Life in Germany: taxation for residents
INDIVIDUAL TAXATION
Residents are assessed with a tax on their total income. Married couples are, as a rule, assessed with a tax in common if they do not prefer separate taxation. Children's income does not join in the income of their parents, but is assessed with a tax separately.
The German residents who are assessed with taxes in accordance with general practice have the right to demand standard annual assignments and benefits.
Income tax
Income can be classified according to the following: (1) income from rural and forestry; (2) trade or business revenues; (3) income from independent professional services; (4) income from a labor activity; (5) income from capital investments and income from leasing of real estate and (6) other income type.
The taxable profit calculates from various categories separately, agrees to different rules. A taxable profit from all sources then are aggregated and it is assessed with a tax at the progressive rate, at the same time the first €8.004 are exempted from taxation.
Residents have the right to the following benefits:
Basic benefit: €8.130 for one person and €16.260 for spouses who are in common assessed with a tax.
Dependent relative allowance: the following benefits are issued for each child dependent
€2.184 children's benefit to each child
€2.208 benefit to keeping of each child
€1.320 an attendance allowance for each child
Privileges on payment of taxes for loner parents: the loner parent can ask an additional deduction from taxes of €1.308; the deduction is impossible if the second parent lives together with this taxpayer.
The tax allowance in support of solidarity
In addition to the income tax, also the tax in support of solidarity which is equal to 5.5% of the levied income tax is levied. That is, if, for example, income tax is equal to 25%, then the tax allowance in support of solidarity will make 5.5% x 25% = 1.375%. And then the general tax will make 25% + 1.375% = 26.375% (but not 25% + 5.5%).
Church tax
For the private resident persons belonging to the Roman Catholic Church, the German Protestant and Lutheran church, Reformed church or the Jewish receipt shall pay a tax at the rate from 8% up to 9%.
Income from property rental
The lease revenue is assessed with a tax at the progressive rate. Owners can subtract all expenses on maintenance of this income from a gross revenue. Assignments are usually established at the level of 2% for secondary housing and at the level of 3% for new buildings within the first 8 years.
The amounts spent for maintenance of property cannot be subtracted from assignments that year in which they were spent if they exceed 15% of purchase price. In this case they need to be added to the depreciable cost of property.
Income from capital gain
If the real estate was in property more than 10 years, the profit got from sale of property is not assessed with capital gains tax.
In case the owner sells the real estate within the first 10 years after its purchase, profit on sale is assessed with a tax at the standard progressive rate plus the tax allowance in support of solidarity.
TAX ON PROPERTY
In Germany the real estate duty is levied. A tax basis – the estimated value of an object. The basic tax is equal to 2.6%-3.5% in the western federal lands, 5%-10% in east federal lands and 6% for rural and forestry.
The basic tax is in addition multiplied by municipal coefficients to calculate the final tax which is subject to payment. The multiplier varies from 280% to 810%. For example, 460% - in Frankfurt, 175% for rural and forestry.
CORPORATE TAXATION
Income tax
Corporate taxation is established for 15%. Plus the tax allowance in support of solidarity of 5.5% of corporate tax. The total tax is equal to 15.8%.
So, residence and business in Germany has the features. The country, as before, attracts investors, especially it concerns such large cities as Berlin, Frankfurt and Munich. Our company offers services in selection of an ideal real estate object and also in escort of the clients at each stage of the transaction that purchase of the real estate in Germany for you became simpler, safer and more reliable.
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