"FAQ about German Individual Taxation"
Date: 11th May 2012
Time: 3 p.m.
Location: MPI-CBG, Atrium
Prof. Dr. Friedrich Vogelbusch
WP/StB – Certified Accountant/Tax Lawyer
Warth & Klein Grant Thornton AG
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300 m …
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Agenda
1.
2.
3.
4.
5.
6.
What are the income tax rates in Germany?
Who needs to report my foreign income in Germany as an Expat?
What are the deadlines for filing a German Income Tax Return?
How long will it take to receive German tax refund?
Are there advantages of hiring a tax lawyer?
For the first part of the year I lived and worked abroad, then I moved to
Germany. Where do I declare my income as an expat?
7. What expenses can I claim in Germany against my income as an expat?
8. What is Tax Free Allowance?
9. Are fees for tax advise deductible for Expats in Germany?
10. How can I avoid being taxed twice? (e.g. between my home country and
Germany)
11. My wife is a freelancer - how about taxes?
12. What is the rate of Capital Gains Tax in Germany?
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Agenda
A. General overview of the German individual income tax
• What are the income tax rates in Germany?
• What are the deadlines for filing a German Income Tax Return?
• How long will it take to receive German tax refund?
• What is Tax Free Allowance?
• Are fees for tax advise deductible for Expats in Germany?
• What is the rate of Capital Gains Tax in Germany?
B. International individual income tax
• Who needs to report my foreign income in Germany as an Expat?
• The first part of the year I lived and worked abroad, then I moved to Germany. Where do I declare
my income as an expat?
• What expenses can I claim in Germany against my income as an expat?
• How can I avoid being taxed twice? (e.g. between my home country and Germany)
• My wife is a freelancer - how about taxes?
C. Tips and tricks
• Are there advantages of hiring a tax lawyer?
D. Appendix
• Check lists
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A.
General overview of the German individual income tax
5
General overview
Basics on determination of German Income Tax
Tax = assessment basis * tax rate
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General overview
Basics on determination of German Income Tax
Tax = assessment basis * tax rate
• tax rate is defined in § 32a Individual
Income Tax Law (EStG)
• basic income tax rate (Einkommensteuer)
• 2 possible surcharges on top of income tax
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What are the Income Tax Rates in
Germany? - 1 Tax Rates
Maximum 45% tax rate for an income from 250.731 €
(„Reichensteuer“)
Taxrate
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Maximum 42% tax rate for an income
from 52.882 € - 250.731 €
…
24% Tax rate for an income from
13.470 € p.a.
15% Tax rate for an income from
8.005 €
5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95
Tax free allowance: for an income
below 8.004 € (Singles)
100 105 110 115 12 0 125 130 1 35 140 145 1 50
Income €)
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What are the Income Tax Rates in
Germany? - 2 Tax Rates
• German income tax (progressive tariff)
• Solidarity surcharge: 5,5% on top of
income tax
• Church tax: about 7 - 9% on top (vary from
state to state)
– Roman Catholic church
– Lutheran church
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General overview
Basics on determination of German Income Tax
Tax = assessment basis * tax rate
salaries an other incomes from capital and
housings are the main components of the
assessment basis
• tax exemptions (Freibeträge)
• additional expenses (Sonderausgaben)
• income-related expenses (Werbungskosten)
are reducing the assessment basis
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General overview
Basic calculation scheme for Income tax:
Income from all categories of the German Tax Code
(employment and independent personal service)
= Total amount of income
‐ Special expenses
‐ Extraordinary burdens
= Taxable income * Tax Rate
= Tax amount
‐ Tax credits
= Tax to be paid
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Overview
Other Topics (General processes)
• Deadlines for filing Income Tax return?
• How long will it take to get my tax refund?
• Is it necessary at all, to fill in a tax declaration?
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B.
International individual income tax
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B. Principles of international income tax
Case 1: Year of moving to
Germany
Case 2: After the first year of
living/ working in Germany
Case 3: Year of relocation
Case 4:
Living
in several
countries at
the same time
Case 5:
Living
in 1 country
and working
in another
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B. Principles of international
income tax
Case 1: Year of moving to Germany
•
•
•
•
Received income: being taxed from the source (i.e. MPI)
Possible tax exemptions : e.g. stipends!
World Income Principle
Possibilities to avoid double taxation in DTA:
1. Exemption method (commonly applied in Germany)
2. Credit method (commonly applied in USA & Great Britain)
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Example
Mrs Smith: 6 months X 2 500 € = 15 000 €
tax rate: 23%
Mr Mueller: 12 months X 2 500 € = 30 000 €
tax rate: 30%
Taxrate
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
30%
23%
5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95
100 105 110 115 12 0 125 130 1 35 140 145 1 50
Income €)
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B. Principles of international
income tax
Case 2: After the first year of living/
working in Germany
• Taxation principles are in general the same as case 1
• Generally: DTA (with exemption method)
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B. Principles of international
income tax
Case 3: Year of
relocation
•Taxation principles are in general the same as case 1
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B. Principles of international
income tax
Case 4: Living in several countries at the same time
• Definition
• Meaning of the 183-day period
Differences between the fiscal and
• Australia
the calendar year
01.07. to 30.06.
• Bangladesh 01.07. to 30.06.
• South Africa 01.03. to 28./29.02
• China
01.01. - 31.12.
• U.K.
06.04. to 05.04.
• Iran
21.03. to 20.03.
• USA
01.10. to 30.09.
• Namibia
01.03. to 28./29.02.
• India
01.04. to 31.03.
• New Zealand 01.04. to 31.03.
• Mauritius
01.07. to 30.06.
• Pakistan
• Sri Lanka
01.04. to 31.03.
01.04. to 30.06.
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B. Principles of international
income tax
Case 5: Living in 1 country and working in another
If the place of employment is in
Germany, you have to fill in this
tax form
http://www.steuern.sachsen.de/img/Steuern/EU_EWR_engli
sch.pdf
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B. Principles of international
income tax
Case 1: Year of moving
to Germany
Duty for tax declaration
(§ 3 number 44 Income Tax Act)
Case 2: After the first
year of living/ working in
Germany
There is no duty for tax declaration,
if there is no foreign income and if tax
class I (single) or IV/IV (couples).
Case 3: Year of
relocation
Duty for tax declaration, if you have
more than 410 Euro p.a. income in
Germany
Case 4: Living in several
countries at the same time
Duty for tax declaration, if you are
living more than 183 days in a
calendar year in Germany
Case 5: Living in 1 country
and working in another
Same as Case 4
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Overview
Other Topics (General questions)
1. Who needs to report my foreign income in Germany as an Expat?
2. The first part of the year I lived and worked abroad, then I moved to
Germany. Where do I declare my income as an expat?
3. What expenses can I claim in Germany against my income as an
expat?
4. My wife is a freelancer - how about taxes?
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C.
Tips and tricks
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C. Tips and Tricks
•
•
•
•
•
•
Children and Income Taxation
400 € Job
What are taxation classes?
Are there advantages of hiring a tax lawyer?
Where to get information about German tax?
Address and opening hours of the Tax Office in
Dresden
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Children and Income Taxation
• Allowances for costs expended on child supervision, education and
training, and with child benefit payments.
• Kindergeld (subsidy) or Tax Free Allowance
Kindergeld
1st
Child &
monthly
2nd
Child
3rd Child
4th
Child,
184 €
190 €
5th
Child ...
215 €
Tax allowance 1
yearly
Kinderfreibetrag
(Each child)
2 184 € (single)
4 368 € (couple)
Tax allowance 2
yearly
Betreuungsfreibetrag
(Each child)
1 320 € (single)
2 640 € (couple)
• Exemption of kindergarten/ Tagesmutter costs
– Both parents are working / single parent
– One of the parents doesn‘t work
Special Expenses
yearly
Kindergarten
2/3, max. 4 000 €
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400 € Job
• Mini Job
• Advantages for employee: Gross = Net
• Advantages for employer
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What are taxation classes?
- Taxation classes (tax groups, Lohnsteuerklasse aka Steuerklassen)
Class I = single
Class II = single parent
Class III = married and spouse has no income or lower income
Class IV = married and similar income to spouse
Class V = opposite of class III, i.e. this is the class your lower
earning spouse has if you have III
Class VI= for a second job.
- Changing the classes
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Advantages an costs
of hiring a tax lawyer
• Help to fill in the forms
• Letter of attorney: tax lawyer
will represent you to deal with
the tax office about any tax
issues
• Fixed range of
consulting fee
• “Steuerberatergebühren
ordnung”
• Higher liability if the form is
proved by the tax lawyer
• Difficult cases (e.g. investment
on real estate, start up etc.)
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Information about German Tax
https://publikationen.sachsen.de/bdb/artikel/10691
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Link of the Federal Ministry of Finance
http://www.bundesfinanzministerium.de/nn_103362/EN/Home/node.html?__nnn=true
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Tax Office in Dresden
Address:
Finanzamt Dresden-Nord
Rabenerstraße 1, 01069 Dresden
Telephone: 0351 4691-0
E-mail: [email protected]
Office hours:
Mon 08:00-15:00
Tue 08:00-18:00
Wed 08:00-15:00
Thu 08:00-18:00
Fri 08:00-12:00
Website: http://www.finanzamt.sachsen.de/dresden-nord.html
https://publikationen.sachsen.de/bdb/artikel/10691
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Thank you very much
for listening!
Agnes Leung
Consultant
Tax Department
Certified Accountant/Tax Lawyer
Prof. Dr. Friedrich Vogelbusch
Partner
Head of Dresden Office
Telefon
Fax
+49 (0) 351 - 318 21 - 612
+49 (0) 351 - 318 21 - 635
E-Mail
Internet
[email protected]
www.wkgt.com
Telefon
Fax
+49 (0) 351 - 318 21 - 632
+49 (0) 351 - 318 21 - 635
E-Mail
Internet
[email protected]
www.wkgt.com
Tax Lawyer
Dipl.Betriebswirt (BA) Sven Fiebig
Manager
Head of Tax Departement
Telefon
Fax
+49 (0) 351 - 318 21 - 615
+49 (0) 351 - 318 21 - 635
E-Mail
Internet
[email protected]
www.wkgt.com
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D.
Appendix
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List of Deductions and
Additional Expenses
Deductions
• Allowance for capital earnings currently at € 801 (€ 1,602 for married
couples)
• lump sum of € 1 000 (earnings in 2011 or onwards)
• more details in the check list…
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