Value added tax – Most legal forms of business are subject to tax. Depending on the legal form, income tax, corporate income tax, sales tax, trade tax and/or capital gains tax are due by law. Under certain circumstances, it is possible for some companies to be exempt from one or more of these types of tax. What is the value added tax? What is the difference between VAT and sales tax? What is sales tax, simply explained? An overview! Back to: Taxes.
Value added tax (VAT) – tax for delivery & service
Value added tax – VAT for short – is usually levied on all turnover generated by a company in Germany for VAT purposes. This includes all supplies and services – as well as occasional ancillary transactions – that the company provides against payment as part of its business activities. VAT amounts that a company has paid for supplies and services it has received and that can be substantiated can be claimed as input tax deductions and thus reduce the entrepreneur’s VAT burden.
From an economic point of view, the own turnover tax thus represents a general consumption tax, but in Germany it ultimately functions as a transfer tax and is ultimately charged to the end consumer. Because it is passed on, sales tax is typically classified as an indirect tax. Currently, the standard German VAT rate is 19 percent – 7 percent on reduced goods – and is one of the main sources of revenue for financing the federal budget.
Other taxes for businesses:
If you want to learn more specifically about taxes for real estate companies, you can learn more here:
Which companies are subject to VAT?
Most companies do not only carry out tax-exempt turnover and are therefore naturally burdened with turnover tax. Therefore, this type of tax is basically relevant for all common legal forms of companies, starting with sole proprietorships (EU) and BGB companies (GbR)… to the general partnerships (OHG) and limited partnerships (KG)… to the limited liability companies (GmbH) as well as the stock corporations (AG).
In common parlance, the term value added tax – VAT for short – is often used and is sometimes also indicated on invoices or receipts. The name comes from the understanding that a tax is levied in trade and production at several stages of the value chain, whereas VAT uses the turnover generated from a sale or in a similar way as the basis of assessment. In purely fiscal terms, however, the term value added tax is no longer used in Germany; instead, there is talk of a sales tax with input tax deduction.
Overview of company law forms
You can find more information about the different legal forms under the following links. Starting with the sole proprietorship and the registered traders… to the various partnerships and corporations… to other companies such as the family foundation – all the essential aspects of formation, liability, tax burden and more explained simply and understandably! First of all, an overview of the individual legal forms of companies:
- Sole proprietorship (EU)
- Small business
- Registered traders (e. K.)
- Silent partnerships
- BGB companies / civil law partnership (GbR)
- Other companies
- Foundations / Family Foundations
- Registered associations (e. V.)
- Registered cooperatives (e. G.)
Taxes in Germany: List
Corporation tax (KSt), income tax (ESt), capital gains tax (KapESt), turnover tax (USt), trade tax (GewSt) – who pays what? In this overview of the different types of taxes / tax forms in Germany, you will find relevant taxes for you as an individual and for your business, depending on which legal form you have chosen. Also, after the tax list: How does the tax cycle work around month-end closing, year-end closing and balance sheet? A little insight for those starting their first company. What taxes are there? Simple explanations, definitions, tax optimization, an insight into taxes.