| Germany Income tax Income tax (Einkommenssteuer) rates:
From 0 to 7.664 EUR: 0%
From 7.664 EUR to 12.739 EUR: 15% to 23.9%
From 12.740 EUR to 52.151 EUR: 23.9% to 42%
Beyond 52.152 EUR: 42%
A surcharge must be added; it concerns a solidarity contribution of 5.5% of the amount of the taxable income.
Fiscal year: The financial year begins on 1st January and ends on 31st December of each year.
Allowable deductions and tax credit: Insurance bonuses, education and training expenses, retirement expenses, alimony, donations and expenses related to disability.
Special expatriate tax regime: Germany has signed avoidance of double taxation agreements.
Tax Treaties: Germany has double taxation treaties with over 90 countries. These treaties are based on the OECD model taxation convention and reduce most forms of withholding tax.
Tax Allowances
- Employee standard deduction: € 920
- Savers' standard deduction: € 801*
- Standard deduction for other income: € 102
- Tax exemption for pensions in 2009: max. € 2,520
- 33.6 % of the pension received, plus additional allowance of: € 756
- Child allowance: € 1,932 for each child* or
- Child benefits: € 1,968 for each child**
- Child care allowance: € 1,080 for each child*
Children are taken into account in the following cases: i) under 18 years, ii) under 21 years and unemployed pursuant to the Code of Social Law, iii) under 25 years and still in professional training, iv) over 25 years only in the event of helplessness due to disability.
- Tax relief for single parents: € 1,308 for single-parent families with at least one child living at home for which the parent is eligible for child benefits or child allowance.
- Old-age allowance in 2009: 33.6 % of the employment income and the positive sum of the (further) income (excluding other retirement benefits and life annuities), max. € 1,596 p. a., if the taxpayer has turned 64 prior to the beginning of the calendar year.
- Educational allowance: € 924 for children aged 18 and over not living at home and still in professional training or studying. The tax-free amount is reduced by the child's own income and earnings that exceed € 1,848 as well as by education grants and subsidies.
* For spouses filing a joint tax return, the stated amounts are doubled.
** For the first two children.
Germany Corporate TaxesThe corporate tax (Körperschaftssteuer)
effective corporate tax rate 26.37% (25% on retained and distributed earnings + a surcharge of 5.5% on corporate income tax)
Trade tax (Gewerbesteuer) is also assessed on companies. This tax is discharged by any person (physical or moral) carrying on a commercial activity or industrial in Germany. Trade tax is a deductible expense as a running cost for corporate income tax purposes. The trade tax amount depends on the rate voted by the concerned municipality, multiplied by a coefficient.
The effective rate of the Trade tax (Gewerbesteuer) varies from 12% to 20%, depending on the municipality.
Tax rate for foreign companies: Company income is taxed at the Federal, Lander and Municipal levels. Company income and expenditure is taxed at the rate of 19%.
Capital gains taxation in Germany: For capital gains on asset disposal, there is a single tax rate of 25% (+ a surtax of 5.5%).
Capital gains from share transfer in resident and non-resident subsidiaries are exempt from corporate tax up to 95%, whatever the stock and the length of time it has been held.
Main allowable deductions and tax credit: Companies can carry forward their former loss limited to € 511,500. Furthermore, they can carry forward their loss on the payment of interests which is deductible up to 30% of the EBITDA (Profits before interest, tax, depreciation and amortization).
Other corporate taxes: Additionally, federal, lader and municipal taxes vary from one municipality to the other.
Germany VAT (Value Added Tax) - Umsatzsteuer (USt) Tax rate: 19% since 1 January 2007.
Reduced tax rate: A reduced rate of 7% is applied to food, public transport, books and magazines and other products.
No rate is applied to exports.
Other consumption taxes: Company expenses are also subject to VAT (Vorsteuerabzug) at the rate of 19%.
Germany - Other taxesFringe benefits tax: For some services provided to its employees (e.g. food offered in a canteen, office outings, transportation of employees, accident insurance and payments to retirement funds), the company has the option to pay the income tax on account for the employee. The tax is paid at a flat tax rate which varies depending on the service provided from 15% to 25% of the given value.
Land Tax: 1 to 2%
Gifts and inheritance tax: 7 to 50%
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