Germany Tax Deductions

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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 20% of gross income.
Business expenses (for an employed person) A fixed annual deduction is allowed in the amount of EUR 1000 without documentation. With documentation, a higher amount may be requested
Child allowance Annual sum of EUR 4,000 for a child.
Life insurance payments Deductible up to a limit.
Unemployment Insurance Up to EUR 2,800 per year.
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 indefinitely.
Only 60% of loss exceeding 1 million EUR can be offset forward.
This option is partially/fully denied in case of change of ownership of 50%, subject to terms.
Loss can be carried back two years up to EUR 10 million for losses in 2020 to 2023.
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 and certain other terms including an agreement for profit & loss transfer for a period of five years minimum..
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 3 million .

Germany Depreciation of Fixed Assets

  • The customary method of depreciation in Germany for movable assets is the straight-line method.
  • For buildings both the depreciated balance method and the straight line method are in use.
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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