Taxation in Germany - Ger the German Tax Facts at InvestGermany

Learn a few basic facts regarding taxes in Germany. InvestGermany.com is here to give you a small taste of German's taxation and show you where to find further relevant information. Take the time and go over this short summary and be better prepared to invest in Germany.

German Taxes - Basic Info

Germany is a Federal Republic and as such taxes are collected by the Federation, the States and the Municipalities. There is a large number of taxes - both direct and indirect - but for most residences the VAT an income tax are most noticeable.

According to the German Constitution there are four basic principles to taxation:

• Ability to Pay
• Lawfulness
• Equality
• Welfare State

Income Tax for Germany Residences and Non-residents

German residences are liable to full income tax. All and any income they have - both that earned on German soil and overseas, can be taxed. Non-residence must only pay income tax in certain cases, mainly when they make money from a permanent company in Germany or involvement in business transaction which have close relations to the country itself, such as real estate.

Corporation Taxes

As made clear by its name, Corporation Tax is mainly relevant for corporate enterprises as well as associations, e.g. cooperatives and foundations. Partnerships and sole proprietorships do most need to pay corporation tax. In most cases incomes by these types of companies would be attributed to specific partners and taxed as part of the standard income tax.

Paying VAT in Germany

The VAT - Value Added Tax belongs to the European Union Value Added Tax System. VAT was originally created as a counter-measurement when high sale taxes encouraged smuggling of goods and other frauds. All services and goods are liable to it with a few examples such as exported goods, financial services, and long-term real-estate deals.

Further Reading

Clearly, InvestGermany.com does not believe that the entire history and evolution of taxation in Germany can be explained in one single page - or even in a hundred. Therefore, we suggest you try Worldwide-Tax.com , Wikipedia or the excellent Gtai.com for further details.