Germany's Tax Structure and System
Germany 's Tax Structure and System
German Basic Law The power to impose taxes is divided between the federal government and the provinces, determined by German basic law (Taxation in Germany, 2000). Germany follows the principle of world wide taxation for individuals and also corporations (Your Tax in Germany, 2005). Non-residents are taxable only on income received from German companies. Germany also has about thirty varieties of non income taxes that are imposed on such things as lotteries, inheritance and motor vehicles (Emerson, 2004). Germany imposes very high tax rates for its residents but they also allow for large deductions compared to the United States. Many think of Germany 's tax system as complex but the country has done significant restructuring to simplify its taxes. American and German citizens would consider Germany to be dissimilar from the U.S.; however, both tax systems have many similar aspects.
Residency
Not just anyone can claim residency in Germany. There are strict and detailed qualifications that must be met to be able to file taxes in the country. The taxpayer 's life must be centered in Germany. If this does not apply, then a taxpayer can still file taxes if they have lived in Germany six continuous months within a two year period (Your Tax in Germany, 2005). Similarly, the U.S. has qualifications to be required to file a return. Like Germany, America taxes the income of all American citizens and resident aliens regardless of the source of the income. Also, any person receiving income in the United States will be taxed on that income (Taxation in Germany, 2000).
Return Time Frame Once a person has claimed residency, they have to file a return within a certain amount of time. The calendar year for Germany is from January 1 to December 31, just like the U.S. Individuals must abide by this calendar year. The Individual return is due within five months after the end of the tax year, which is May 31 (U.S. is April
German Basic Law The power to impose taxes is divided between the federal government and the provinces, determined by German basic law (Taxation in Germany, 2000). Germany follows the principle of world wide taxation for individuals and also corporations (Your Tax in Germany, 2005). Non-residents are taxable only on income received from German companies. Germany also has about thirty varieties of non income taxes that are imposed on such things as lotteries, inheritance and motor vehicles (Emerson, 2004). Germany imposes very high tax rates for its residents but they also allow for large deductions compared to the United States. Many think of Germany 's tax system as complex but the country has done significant restructuring to simplify its taxes. American and German citizens would consider Germany to be dissimilar from the U.S.; however, both tax systems have many similar aspects.
Residency
Not just anyone can claim residency in Germany. There are strict and detailed qualifications that must be met to be able to file taxes in the country. The taxpayer 's life must be centered in Germany. If this does not apply, then a taxpayer can still file taxes if they have lived in Germany six continuous months within a two year period (Your Tax in Germany, 2005). Similarly, the U.S. has qualifications to be required to file a return. Like Germany, America taxes the income of all American citizens and resident aliens regardless of the source of the income. Also, any person receiving income in the United States will be taxed on that income (Taxation in Germany, 2000).
Return Time Frame Once a person has claimed residency, they have to file a return within a certain amount of time. The calendar year for Germany is from January 1 to December 31, just like the U.S. Individuals must abide by this calendar year. The Individual return is due within five months after the end of the tax year, which is May 31 (U.S. is April
Cited: Anderson, Kenneth E., John L. Kramer, and Thomas R. Pope (Eds). Federal Taxation 2005. Upper Saddle River: Prentice Hall, 2005. Emerson, Chuck. Paying Taxes in Germany (2004). March 23, 2006. German Embassy: Washington D.C. March 23, 2006. http://www.germany-info.org/relaunch/info/facts/facts/questions_en/landandpeople/name2.html. Germany Income Taxes and Tax Laws (2005). March 23, 2006. http://www.worldwide-tax.com/germany/germany_tax.asp. Germany V.A.T. and Other Taxes. March 23, 2006. Taxation in Germany. 2000. Horwath Germany Group. March 20, 2006. Your Tax in Germany (2005). Expatica Communications. March 23, 2006.