Germany accounting and tax considerations

Germany accounting and tax service

Many international clients engage Tetra Consultants for Germany accounting and tax services. Tetra Consultants will timely complete your firm’s financial statements, corporate tax returns and manage auditors on your behalf and without the need to travel. It is important to meet the deadlines stipulated by the Germany Tax Authorities. Failure to comply will result in late penalties and fines.

With Tetra Consultants’ assistance, the Germany company registration process will be smooth and hassle-free at every step. Contact us now for a free consultation. Our team of experts will revert within the next 24 hours.

Annual reporting requirements

• According to Germany Federal Central Tax Office, all businesses are required to file annual tax returns electronically by 31st July of the year following the tax year; extension are available however it is strictly subject to the approval of the tax authorities.
• Companies whom fail to lodge the tax on time will be subjected to a late filling penalty on the tax due. Tax payers whom does not comply with the transfer pricing documentations will be subjected to penalties as well.

Corporate income tax

• For companies that are resident in Germany, the business is subject to corporate tax on their global-sourced income.
• The corporate tax rate in Germany is 15% (15.28% including solidarity surcharge) , plus municipal trade tax of 7% – 17%. Resulting in the effective corporate tax rate ranging between 30% to 33%.
• A company is considered resident corporation if it maintains its registered office or effective place of management in the country.
• For companies that are non-resident in Germany, the business is subject to corporate tax on locally-sourced income.
• A German company can enjoy up to 95% exemption on capital gains taxes if it sells its local or overseas subsidiary.

Value Added Tax

• Taxable transactions are subject to a value added tax  (VAT) of 19% with a reduced rate of 7% applying to specified transactions. Certain sales of goods and provision of services are exempted from the VAT rules.
• It is compulsory for the German business entities to register for VAT. Unless it meets the exemption threshold. A business with turnover less than EUR 17,500 in the previous calendar year and not expecting its estimated income for the current calendar year to exceed EUR 50,000 may apply for exemptions.
• In Germany, Companies which are non resident are required to register for VAT if it is supplying taxable goods or services within the country.
• Quarterly electronic filling is compulsory for VAT registered entities.

Withholding tax

• Generally, dividends are subject to a 25% withholding tax irrespective whether paid to residents or non-residents. Certain exemptions are available for the qualifying companies under specific treaties.
• Interest paid to resident and non resident are not subjected to withholding tax.
• Royalties paid to resident are exempted from withholding tax however royalties paid to non resident corporation is subject to 15% withholding tax.
• There is no withholding tax on fees for technical services and branch remittance tax.

Other tax considerations

• With effect from 1 January 2020, certain incentive programmes are available for qualifying start ups and small medium sized business. Tax incentives amounting to EURO 500,000 has been introduced for qualifying research and expenditure expenses. Cash grants are also offered for selected sectors.
• Germany has signed more than 95 Double Tax Avoidance Agreements (DTAAs) with other countries, minimizing tax obligations of businesses.
• Standard transfer pricing rules apply for business dealings with related persons. An entity is required to document all facts and evidence that support their transactions with related parties have been conducted at arm’s length under which the underlying principle is the normal degree of commercial prudence.

Our team of experts is able to advise on how to legally reduce your tax obligations.

Contact us now to find out more about your local accounting and tax obligations. Our team of experts will revert within the next 24 hours