Some of the major items in determining taxable income are
considered below:
– Capital gains are, in general, treated as ordinary income and
taxed at ordinary rates (except gains from the sale of shares,
see above). 100% of gains realized on the sale of real estate
and buildings may be offset against the cost of similar assets
acquired in the year of sale, the preceding year, or the follow-
ing 4 years (6 years for buildings – roll-over relief).
– Non-taxable income includes declared and constructive con-
tributions to capital.
– Organizational expenses incurred as a result of forming a cor-
poration or increasing its capital may not be capitalized. They
must instead be deducted in the year incurred. Organizational
expenses include accountant and attorney fees and registra-
tion fees, among other things,
Salaries and other compensation paid for the services of
shareholder-employees are deductible. The compensation
must be at arm’s length; otherwise, a constructive dividend
may be imputed.
Rental expense in connection with the business may be
deducted as incurred.
Interest expenses are generally deductible unless they relate
to tax-exempt income (other than dividends and capital
gains from the sale of shares). But the deduction of interest
expenses is restricted due to the earnings stripping rules .
Repair and maintenance expenses are deductible in the
period incurred.
Charges by a foreign parent for providing certain assets or
services to its German subsidiary are deductible if at arm’s
length. To the extent that they exceed an arm’s length price,
they are treated as constructive dividends.
Excise tax and real estate tax are all deductible for
corporate income tax purposes.
Corporate income tax and trade tax are non-deductible
expenses, however.
Other non-deductible expenses include expenses relating to
tax-exempt income; in addition, as a general rule, expenses
for hunting rights, yachts or guest houses not located on
business premises, and 50% of fees paid to members of the
supervisory board are not deductible.
Business gifts worth up to € 35 per recipient per year are
deductible if they are accounted for separately.
Only 70% of reasonable business entertainment expenses
are deductible.
EU Forecast
euf:ba18f:201/nws-01