Avoiding Tax Evasion

Will I evade taxes, when I decide to deduct expenses I really had or when I have my tax consultant structures my situation “tax friendly”?

Taxes on Capital Interest

This tax all about the money you make with your money: capital interest.

Child Benefits (Kindergeld)

The German government wants to reward parents with benefits. This grant will be introduced further below.

Church Tax

Is church really independent from the state? No, this question will not really be answered here. Due to treaties between certain denominations and the government, the state assists these denominations in collecting their tenth from members of these denominations.

Customs Exemption for Household Goods when Relocating to Germany

Global mobility is something typical nowadays. Mobility and world trade would stop when one’s goods and belongs were subject to custom duties. Nobody would want to spend so much money for used things. This is reason why European customs law provides exemption of certain household goods under certain conditions.

Deductions

Tax law in Germany strictly distinguishes between income-related expenses,"Werbungskosten", and special expenses, Sonderausgaben. Some of these special expenses are deductible in full and some only partially. For simplification, this distinction will not be discussed here. Your attorney or tax advisor (Steuerberater) will professionally deal with this. The difference between both kinds of deduction is that only income-related expenses can create a negative result for taxation. Sonderausgaben do not create negative income. A typical example will be if you are laid off. You have no income but expenses for job applications, which can give you negative income.

Double Taxation

Are you in fear of paying taxes back home and simultaneously in Germany? Well, generally this is not to happen because double taxation treaties between Germany and many other countries exist. However, if you are an American, chances remain that you will still be have to pay taxes in Germany.

Formalities in Taxation / Tax Returns

This page will introduce to you what general formalities you will encounter and have to deal with when it comes to your taxation.

Income Tax

Who is subject to income tax?

Every physical person is subject to income tax with domicile or habitual residence in Germany. This also includes minors, and elderly people. They all fall under the same rules. Sometimes it might be a good idea to share income – especially with minors. This will be able to use the statutory set-offs.
§§§§

How high is income tax?

Taxable income starts at € 8,004 with 16% income tax and leads in brackets up to approx. 52% starting € 52,882. Double these thresholds for married persons (§32a EStG).
§

How is the taxable income to be determined?

The general principle income taxation in Germany is based on the individual performance. Your world-wide income will generally be taxed in Germany but double taxation agreements will usually prevent you from paying taxes in Germany and at home. The very basic and crude formula is simple income - expenses = taxable income.
§

Why is the tax law and taxation in Germany so very complicated?

The law on taxes in Germany is as regular as the irregular verbs in the English language. This fact is due to the Germans’ attitude toward the fiscal authority. It is considered as a sport, comparable to a cat and mouse game, for a German to outwit the fiscal authority in order to reduce tax payments as much as possible. This corresponds with the difficulty of tax law. The eagerness for this game supposedly derives from the general dissatisfaction with Germany’s political and/or commercial situation.
§

Do I not have to pay any value added or sales tax when I buy something? I have been always paying the price on the tag and nothing more.

Sure, you are paying value added tax. Here we typically have all inclusive prices. Taxes and service fees must be included in prices for the end consumer (§1 I 1 PAngV). As a businessman on the other hand, you will often find two or three sums as the “price” (net/gross sum, VAT). What ever the price structure may be, do take a good look for the final price.
§

Employees check your Personal Details with Tax Office

Listen all ye employees! ELStAM is on its way! Check your tax details!