TAXES, ACCOUNTANCY AND PAYROLL
Accountancy is mandatory for any of the company forms you choose to establish. Regulations differ according to the structure – please contact us for further advice on our German accountants service.
We can assist you with a wide range of German accountancy services, German taxation services and payroll, for whichever type of company structure you require.
Statutory books must be kept in the place in which the company’s registered office is located.
Payroll is based on the employee’s gross salary. We can assist in all aspects of administering this task including the following:
- Calculation of the amount to pay to the employee and to social security
- Payroll statement to the employee each month
- Employment contracts
- Social security registration and updates where required
- Completion of social security forms
- Handling e-payments to social security
- Withholding tax administration
GERMAN TAXATION SERVICES
Incorporated businesses (and branches) are subject to corporation tax (“Körperschaftssteuer”) in Germany. If corporations are resident in Germany unlimited tax liability (unbeschränkte Steuerpflicht) applies on their worldwide income. Non-resident corporations are subject to limited tax liability (beschränkte Steuerpflicht), including income derived from their German operations and certain other income (e.g. capital gains, rental income) derived in Germany.
The corporation tax rate on a company’s taxable income is 15 %. Incorporated businesses in Germany enjoy a vast array of (legal) opportunities to offset items against profits and income and therefore reduce what is determined as taxable profits. As a result, effective corporate taxation is generally much lower than the nominal corporation tax rate.
Please contact us for further details on our German taxation services and initial advice on how this could relate to your enterprise. Our specialist team of German accountants and tax experts can suggest ways of optimising your tax liability according to your circumstances.
Trade Tax
Incorporated businesses in Germany are also subject to trade tax (Gewerbesteuer). A business’s trade tax liability is derived from the operating profits (“Gewerbeertrag”). This profit is assessed by Addition and Reduction to the companies taxable income of 3,5 % from the operating profit which will measure the base value of trade tax. To this base a local mark-up is then added which is set by the local authorities and this will finally lead you to the trade tax figure. The local rates can vary significantly (280% – 490%).
Value Added Tax (VAT)
All businesses in Germany, whether incorporated or not, are subject to value added tax / VAT (Mehrwertsteuer / MWSt). VAT liability is applicable to all taxable situations within Germany irrespective of citizenship, residence, principal place of management, and place of billing or payment. VAT is essentially a sales / revenue tax on all chargeable goods and services delivered or consumed within the assessment territory (i.e. Germany) including intra-company transactions.
VAT rate for most goods and services currently amounts to 19% in Germany; certain goods and services (e.g. food, printed matter, short-distance passenger carriage) carry a reduced rate of 7% and some goods and services are VAT-exempt (medical, educational and charitable services; lease and sale of real estate). There are strict formal requirements for invoices; i.e. the VAT and the VAT rate. VAT must be stated separately on the invoice.
(Suppliers do not have to do so per se, but have the statutory obligation to do this if the customer requests it.) Enterprises and entrepreneurs can offset against their total VAT liability the input taxes (Vorsteuer) and the tax on intra-EU acquisitions (Erwerbssteuer); i.e. the VAT charged to him on goods and services received during the assessment period. Taxpayers entitled to and wishing to deduct input VAT from their VAT liability have to obtain a VAT identification number from the Federal Bureau of Finances (Bundesamt für Finanzen) and a tax number from the German tax authorities.
Preliminary VAT returns have to be filed with the Bureau on a monthly basis and a summarised report (Zusammenfassende Meldung). VAT liability arises from all transactions subject to VAT, regardless of whether it has actually been collected from the customer. VAT liability, however, can be adjusted if receivables can be proven as uncollectable.
GERMAN ACCOUNTANCY SERVICES – EU VAT NUMBER
If you are trading within the EU, you will need to provide an EU VAT number. The German tax authorities require the company to have office facilities in order to fulfil criteria for obtaining the number.
Our sister site www.openaeuropeancompany.com which can assist with setting up a complete corporate structure across Europe according to your requirement.
Please contact us for further information on our comprehensive range of German Accountants and German Taxation services.