If you are planning to move to Germany, or you want to establish a subsidiary company or a branch of your Australian business in Germany, you may have a lot of questions – and certainly some about taxation. This fact sheet will help you get an overview of some important aspects of German taxation.
Taxation of Businesses
Will I have to register my business for tax purposes?
If you start a business in Germany – either as an individual entrepreneur, a corporation or a partner-ship – you will in any case have to register your business for tax purposes with the local tax office (“Finanzamt”) and be assigned a tax number (“Steuernummer”). The tax number may change, e. g. when you move your business to another place. When you are planning to engage in business rela-tionships with clients or providers outside of Germany, you will also need to apply for a special Value Added Tax identification number (“Umsatzsteuer-Identifikationsnummer”).
Will I have to file tax returns for my business?
Corporations, partnerships and individuals running a business have to file annual tax returns for Cor-poration Tax, Personal Income Tax and Trade Tax. The tax year is the calendar year. Tax returns for Value Added Tax need to be filed monthly, quarterly or annually, depending on the size of the busi-ness.
Which German taxes apply to businesses and how will they affect my business?
> Corporation Tax (“Körperschaftssteuer”)
> Trade Tax (“Gewerbesteuer”)
> Value Added Tax (“Umsatzsteuer”)
> PAYG withholding (“Lohnsteuer”)
Taxation of Individuals
I will be moving to Germany – will I have to register for tax purposes?
Every individual moving permanently to Germany has to register with their local registration office (“Einwohnermeldeamt”). They will then be automatically assigned a tax identification number (“Steueridentifikationsnummer”). The tax identification number will remain unchanged for the lifetime of the individual. It is not only used for correspondence with the tax authorities, but is also needed by employers for PAYG withholding (see above), as well as by banks and insurance companies for certain tax-relevant information that will automatically be transmitted to the tax authorities. Unless you start a business, there is no need for separate registration with the local tax office.
Will I have to file tax returns as an individual?
Individuals generally have to file annual tax returns for Personal Income Tax, unless they only receive income as an employee and do not want to claim any deductable expenses. The tax year is the calendar year.
What German taxes apply to individuals and how will they affect me?
> Personal Income Tax (“Einkommensteuer”)
> Church Tax (“Kirchensteuer”)
> Wealth Tax (“Vermögensteuer”)
> Inheritance and Gift Tax (“Erbschaft- und Schenkungssteuer”)
Taxation with respect to real estate
Will I have to pay Real Estate Transfer Tax when acquiring real estate?
If you acquire real estate in Germany, Real Estate Transfer Tax (“Grunderwerbsteuer”) will be levied on the purchase price. The tax rate depends on the German State in which the real estate is located, and it currently ranges from 3.5% (Bavaria, Saxony) up to 6.5% (Brandenburg, North Rhine-Westphalia, Saarland, Schleswig-Holstein, Thuringia). Real Estate Transfer Tax may also be charged if you acquire a (direct or indirect) interest of 95% or more in a company or partnership that owns real estate in Germany. In this case, the Real Estate Transfer Tax will be charged on the market value of the real estate.
Is there a property tax on real estate in Germany?
Real estate in Germany is subject to local Real Estate Tax (“Grundsteuer”). Real Estate Tax is levied on an annual basis by the local municipality at a tax rate determined by the municipality. The Real Estate Tax is currently charged on a special tax value (“Einheitswert”) of the real estate, which may be significantly below the current market value of the real estate. In a judgment of 10th April 2018, the Federal Constitutional Court (“Bundesverfassungsgericht”) declared the relevant valuation provisions unconstitutional, ordering that the legislature must enact new provisions by 31st December 2019. Until that date, the unconstitutional provisions may continue to be applied. If you do not own real estate, but rather rent an office or a home, the landlord will have to pay the Real Estate Tax, but then will allocate it to the tenants.
Disclaimer: Please note that the content of this leaflet is intended only to provide a general overview on matters of interest. It is not intended to be comprehensive, nor does it constitute legal advice. Please seek professional advice from a lawyer in respect of your particular individual circumstances before acting