T4 Network Forums T4 Forum "a bissle"/bit of German tax law! Reply To: "ein bissle"/bisschen Deutsches Steuerrecht!

  • Ralf

    February 19, 2021 at 8:37 PM

    Beverage tax

    Legislative competence: Länder

    Revenue authority: municipalities

    Administrative competence: municipalities

    Tax burden: currently suspended

    Our next tax, the beverage tax, represents a small miracle: it has actually been abolished throughout Germany. We don't know if it will make a comeback, but for now it is history. The beverage tax has a tradition dating back to the 12th century, and it lasted deep into the 20th century. But by the 1980s, it only existed in Hamburg and a few cities in Hesse and Lower Saxony. In 2009, Offenbach was the last city to abolish the beverage tax.

    Until its abolition, the beverage tax was administered by the municipalities, it was a classic local tax. Both alcoholic and non-alcoholic beverages were affected by it, described in more detail in the laws of the Länder and statutes of the municipalities and cities. All businesses that sold these beverages were liable for the tax. They were also the ones who opposed the tax. Even though it was a very small tax, its abolition is an amazing success. Let us hope that it never returns.

    Trade tax

    Legislative competence: Federal government

    Revenue authority: municipalities (with apportionment for federal/state government)

    Administrative competence: Länder/municipalities

    Tax burden: varies according to country and municipality

    This tax is important for anyone who has ever wanted to start their own business. Hand on heart: This is probably true for many readers of the blog. The first thing you have to do to register a trade in Germany is to inform the trade office. This wants to preventively secure its share on any profits that may be made in the future. Besides the brave sole proprietors, partnerships and corporations are also affected by the tax, with the exception of freelancers (e.g. doctors, tax consultants, management consultants) and businesses in agriculture and forestry.

    The amount of tax is based on the trade income. For sole proprietors and partnerships, there is a basic tax-free amount of 24,500 euros. Each subsequent taxable income is calculated by first multiplying it by the nationwide tax rate of 3.5 percent in increments of one hundred and then multiplying it a further time by an assessment rate set by the municipalities. The latter is on average around 400 percent (which means it has to be multiplied by four).

    If a trader makes 100,000 euros in revenue and the assessment rate of the municipality is 400 percent, the tax burden is 10,570 euros:

    Basic tax-free amount: 100,500 - 24,500 = 75,500

    Tax base: 75,500 ÷ 100 = 755, 755 x 3.5 = 2,642.5

    Rate of assessment: 2,642.5 x 4 = 10,570

    The annual revenues from trade tax amount to over 40 billion euros. For the municipalities, they represent one of the most important sources of financing. But they have to share the revenue with the federal and state governments through the trade tax levy, the amount of which is determined almost annually. The national average for the trade tax levy is 25 percent.

    To find out the economic strength of a municipality, it is often enough to look at its business tax revenues: As a rule, the higher they are, the better the economy is doing. The North Rhine-Westphalian town of Monheim offers a success story in terms of tax cuts. The mayor, Daniel Zimmermann, drastically cut the trade tax in 2012, and as a result, trade tax revenues soared, making the city debt-free. As you might expect, few municipalities have enough political will and economic savvy to emulate Zimmermann.

    Monheim is with an assessment rate of 260 well there, but by no means the front-runner among the trade tax havens. With other Westphalian Gemeiden with Hebesätzen around 700, it is but no one misunderstood if he prefers to move his business to Monheim. Especially for online companies, this is also easily and credibly feasible. A virtual office with a summonable address, for example via a co-working space, is usually sufficient.

    In northern Germany, the trade tax havens are mostly in Mecklenburg-Western Pomerania, such as Rögnitz with 200 or Schönbeck with 220. In the east, near Berlin, there is Zossen with 200 and Schönefeld with 240. Lützen in Saxony-Anhalt is the most favourable municipality in central Germany with an assessment rate of 209. The most trade tax havens, however, are in southern Germany. The front-runner is Stammham am Inn in Bavaria with 209, but Grünwald, Bad Wörrishofen or Pöcking with 240 are also impressive.

    Incidentally, there are also municipality-free areas in Germany that are administered by the district. Here, usually only the minimum assessment rate of 200 applies. Well-known is for example the Ebersbacher Forst near Munich where mailboxes of several global investment companies are domiciled. In 2020, however, it was determined that not the district, but the state capital Munich is entitled to the generated trade taxes.

    Property tax

    Legislative competence: Federal government

    Revenue authority: municipalities

    Administrative competence: Länder/municipalities

    Tax burden: varies depending on the type of property as well as the country and municipality

    One of the oldest taxes in human history is the property tax. Even the oldest cultures came up with the idea of taxing the ownership of land. The current property tax law in Germany dates back to 1973. All properties of an owner are taxed, whereby agricultural and forestry properties are grouped together in property tax A and developed or buildable properties and buildings are grouped together in property tax B.

    The amount of the tax is determined in three steps. First, each property is given a assessed value determined on a cut-off date. The next two steps are similar to the determination of the trade tax. The assessed value is multiplied by the property tax rate in increments of one thousand, which ranges from 2.6 to 10 percent, depending on the property; this calculation yields the property tax assessment amount. Finally, the property tax assessment amount is multiplied by an assessment rate, which is determined by the municipalities. The assessment rates range from 0 to 1050 percent of the assessed property tax amount; on average they are around 400 percent.

    Anyone who owns a property with a assessed value of 100,000 euros and a property tax rate of 3.5, and whose municipality has an assessment rate of 400 percent, must pay a property tax of 1,400 euros:

    Unit value: 100,000

    Tax base: 100,000 ÷ 1,000 = 100, 100 x 3.5 = 350

    Rate of assessment: 350 x 4 = 1,400

    If a property owner suffers a loss in the value of their property through no fault of their own, they can apply for a waiver of property tax. This may apply, for example, to landlords who have had an apartment burn down. Listed properties can also be exempted from property tax if their costs of preservation are higher than their income (the thinking behind this is probably: Germany may be an envious society, but it is also a cultural nation). However, by its very nature, the property tax remains particularly cruel because, like any tax on assets, it does not look at the income situation of the wealthy person. A person who owns a property with a unit value of €50,000 but otherwise lives on welfare still has to pay the property tax. It doesn't get much more anti-social than that.

    The property tax is the most important tax of all for the municipalities. It brings in 14 billion euros annually. As expected, the assessment rates are highest in highly indebted municipalities, with Berlin, Bremen and municipalities in North Rhine-Westphalia having the highest assessment rates. In 2018, the tax hit the headlines because the Federal Constitutional Court ruled that the calculation of assessed values for the old federal states was unconstitutional because they dated back to 1964. However, it would have been an extreme effort for the authorities to calculate all unit values of all taxable properties again. As a result, new methods of calculating unit values have been introduced, but the disputes have still not been resolved. A fundamental reform of the tax in the next few years seems inevitable, and the federal states are already pressing ahead.

    Real estate transfer tax

    Legislative competence: Federal Government (amount determined by Länder)

    Yield competence: Countries

    Administrative competence: Länder

    Tax burden: 3.5-6.5 percent

    Not only land is taxable, but also the purchase of land. In the purchase contract there are already countless additional costs, the land transfer tax is one of them. It is charged by the seller to the buyer and paid directly to the state. The amount of the tax was 3.5 percent of the purchase price nationwide until 2006, since then it can be determined by the states themselves. Naturally, this has led to increases of up to 6.5 percent in the majority of the states. The federal states take in 15 billion euros a year through the tax.

    The purchase of real estate valued at less than €2,500 is exempt from real estate transfer tax, in the case of a sale to first-degree relatives (this includes spouses or civil partners) and in the case of transfers due to death and gifts. Finally, anyone who has to pay real estate transfer tax on a purchase transaction does not have to pay sales tax in return.

    Dog tax

    Legislative competence: Länder

    Revenue authority: municipalities

    Administrative competence: municipalities

    Tax burden: Varies according to country or municipality

    Anyone who believes that the greed of the state shies away from man's best friend is sorely mistaken. Dogs are also taxed in Germany. More precisely, the keeping of dogs. With this tax, the state officially pursues the goal of limiting the number of dogs. It's not about dog excrement on the streets or dangerous fighting dogs, because the problem could be tackled differently, no, it's about fewer dogs. And, to be honest, it may not be about that after all, because as always, behind supposed regulatory policy could simply be the greed of the state.

    The dog tax is administered by municipalities. Unless the state government provides for it, a municipality can waive a dog tax, but few municipalities do not levy a dog tax (unless they already have to). State and local dog tax laws regulate the amount, which varies by region. The annual revenue amounts to over 200 million euros. However, despite this figure, it must be said: With the dog tax, the honest man is the fool. If you don't register your dog, you don't have to pay dog tax, and even if you do, you usually don't have to worry about penalties if you don't pay dog tax. So in practice it is one of the more harmless taxes in the cruel repertoire of the treasury.

    Hunting and fishing tax

    Legislative competence: Länder

    Yield competence: counties/municipalities

    Administrative competence: counties/municipalities

    Tax burden: varies according to country, municipality or district

    Imagine taking some time off and pursuing a hobby to relax. Not being a green person, you decide to go hunting or fishing. Here, too, the state does not stay out of it. These activities are of course subject to taxation in Germany.

    The hunting tax and the fishing tax are levied by the Länder and, like few other taxes, are mostly administered by the municipalities and counties. The combined revenue from both taxes amounts to slightly more than 10 million euros per year. In the case of the hunting tax, the legal entity entitled to hunt in accordance with the hunting law is liable to pay the tax. It accrues annually and is levied on the annual hunting value or, in the case of leasing, on the lease price to be paid by the lessee. In the case of the fishing tax, the number of fishing districts (yes, fishing is also strictly regulated in Germany) is the basis of taxation. Similar to dog tax, if you don't want to pay, you can just hunt and fish illegally. Not that we at stateless would approve of such a thing - just sayin' ...

    Coffee tax

    Legislative competence: Federal government

    Revenue authority: Confederation

    Administrative competence: Confederation (customs)

    Tax burden: 2.19 euros per kilogram for roasted coffee, 4.78 euros per kilogram for soluble coffee

    When coffee consumption in Germany began to rise sharply in the 17th century, the German states began to tax coffee consumption. This tradition survived the Kaiserreich, the Weimar Republic, the Nazi era and the FRG until today. The latest version of the coffee tax law dates back to 2009, according to which coffee tax is due on both domestic sales and imports from abroad.

    For a kilogram of roasted coffee, the seller must pay 2.19 euros in coffee tax to the state, for a kilogram of soluble coffee 4.78 euros. Goods containing 10 to 900 grams of coffee in a kilogram are also taxed. Do not forget: Sales tax is, of course, added to the coffee tax. Coffee products are thus among the most heavily taxed goods, and this despite the fact that, unlike alcohol or tobacco, its regular consumption does not cause any damage to health. It is therefore pure, naked greed on the part of the state. The tax brings in 1 billion euros a year for the federal government.

    Church tax

    Legislative competence: Länder

    Yield competence: Churches

    Administrative competence: Länder/churches

    Tax burden: 8-9 percent

    The separation of church and state is a great good that stems from the ideals of the Enlightenment. In Germany, people are happy to have achieved this goal and look down on other countries where religion still determines politics, such as ... the US. At least that's the country many Germans see as the poster child for overly powerful religious fundamentalists. But in the USA it would not be possible for the state to collect a church tax. In Germany, it's a sad reality.

    Taxable are all people who belong to a religious society that is recognized as a public corporation. This does not apply to Islam and Scientology, but it does to most Christian churches. Membership of a church is determined by internal church law. Those who do not want to pay church tax can leave their church - into which they were usually born - which involves bureaucratic and, in some countries, financial effort. For those who wish to remain in their church, the tax rate varies from country to country. Generally, the rate is based on income tax (also in its form as wage tax or final withholding tax). Those who live in Bavaria and Baden-Württemberg have to pay a surcharge of 9 percent as church tax on top of the income tax they pay, in all other states the surcharge is 8 percent.

    Reductions are available under the spousal splitting scheme if both spouses belong to a church (it does not have to be the same church). Church tax can also itself serve as a reduction for income tax, i.e. the church tax contribution paid is deducted from income tax. This rule does not apply to the final withholding tax; it must continue to be paid in full even if the church tax is paid.

    The right of churches to collect compulsory contributions from citizens has a long tradition in Germany. Already in the times of small states many German states implemented this measure, in the Weimar Constitution it was established in 1919 for the entire German territory, confirmed in 1933 by the Nazis in the Reich Concordat and finally reaffirmed in 1949 in the Basic Law. Thus, the separation of church and state was never fully completed in Germany. So it is that even in the 21st century the tax offices still collect church taxes and transfer the revenues of more than 12 billion euros per year to the churches. And these unsurprisingly manage, despite all the promised charitable purposes, to still find enough revenue to allow themselves a carefree life.

    Corporation tax

    Legislative competence: Federal government

    Yield competence: Federal Government/Länder

    Administrative competence: Länder

    Tax burden: 15 percent

    The corporate income tax is the tax that comes closest to a "company tax". Legal entities (corporations) that generate income are liable for tax. They include, among others, associations or cooperatives, but especially corporations such as AG and GmbH, the most important legal forms of companies in Germany, as they generate most profits and employ employees. Every profit that a corporation makes per year must be taxed at 15 percent. To prevent double taxation, profit distributions from one corporation to another corporation are not taxed.

    Of course, corporate income tax is not the only form of "business taxation." There is the income tax on business income for individuals - which includes the Left's objects of hatred, the super-rich entrepreneurs; and there is the business tax, applicable to individuals and corporations, which has a higher revenue stream than the corporate income tax. But still, the corporate income tax is the most familiar "business tax" to the public. It is administered by tax offices and brought in about €32 billion in 2019.

    Its history began in the founding era of the German Empire, as it was at this time that the legal form of the corporation came into being. It was officially introduced in 1920, the same year as the income tax, and has been modified ever since, including in the 2008 corporate tax reform. In the US, by the way, the tax rate of the equivalent of the corporate income tax was 35 percent before Trump - he lowered it to 21 percent. So Germany is surprisingly less greedy in this area.

    Vehicle tax

    Legislative competence: Federal government

    Revenue authority: Confederation

    Administrative competence: Confederation (customs)

    Tax burden: varies according to the type of vehicle and its characteristics

    Anyone who owns a motor vehicle in the car country of Germany must pay motor vehicle tax, colloquially known as vehicle tax. The term "motor vehicle" includes, for example, cars, motorcycles, light vehicles, trailers, motor homes, trucks and buses. All vehicles located in Germany are taxed. The owner of the vehicle is liable to pay tax. Whether and who uses the vehicle is irrelevant; if a vehicle is registered in traffic, it is taxable and the owner bears the sole tax burden. If the vehicle has a foreign license plate and the owner does not live in Germany, the vehicle is exempt from tax for one year if no people or goods are transported for payment with the vehicle during that time. After one year, the person who uses the vehicle in Germany must pay the vehicle tax.

    The amount of tax depends on both the type of vehicle and other criteria, including engine capacity, type of drive, pollutant emissions, registration date and total weight. On this basis, there are dozens of possible tax rates for vehicle owners, who can calculate them for safety's sake using so-called "vehicle tax calculators". In the case of a passenger car, for example, the date of first registration, the type of drive, the engine capacity in cubic centimetres (cm3) and the CO2 emissions in grams per kilometre all play a role in calculating the tax. Example:

    A car that was registered after 1/1/2014 and uses a diesel engine currently has to pay as road tax:

    - 9,50 Euro per 100 cm3 cylinder capacity and

    - 2.00 Euro per CO2 emission in g/km (with an exemption limit of 95 g/km)

    Anyone with a vehicle with an engine capacity of 1,000 cm3 and CO2 emissions of 120 g/km will have to pay 145 euros in vehicle tax:

    - 1,000 ÷ 100 = 10, 10 x 9.50 = 95 euros

    - 120 - 95 = 25, 25 x 2 = 50 Euro

    - 95 Euro + 50 Euro = 145 Euro

    As a rule, Germans pay an average of between 100 and 200 euros in vehicle tax per year for newly registered cars.

    Under the current environmental policy, electric cars are exempt from tax for the first five years. Vehicles that are used exclusively for specific purposes, e.g. in agriculture and forestry, as service vehicles for the police, federal armed forces or fire brigade, or in regular service or street cleaning, are completely exempt from tax. There are concessions for severely disabled vehicle owners.

    Only a short time passed from the patent application of the first automobile in 1886 to the first tax on them, which was introduced in Hesse-Darmstadt in 1899. In 1922, a modern motor vehicle tax law was introduced. In the FRG it remained a matter for the states for a long time, but since 2014 the motor vehicle tax has been administered entirely by customs and the revenue of 9 billion euros annually goes to the federal government alone. Since the tax is not earmarked, it is not spent to support infrastructure, but for whatever the bureaucrats want.

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