1 / 20

3. Taxing profit shares, dividends and other income from sources (4) to (7)

3. Taxing profit shares, dividends and other income from sources (4) to (7). Topics : Partnerships Dividends Tax allowances Other Income. Company Taxation: Partnership. → Business entity is no legal person. English Term: General commercial partnership Limited commercial partnership.

elin
Download Presentation

3. Taxing profit shares, dividends and other income from sources (4) to (7)

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. 3. Taxing profit shares, dividends and other income from sources (4) to (7) Topics : Partnerships Dividends Tax allowances Other Income

  2. Company Taxation: Partnership → Business entity is no legal person English Term: General commercial partnership Limited commercial partnership German Term: Offene Handelsgesellschaft (oHG) Kommanditgesellschaft (KG)

  3. Taxing partners § 15 (1) Nr. 2 EStG covers: • Profit share of the partner + • Other payments flowing from the partnership to the partner (These other payments are not qualified as income from employment, capital investments or from property!)

  4. Taxing partners - § 15 (1) Nr. 2 EStG Example: Profit from business before tax = 100 A limited commercial partnership has: • two limited partners (A, B) with a 20 % rate of participation per person and • a general partner (C) with a 60 % rate of participation

  5. Income from business A B C and trade Profit: 60 + 60 + 20 + 20 + 20 + 20 + 100 + 20 + 20 + 60 Only the legal persons A, B and C are liable to income tax, but not the partnership itself ! The profit share from business and all other payments are qualified as income business and trade !

  6. Taxing partners pursuant to § 15 (2) Nr. 2 EStG

  7. Taxing partners pursuant to § 15 (2) Nr. 2 EStG • Going on with the case: • Partner (C) is managing the partnership and receiving a management fee totalling 50. This expense is included in the profit & loss statement • Which source of income is effected?

  8. Income from business A B C and trade Profit: 60 + 60 + 20 + 20 + 20 + 20 Fee + 50+ 50 + 150 + 20 + 20 + 110 The management fee is qualified as income from business and trade , when dealing with a partnership !

  9. Income from capital - § 20 EStG Main sources of income from capital investments: • Dividends - § 20 (1) No. 1) • Interest - § 20 (1) No. 7) • Income from silent partnerships - § 20 (1) No. 4 • Capital gains from the sale of assets - § 20 (2) No.1

  10. Corporation / Limited Company: → Business entity is a legal person English Term: Limited liability comp. Stock corporation GermanTerm: Gesellschaft mit beschränkter Haftung (GmbH) Aktiengesellschaft (AG) • Corporation is liable to Corporation Tax •IndividualShareholder are liable to Income Tax → Problem of double taxation

  11. Company level:Corporation Tax in Germany Profits before tax CT 25 % (till 2007) CT 15 % Profits after tax Withholding tax 20 % Withholding tax 25 % Net dividend = Cash dividend former system 100 - 25 75 - 15 60 from year 2009 100 - 15 85 - 21.25 63.75

  12. Shareholder level:Private dividends Net dividend Gross up: Withholding tax = Gross dividend tax free: 50 % taxable income (Assessment) Half-Income system (former system) 60 + 15 75 37.5 37.5 Abgeltungsteuer (from year 2009) 63.75 0 Marginal income tax (45 %) tax credit Withholding tax payable income tax Total tax load (CT + WT) 16.87 - 15 1.87 26.87 36.25

  13. „Abgeltungsteuer“(§ 32d para. 1)= Withholding Tax (without Assessment) The new system must be considered for: • private dividends, • interest • income from silent partnerships, • capital gains from the sale of assets • other capital income pursuant to § 20 EStG

  14. Exceptions(§ 32d para. 2 No. 1b and 3a EStG) Abgeltungsteuer = Withholding Tax (without assessment) does not apply for: • Dividends, if the shareholder is holding at least 25% of shares, • Interest and silent income paid by a corporation, if at least 10 % of shares are being held

  15. Shareholder level:Dividends received within a business Net dividend Gross up: Withholding tax = Gross dividend tax free: 50 % tax free: 40 % taxable income (Assessment) Half-Income system (former system) 60 + 15 75 37.5 37.5 Part-Income system (from year 2009) 63.75 + 21.25 85 34 51 Marginal income tax (42 %) Marginal income tax (45 %) tax credit Withholding tax payable income tax 15.75 - 15 1.75 22.95 - 21.25 1.7

  16. Income from capital - § 20 EStG As far as the „part-income-system“ applies a savings allowancepursuant to § 20 (9) EStG (singles: € 801 / married couples: € 1,602) is deductible. Itemised income-related expenses and the standard allowance are not deductible anymore (see: § 20 para. 9 EStG).

  17. Income from Employment§ 19 EStG Deductible expenses are: • Itemised income related expenses pursuant to § 9 EStG • A standard allowancepursuant to § 9a No. 1a EStG (920 € per person)

  18. Other incomepursuant to § 22 EStG Since year 2009, this provision covers short term gains from the disposition of real property or personal property where the holding period was less than: • 10 years (for real property) • 1 year (for personal property). Tax free: a gain below 600 €.

  19. Income tax rate • Scale of charges (see: § 32a (1), (5) EStG) • Top marginal rate: 42 % / 45 % • Additional solidarity charge: 5.5 % of income tax • Joint assessment for spouses (see: splitting table)

  20. Deductible taxes - § 36 (2) Nr. 2 EStG

More Related