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Germany Tax Deductions



 








  • In Germany, all forms of tax relief refer to the income of an individual.
  • Most relief is given in the form of a deduction from taxable income.
  • The following amounts are subject to the definitions in law
Personal Relief Amount - EUR
Donations Allowable up to 5% of gross income.
Business expenses (for an employed person) A fixed annual deduction is allowed in the amount of EUR 920 without documentation. With documentation, a higher amount may be requested
Child allowance Annual sum of EUR 1,824 for a child .Additional EUR 1,000 for a child under 14 years old.
Life insurance payments Deductible up to a limit.
Insurance payments An annual fixed deduction of up to a limit.
Alimony up to EUR 13,805 per year.
Church Tax Fully deductible
Travel Expenses(to/from work) Up to EUR 4,500 per year.
Mortgage Interest Can be set off against rental income.
Home Office Up to EUR 1,250 per year.
Professional Travel Fully deductible


Germany Business Deductions

      In addition to the deductions / credits that were listed above, deductions and business expenses may be claimed as follows:

Business Deductions Amount - EUR
Offset of losses Loss up to 1 million EUR can be offset forward in one year. Loss above this amount can be offset up to EUR 1 million plus 60% of the current year taxable income.
This option is partially/fully denied in case of change of ownership of 25%-50%.
Loss can be carried back one year.
Transactions between associated parties These are transactions with associated companies with which there are significant ownerships or control associations.
When transactions between associated parties are concerned, they are closely monitored by the tax authorities while comparing them to accepted market prices.
Consolidated statements A parent company may submit consolidated tax statements for the subsidiary companies and so offset company profits against losses in other subsidiary companies.
Submission of a consolidated statement is conditional on the parent company holding in excess of 50% of the voting rights in the subsidiary company.
Financing expenses Interest is deductible up to 30% of the annual income before interest, depreciation and loss carried forward.
The limitation does not apply to interest expense of up to EUR 1 million .


Germany Depreciation of Fixed Assets

  • The customary method of depreciation in Germany is the depreciated balance method or the straight-line method.
  • In any case of depreciation according to the depreciated balance method it must not be more than twice the depreciation according to the straight-line method and must not be in excess of 20% per annum.
  • For fixed assets bought after 1.1.2008 only the straight line depreciation method is allowed.
The depreciation table (straight line) is as below:

Class of asset Annual Depreciation - %
Aircraft 5
Vehicles 16.6
Computers 33.3
Office Equipment 6-14
Machinery and Equipment 6-10






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