift 1,000 (1,000)
Total burden
2. Calculation (for 2022): With child deduction and deduction for childcare,
etc.
(Married couple filing jointly)
(EUR)
Income and deductions
Calculation as above:
– taxable income 66,329
– child deduction (10,920)
– deduction for childcare, etc. (5,856)
Final taxable income 49,553
Income tax for 2022 (for joint assessment, see section 1.1.4.2.) 6,862
Surcharge (5.5%) 0
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3. Comparison
(EUR)
Actual burden
– method 1 7,218
– method 2 7,480
Difference 262
As method 1 – child tax relief – gives more relief to the taxpayer, he will keep the child tax relief. In computing his income tax, the
tax authorities will automatically choose method 1.
5. Taxes on Capital
5.1. Net wealth tax
The net wealth tax was abolished with effect from 1 January 1997.
Taxable persons
Inheritance or gift tax is levied on the following persons:
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Every child has a basic exemption of EUR 400,000 and an additional exemption in the case of acquisitions mortis causa up to 5
years of age of EUR 52,000, from 5 to 10 years of age of EUR 41,000, from 10 to 15 years of age of EUR 30,700, from 15 to 20
years of age of EUR 20,500, and from 20 to 26 years of age of EUR 10,300. The additional exemption is reduced, however, by the
capitalized value of any pension or similar recurrent payments that the child receives as a result of the death of the deceased.
Every other person from Category I (see section 6.1.4.) is entitled to an exemption of EUR 100,000. However, grandchildren are
entitled to an exemption of EUR 200,000. Recipients in Category II (see section 6.1.4.) are entitled to an allowance of EUR 20,000.
The same applies to recipients of Category III (see section 6.1.4.). There are also exemptions for certain items, such as household
goods and works of art.
In the case of the limited tax liability under section 2(1), number 3, of the ErbStG in respect of domestic assets (as defined in
section 121 of the Valuation Law (see section 6.1.1.)), the basic exemption is only available pro rata. The amount of the pro-
rata exemption corresponds to the value of the domestic assets subject to limited tax liability in relation to the total sum of assets
received via inheritance or donation. Before 25 June 2017, the basic exemption in the case of the limited tax liability amounted
to EUR 2,000, but the beneficiary could opt for resident taxation regarding the entire inheritance or gift and consequently qualify
for higher personal reliefs. With effect from 25 June 2017, the additional exemptions mentioned above are also available to
beneficiaries who are only subject to limited tax liability, provided that between Germany and the state of residence of the
beneficiary or the deceased/donor, administrative cooperation in the field of taxation is in place. If the deceased owned a house or
a flat and used it for himself and his family as a residence before his death, that property may be inherited tax-free by the surviving
spouse or civil partner. However, the heir must continue to use the property as his own residence for the following 10 years. If
the property is sold or rented out during this time, the inheritance will be subject to tax retrospectively, unless the heir provides
sufficient reasons. Children may inherit an owner-occupied house tax free under the same conditions. However, for children, the tax
exemption is limited to the inheritance of houses or flats with a living space of up to 200 square metres.
Certain reliefs exist for business property. For example, 85% of the business assets acquired by way of inheritance or gifts mortis
causa is excluded from the tax base, if:
- the business is continued with its assets for the following 5 years;
- the majority of the jobs are maintained for the following 5 years after succession, i.e. if the sum of salaries in the subsequent
5 years is not lower than 400% of the sum of salaries in the year of succession (for companies with more than 15 employees)
(see below the requirements as regards companies with up to 15 employees); and
- the value of passive business assets, e.g. rented-out property or rights equivalent to real property rights, does not exceed
10% of the total business assets value. Before 1 July 2016, in order for business assets to qualify for the relief, up to 50% of
the total business assets could be passive assets.
The exemption is granted pro rata, if the business is discontinued or sold before the end of the 5-year period or the sum of salaries
falls below the required threshold. Where the business or a part of it is sold, the exemption can be preserved if the capital gains are
reinvested under certain conditions within 6 months.
As an alternative, the heirs may apply for full exemption from inheritance tax, if:
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With effect from 1 July 2016, if the value of the inherited business property exceeds EUR 26 million, an heir may apply either for
a partial waiver of inheritance tax or for a reduction in relief for business assets. If an heir can provide proof that he is not able to
pay the full amount of inheritance tax due (after applying the above-mentioned 85% or 100% relief options), because 50% of the
total value of the inherited or received as donation passive assets and passive assets which the heir or donee already owned are
insufficient to pay the tax, the amount of tax due which exceeds that amount is waived. For the calculation of the threshold of EUR
26 million, all inheritances or donations qualifying for relief, which were received during a period of past 10 years, are added up.
Alternatively, if assets with a value of more than EUR 26 million are inherited, an heir may opt for a reduction of the 85% or 100%
relief. The relief is then reduced by 1% for every EUR 750,000 in excess of the amount of 26 million. This means that an heir may
not claim any relief if the value of the inherited assets is more than EUR 90 million (sections 13-17 of the ErbStG).
6.1.4. Rates
The tax rates vary between 7% and 50%, according to the relationship between the deceased and the heir, and between the donor
and the donee. The inheritance and gift tax rates are (sections 15 and 19 of the ErbStG):
Value of the gift/inheritance Rate
up to and incl.
Category I [1] Category II [2] Category III [3]
(EUR) (%) (%) (%)
75,000 7 15 30
300,000 11 20 30
600,000 15 25 30
6,000,000 19 30 30
13,000,000 23 35 50
26,000,000 27 40 50
> 26,000,000 30 43 50
1 Category I: spouses and civil partners, children and stepchildren, grandchildren, great grandchildren and, in the case of inheritance,
parents and grandparents.
2 Category II: brothers, sisters, nephews, nieces, stepparents, sons-in-law, daughters-in-law, parents-in-law and divorced spouses
and former civil partners and, in the case of gifts, parents and grandparents.
3 Category III: other persons, including legal entities.
7. International Aspects
7.1. Taxation of resident individuals
For residence rules, see section 1.1.4.1.
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- frontier workers are defined as workers who exercise their employment in the frontier zone of the other contracting state and
return daily to their residence state. Under the treaties with France, Austria and Switzerland, employment income of frontier
workers is taxable only in the country of residence;
- Germany generally applies the exemption-with-progression method on employment income. Several treaties deviate from
this, e.g. treaties with Denmark, France and Italy (in cases of hiring-out of labour);
- depending on the treaty, the 183 days may relate to the tax year, the calendar year or any other period of 12 months;
- in most treaties, the 183-day rule relates to the presence of the employee in the state of performance. The physical presence
is relevant, not the duration of the performance. Short stopovers (with the exception of transit) qualify as countable days and
multiple stays must be added up;
- in some treaties, e.g. with Belgium and Denmark, the 183-day rule relates to the performance itself. Only those days must be
taken into account where the employee was actually present to perform his duties (including days where such performance
was not possible due to exceptional circumstances such as strike or illness). However, as an exception, in the case of the
treaty with Belgium, typical interruptions must be taken into account for the calculation. Thus, e.g. weekends, vacations and
sick leave must be added in so far as they relate to the foreign employment, even if the employee is not present in the country
of performance;
- “employer” in the sense of the treaty may not only be the employer under civil law, but also every natural or legal person that
economically bears the remuneration for the dependent services. In particular, the receiving company will be treated as the
economic employer if the employee is integrated into the company and remunerated by it due to its own economic interest. To
establish whether the employee becomes integrated into the company, all circumstances of the relation must be examined.
Particularly decisive criteria are whether or not the receiving company bears the responsibility or risk for the results produced
by the employee’s work, and whether the authority to instruct the employee lies with the receiving company. However, if the
employee is sent abroad for a period not exceeding 3 months, the receiving company is deemed not to be the economic
employer;
- if the employee alternates between the associated enterprises, there might ensue cases where both enterprises might
be treated as the employer under the treaty. In such cases, two employment contracts exist, which must be considered
separately pro rata temporis;
- if the foreign employment contract must be considered used almost exclusively in order to avoid German taxation, the anti-
abuse provision section 42 of the General Tax Act, which would render it a sham transaction, may be applicable on a case-
by-case evaluation;
- in cross-border cases of commercial hiring-out of labour, the hiring company principally functions as employer. The 3-month
threshold is not applicable. Such cases must be judged on a case-by-case basis taking all circumstances into account.
The following criteria are particularly relevant: (1) who bears the risk and responsibility for the result of the employee’s
performance; (2) who commands the employee; (3) who has control over and bears the responsibility for the establishment
in which the employee performs his duties; (4) who provides the essential tools and materials to the employee; and (5) who
decides on the number and qualifications of the employees; and
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- for some treaties, e.g. with France, Italy and Sweden, the 183-day rule does not apply to cases of commercial hiring-out of
labour. Both contracting states retain their taxing rights and double taxation is avoided through a credit.
The letter also comments on the attribution of the employment income and several specific forms of remuneration, and contains
numerous case studies that describe the rules by way of practical examples.
Any foreign tax imposed on the employment income may be credited against the related German tax, provided certain conditions
are satisfied, if the double taxation is not avoided by tax treaty rules (section 34c of the EStG).
Non-residents, irrespective of their nationality, may elect to be deemed residents for German income tax purposes if at least 90%
of their worldwide income is subject to German taxation or if their income not subject to German taxation does not exceed EUR
10,347 (EUR 9,744 before 1 January 2022) (section 1(3) of the EStG). Income from German sources which under a tax treaty is
either not taxed in Germany or is taxed only at a limited rate (e.g. dividend, interest and royalties) is income not subject to German
taxation in determining the 90% or EUR 10,347 limit.
Deemed residents are, in principle, treated in the same manner as residents, irrespective of the income category. However, in
general a non-resident does not benefit from joint assessment (see section 5.) with his spouse who is also not resident in Germany,
and the deduction of alimony payments to a former spouse not resident in Germany, as these reliefs require a resident spouse.
A non-resident single parent furthermore generally does not qualify for the single-parent allowance of EUR 4,008 (see section
1.8.2.) for a child living in the taxpayer’s household which is not located in Germany, as the allowance generally is only available for
(deemed) residents.
However, a national of an EEA country who qualifies as a deemed resident as well as a German resident who meets the conditions
for a deemed resident (90% or EUR 10,347) is entitled to:
- joint assessment (see section 5.) with his spouse resident in an EEA country other than Germany, provided that at least 90%
of their joint worldwide income is subject to German taxation or their income not subject to German taxation does not exceed
EUR 20,694; and
- the deduction of alimony payments to a former spouse resident in an EEA country other than Germany (section 1a of the
EStG), provided that the alimony payments are subject to tax in the hands of the former spouse in the new residence state.
The ECJ held the non-availability of the deduction in a case where the maintenance payments were not taxable in the hands
of the recipient in the EU Member State of which the recipient was resident to be compatible with articles 12 and 18 of the EC
Treaty (Case C-403/03, Schempp).
On 6 November 2013, the German Ministry of Finance issued official guidance, of 16 September 2013, in response to the decision
of the Court of Justice of the European Union (ECJ) in the case of Katja Ettwein v. Finanzamt Konstanz (C-425/11). The guidance
provides that a national of an EEA country who qualifies as a deemed resident is also entitled to joint assessment with his spouse
and to the deduction of alimony payments to a former spouse, if the spouse or former spouse has a permanent home or a habitual
abode in Switzerland. The guidance applies to all pending cases.
If the non-resident worker does not meet the conditions for deemed residents or does not apply for the treatment as a deemed
resident, he is taxed as a non-resident. Generally, the non-resident employee’s tax liability is met by the withholding of wage tax,
unless the non-resident employee opts for assessment. In that case, the non-resident employee must file a tax return. The German
tax will be levied in accordance with the rules applied to the single taxpayer. The non-resident employee will be entitled to the
normal deductions given to residents except the deduction of insurance contributions for future care expenses, in respect of which
only the lump-sum deduction is available (premiums for social security insurances, health, accident, nursing, life and public liability
insurances, etc. In the case of assessment, the lump-sum deductions for employment income-related expenses (EUR 1,200), and
for insurance contributions for future care (section 10a(1)-(3) of the EStG; are fully granted even if the employee does not earn
German-source employment income during the whole year. If the non-resident employee applies for assessment, his income which
is not taxable in Germany is taken into account in determining the tax rate applicable to the employee’s income taxable in Germany
(exemption with progression; section 32b of the EStG).
Some tax treaties deal with cross-border workers (treaties with Austria, France, the Netherlands and Switzerland). Regulations
to the Germany-Switzerland treaty allow Germany to levy a 4.5% tax at source on employment income earned by Swiss workers
who commute to work in Germany. This tax reduces the tax base for the purposes of Swiss taxation, if the employee is a Swiss
resident. If a German resident works in Switzerland but commutes daily back to his residence in Germany, Switzerland is also
allowed to levy a 4.5% tax at source on employment income. This tax is creditable for German tax purposes (article 15a of the
treaty).
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- the other contracting state does not tax (or only taxes at a lower rate) because of a different characterization; or
- the recipient is not subject to tax in the other contracting state because of his residence, habitual abode, seat, place of central
management and control or similar attribute. This does not apply to dividends.
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- has been subject to unlimited German taxation for at least 5 of the 10 years preceding his departure;
- has moved to a country which imposes no or low taxes on income; and
- has retained essential economic ties with Germany (section 2(1) of the AStG).
Low taxes are assumed if the income tax imposed is more than one third lower than it would be in Germany for a single person
with an annual income of EUR 77,000, or if the individual is subject to preferential taxation which diminishes his tax burden
considerably in comparison to other taxpayers of that particular country (section 2(2) of the AStG).
Essential economic ties with Germany are presumed if, inter alia:
- the taxpayer holds a substantial shareholding in a German resident company (at least 1%);
- he receives income from Germany which exceeds either 30% of his worldwide income or EUR 62,000; or
- his assets, which would give rise to income derived from Germany if he were a resident taxpayer, amount to more than 30%
of his total assets or exceed EUR 154,000 (section 2(3) of the AStG).
Under section 6 of the AStG, an individual who has been subject to unlimited German income tax liability for at least 10 years prior
to emigrating to another country, and who is thereby no longer subject to unlimited German income tax liability, is subject to tax on
emigration in respect of the unrealized increase in the value of his shares in a domestic company in which the individual owns or
has owned at any time within the preceding 5 years, directly or indirectly, at least 1% of the share capital.
With effect from 1 January 2022, this exit tax applies to individuals who have been subject to unlimited domestic income tax liability
for at least 7 years within the 12 years preceding the emigration to another country. The exit tax equally applies if an individual
transfers his shares gratuitously to another taxpayer who is not subject to unlimited domestic tax liability, or if Germany would
lose the right to tax capital gains from the sale of such shares in any other way. The shares are deemed to be sold at market value
at the moment of transfer of residence, at the moment of gratuitous transfer or a second before the moment Germany loses its
taxation right.
Where the termination of subjection to tax as a resident is due to temporary absence and when the taxpayer again becomes
subject to tax as a resident within the following 7 years (before 2022 – 5 years), the tax claim ceases to exist if the shares have
not been disposed of during that time. The tax authorities may extend this 7-year period to the maximum when the taxpayer is in
a position to demonstrate that his absence is motivated by professional reasons and that his intention to return as a resident is
unchanged (section 6(3) of the AStG).
Upon request, the tax due may be paid by regular deposits during a maximum period of 7 years (before 2022 – 5 years) as from
the first deposit due against the provision of securities when the immediate collection would be too rigorous for the taxpayer
(section 6(4) of the AStG). However, if the individual is a national of an EEA country, where the Directive on Administrative
Cooperation (2011/16) (DAC) or a similar agreement is applicable between Germany and the respective EEA country, the tax
authorities ex officio grant an interest-free deferral of the tax on the unrealized capital gain. The deferral is repealed if the taxpayer
alienates (all or part of) the shares, or is no longer subject to taxation comparable to German unlimited income tax liability in an
EEA country (section 6(5) of the AStG).
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- income from leasing immovable property or certain tangible movable property situated in Germany, and income from royalties
if the property or royalties are situated in Germany, or the respective rights are entered in a domestic public book or register;
and
- pensions paid by the German statutory pension scheme and other domestic insurance enterprises or paying agents (section
22, number 3 of the EStG).
7.3.1.6. Capital gains
Capital gains realized by a non-resident individual from private transactions or from the alienation of a substantial interest in a
resident company may be subject to German income tax as for residents. For details, see section 1.7. However, a treaty may
provide for these gains not to be subject to German taxation.
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7.3.2.2. Interest
Interest on convertible bonds (Wandelanleihen), profit-sharing bonds (Gewinnobligationen) or participating loans (partiarische
Darlehen) is subject to a final withholding tax (Kapitalertragsteuer) at the rate of 25%, increased to an effective rate of 26.375% by
the 5.5% solidarity surcharge. The tax is withheld on gross income, i.e. without deduction of related expenses.
Income from the participation of a typical silent partner in a trade or business (Beteiligung an einem Handelsgewerbe als stiller
Gesellschafter) is subject to tax in Germany if the payer is resident in Germany. Such income is subject to withholding tax in the
same manner as is interest on convertible bonds, etc.
Anonymous over-the-counter transactions (anonyme Tafelgeschäfte) are also subject to withholding tax (Kapitalertragsteuer) at
a rate of 25%, increased to an effective rate of 26.375% by the 5.5% solidarity surcharge. The tax is withheld on gross income,
i.e. without deduction of related expenses. “Anonymous over-the-counter transactions” mean that interest is paid on coupons
from bearer bonds (e.g. corporate and government bonds), the interest is not credited to an account of a foreign bank or another
foreign financial institution and the custody of the bond is not retained by the debtor, the German bank or another German financial
institution.
The withholding tax on ordinary bank interest (see section 1.10.3.3.) does not apply to payments to non-residents. Interest that
is effectively connected with a permanent establishment or that is paid on a loan secured directly or indirectly by a mortgage on
German immovable property, or on a ship entered into a German ship register, is taxed by assessment.
7.3.2.3. Royalties
Royalties are subject to income tax if registered in Germany or utilized in a permanent establishment in Germany. The income tax
on these types of income is levied by a final withholding tax of 15% (15.825% including the 5.5% solidarity surcharge).
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7.3.6. Administration
Non-residents must file a tax return for each tax year with respect to German income, unless the tax liability is satisfied by a final
withholding tax. For details, see section 1.11.
- the shareholders (the beneficial owners) would not be entitled to the treaty benefit if they had received the income in question
directly; and
- the source of income does not have a material connection with the economic activity of the intermediate company.
Regarding the second condition, section 50d(3) of the EStG provides for an assumption that the mere income generation and its
passing on to the beneficial owners as well as the carrying on of a business activity without being adequately equipped for it, in
view of the business purpose, is not sufficient to create the required material connection with an economic activity.
The non-resident company may avoid the consequences of the application of section 50d(3) of the EStG, if it can prove that none
of the main purposes of its interposition is to obtain a tax advantage. Also, it may avoid the consequences if the non-resident
company is listed at a recognized stock exchange and the main type of its shares is regularly and materially traded at such a stock
exchange.
Until 9 June 2021, section 50d(3) of the EStG denied treaty benefits to a non-resident (intermediate) company if:
- it was not the beneficial owner of the income and its shareholders (the beneficial owners) would not be entitled to the treaty
benefit; and
- the foreign company did not generate its gross income from its own active business activities.
However, if the intermediate company failed both of these tests, it could qualify for treaty benefits if:
- there were economic or other important reasons for the use of the intermediary company in view of the respective income;
and
- the foreign company was adequately equipped for carrying out its own business activities and for participation in the general
commerce.
Section 50d(3) of the EStG imposed the burden of proof for the existence of economic or other important reasons for the
interposition of the intermediary company as well as for its adequate business substance on the non-resident company.
Before 2012, section 50d(3) of the EStG denied treaty benefits to a non-resident (intermediate) company if:
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- it was not the beneficial owner of the income and its shareholders (the beneficial owners) would not be entitled to the treaty
benefit;
- the use of the intermediary company did not have economic or other important reasons; or
- the foreign company did not generate more than 10% of its gross income from its own active business activities; or
- the foreign company was not adequately equipped for carrying out its business activities.
The anti-treaty-shopping provision had been amended in 2011, in response to an infringement procedure against Germany
initiated by the European Commission. On 18 March 2010, the Commission had announced that it had sent Germany a reasoned
opinion, requesting Germany to amend section 50d(3) of the EStG. The Commission had considered that section 50d(3) of the
EStG was disproportionate in particular as regards the third condition listed above, where the possibility to produce proof to the
contrary did not exist. Therefore, in the Commission’s view, the German measure went beyond what was necessary to attain its
objective of preventing tax evasion. On 27 September 2012, the Commission announced that it closed the infringement procedure
against Germany regarding section 50d(3) of the EStG, because Germany had amended its legislation.
On 23 September 2016 and on 28 November 2016, reference was made to the ECJ by the Finanzgericht Köln (Cologne tax court
of first instance) for preliminary rulings in the case of Deister Holding AG, as full legal successor to Traxx Investments N.V. v.
Bundeszentralamt für Steuern (Case C-504/16) and in the case of Juhler Holding A/S v. Bundeszentralamt für Steuern (C-613/16)
respectively, concerning the compatibility of section 50d(3) of the EStG (as applicable before 2012) with EU law. In its decision
of 20 December 2017, the ECJ held that section 50d(3) of the EStG (as applicable before 2012) is not compatible with EU law, in
particular with article 1(2) of the Parent-Subsidiary Directive (2011/96) and the freedom of establishment. In another decision of 14
June 2018, in the case of GS v. Bundeszentralamt für Steuern (Case C-440/17), the ECJ held that also section 50d(3) of the EStG,
as applicable from 2012, is not compatible with EU law.
On 4 April 2018, the Ministry of Finance issued official guidance (IV B 3 – S 2411/07/10016-14) in response to the ECJ decision in
Deister Holding and Juhler Holding (Joined Cases C-504/16 and C-613/16). The guidance stipulates that the previously applicable
version of article 50d(3) of the EStG as amended in 2007 is not applicable any longer. The guidance further provides that article
50d(3) of the EStG, in the current version as applicable from 1 January 2012, applies in a modified way. Accordingly, sentence
2 of article 50d(3) of the EStG is no longer applicable. Sentence 2 of article 50d(3) of the EStG provides that only the facts and
circumstances of the foreign company are relevant, i.e. organizational, economic or other reasonable circumstances of associated
enterprises must be disregarded. The guidance, in addition, provides for some modifications regarding substance requirements
contained in the official guidance (IV B 3 – S 2411/07/100016) on the current version of article 50d(3) of the EStG issued in
January 2012.
For Germany’s policy on tax sparing credits, see section 7.4.1.6.2.
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expenses. Most of Germany’s treaties follow the OECD Model Convention, but specify that Germany’s unilateral tax credit rules
are to be respected.
The credit method applies mainly to withholding tax on interest and royalties, and income taxes on foreign permanent
establishments that do not meet the activity test.
If the treaty tax credit relief is less favourable than the unilateral relief provisions, the latter can be used. Thus, instead of claiming
a tax credit under the treaty, the foreign tax might be deducted under the unilateral relief provisions, which are more favourable in
loss situations (section 26(2) of the KStG).
An application to reduce the foreign withholding tax to the treaty rate must first be presented to the German tax authorities for
confirmation that the applicant is entitled to the reduction as a resident.
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Additionally, the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting
(MLI), which is effective in Germany from 1 April 2021, provides for the implementation of anti-abuse rules in the tax treaties
covered by the MLI. Article 7 of the MLI on the prevention of treaty abuse requires that one of the following measures is adopted: (i)
a principal purpose test (PPT); (ii) a PPT together with a simplified or a detailed limitation on benefits (LOB) test; or (iii) a detailed
LOB (together with an anti-conduit provision).
7.4.1.6.2. Tax sparing credit
The effect of tax exemptions granted by some countries to non-resident investors is not intended to be nullified by levies in the
investor’s country of residence. To that effect, several German tax treaties contain provisions granting a foreign tax credit on
certain categories of foreign income, even if such income is exempt from foreign tax or subject only to a reduced taxation under the
law of the source country.
Tax sparing credits are granted by Germany to its resident companies under the following tax treaties:
Country Qualifying Credit Treaty article Expiry date
income rate (%)
Argentina Dividends [1] 20 23(3) None
Interest 15 23(3) None
Royalties 20 23(3) None
Bangladesh Dividends 15 22(1)(c) None
Interest 15 22(1)(c) None
Royalties 15 22(1)(c) None
Bolivia Interest 20 23(1)(c) None
Royalties 20 23(1)(c) None
Ecuador Interest 20 23(1)(c) None
Royalties 20 23(1)(c) None
Egypt Dividends 15 [2] 24(1)(c) None
Interest 15[2] 24(1)(c) None
Greece Dividends[1] 30 [3] 17(2)(2)(b) None
Interest 10 17(2)(2)(a) None
Indonesia Interest 10 23(1)(c) None
Iran Dividends 20[2] 24(1)(c) None
Royalties 10[2] 24(1)(c) None
Ivory Coast Dividends[1] 15 23(1)(c) None
Interest 15 23(1)(d) None
Jamaica Dividends 15[2] 23(1)(c) None
Interest 10/12.5[2] [4] 23(1)(c) None
Royalties 10[2] 23(1)(c) None
Kenya Dividends[1] 15 [5] 23(1)(c) None
Interest 15[5] 23(1)(c) None
Royalties 20[5] 23(1)(c) None
Management fees 15[5] 23(1)(c) None
Liberia Interest 10 23(1)(c) None
Royalties 10 [6] 23(1)(c) None
Mongolia Dividends[1] 10 23(1)(c) None
Interest 10 23(1)(c) None
Royalties 10 23(1)(c) None
Morocco Dividends 15 23(1)(3) None
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The following tax treaties (as possibly amended by protocols) concluded by Germany contain arbitration clauses:
Country Treaty article
Armenia 24(5)
Australia 25(5)
Austria 25(5)
Canada 25(6)
France 25(5)
Ireland 22
Japan 24(5)
Jersey 9 (5)
Liechtenstein 25(5),(6),(7)
Luxembourg 24(5)
Netherlands 25(5)
Singapore 26(5)
Sweden 41(5)
Switzerland 26(5),(6),(7)
United Kingdom 26(5)
United States 25(5)
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Option Implementation
Possibility for intermediaries to receive a waiver from filing information on a Yes
reportable cross-border arrangement if that obligation would breach the legal
professional privilege under the national law of that EU Member State
Require each relevant taxpayer to file information about its use of the arrangement Yes
to the tax administration in each of the years for which the taxpayer uses it
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Notes:
The agreement with Italy was reinstated from the date mentioned.
The agreement with the Netherlands applies to collection claims that are not more than 15 years old (from the date of the original
collection order).
The treaty with Saudi Arabia applies from 1 January 2009 in the case of individuals employed aboard an aircraft of an international
air transport enterprise of a contracting state.
In addition, there is a unilateral exemption from the German taxes on income connected with the operation of ships and aircraft in
international traffic (section 49(4) of the EStG), which applies to residents of:
Country Scope Effective date
Afghanistan Air 01.01.59
Brunei Air 01.01.90
Chile Air 01.01.70
China (People’s Rep.) Air -
Chinese Taipei Sea 23.08.88
Ethiopia Air -
Ghana Air/sea 17.05.85
Iraq Air/sea n/a
Jordan Air 01.01.70
Lebanon Air/sea 01.01.57
Lithuania Air 01.01.92
Papua New Guinea Air/sea 10.02.89
A. Perdelwitz, Germany - Individual Taxation, Country Tax Guides IBFD (accessed 30 November 2022). 53
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Disclaimer: IBFD will not be liable for any damages arising from the use of this information.
Note:
The exemption regarding residents of China, Ethiopia and Syria is effective since flights/shipping commenced between the
countries.
A. Perdelwitz, Germany - Individual Taxation, Country Tax Guides IBFD (accessed 30 November 2022). 54
© Copyright 2022 IBFD: No part of this information may be reproduced or distributed without permission of IBFD.
Disclaimer: IBFD will not be liable for any damages arising from the use of this information.
1 Certain provisions of bilateral social security agreements entered into by the EU Member States before the date of application
of Social Security Regulation (2004/883) may continue to apply provided that they are included in Annex II of Social Security
Regulation (2004/883).
A. Perdelwitz, Germany - Individual Taxation, Country Tax Guides IBFD (accessed 30 November 2022). 55
© Copyright 2022 IBFD: No part of this information may be reproduced or distributed without permission of IBFD.
Disclaimer: IBFD will not be liable for any damages arising from the use of this information.
A. Perdelwitz, Germany - Individual Taxation, Country Tax Guides IBFD (accessed 30 November 2022). 56
© Copyright 2022 IBFD: No part of this information may be reproduced or distributed without permission of IBFD.
Disclaimer: IBFD will not be liable for any damages arising from the use of this information.