Indirect taxation in Germany

1. INDIRECT TAXES
TAXATION OF INDIVIDUALS, VAT, ECOLOGICAL TAX, RESPONSABILITIES
Wahidulllah Abedi

2. TABLES OF CONTENTS
 I. Indirect taxes
 II. Value Added Tax
 III. Ecological taxes and Excise duty
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3. I. INDIRECT TAXES
A. DEFINITION
 Indirect Taxe:
 “those which are paid by households and firms when they engage in spending,
such as sales tax and Value Added Tax (VAT). Indirect taxes are also called
'expenditure taxes” (Economic Online website)
 Taxation on an individual or entity
 Two type of indirect taxes:
 Specific tax
 Example: Packet of cigarettes
 Ad valorem tax
 Example: Value Added Taxe
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4. I. INDIRECT TAXES
A. DEFINITION
 Direct taxe :
 a tax is said "direct" when it is paid and borne by the same person, which means
that the taxpayer and the direct taxpayer are the same person, when there is not a
intermediary between treasury and the ratepayer
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5. I. INDIRECT TAXES
A. DEFINITION
 Indirect tax: a regressive tax
 The same for everybody
 Don’t depends of your income
 Direct tax: a progressive tax
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Difference between indirect tax and direct tax:

6. I. INDIRECT TAXES
A. DEFINITION
 Direct taxe : Income tax
 A tax that governments impose on income generated by businesses and individuals within their
jurisdiction.
 Source of revenues for the governments to fund public services, pay government obligations, and
provide goods for citizens.
 How Income tax works:
 For individual income tax :
 Is levied on wages, salaries, and other types of income
 International Reduce Service offers deductions
 Example: if an individual owes $20,000 in taxes but qualifies for $4,500 in credits, his tax obligation reduces to
$15,500 ($20,000 - $4,500)
 For Business income tax:
 Pay income tax on their earnings
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7. I. INDIRECT TAXES
B. WHO PAYS ? WHO COLLECT ? AND FOR WHAT ?
 Who pays?
 Consumers, people when they sell something
or when they consume a service
 More generally, individuals or entity
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8. I. INDIRECT TAXES
B. WHO PAYS ? WHO COLLECT ? AND FOR WHAT ?
 Who collect them ?
 An entity in the supply chain
 A producer
 A retailer
 A direct tax is one that cannot be shifted
by the taxpayer to someone else,
whereas an indirect tax can be
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9. I. INDIRECT TAXES
B. WHO PAYS ? WHO COLLECT ? AND FOR WHAT ?
 Indirect taxes represent:
 26% of an individual’s budget
 Re-injected in public services like:
 Hospitals
 Schools
 Re-injected to put in place social policies
 Stop smoking
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10. I. INDIRECT TAXES
C. EXAMPLES OF INDIRECT TAXES
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11.  VAT : indirect tax which is imposed on goods and services at each stage of
production,
starting from raw materials to final product.
 VAT introduced in France by economist “Maurice Laure” in 1954.
 VAT is mandatory in European countries.
 15% VAT rate in European Union is mandatory.
 Reduced VAT rate in European Union is arbitrary.
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II. VALUE ADDED TAX
A. DEFINITION

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From - To Regular rate Reduced rate
January 1968 – June 1968 10 % 5 %
July 1968 – December 1977 11 % 5.5 %
January 1978 – June 1979 12 % 6 %
July 1979 – June 1983 13 % 6.5 %
July 1983 – December 1992 14 % 7 %
January 1993 – March 1998 15 % 7 %
April 1998 – December 2006 16 % 7 %
Since January 2007 19 % 7 %
II. VALUE ADDED TAX
B. VAT RATES FROM STARTS UNTIL NOW IN GERMANY

13.  A VAT is levied at each stage of production (raw material, manufacturing & sales of
goods)
 At each stage of the supply chain, a specific amount in percentage get locked
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II. VALUE ADDED TAX
C. HOW VAT WORKS ?

14. EXAMPLE
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15.  Generally, VAT must be reported and paid quarterly to
the tax office
 If the annual VAT liability is over 7,500€, the pre-
reporting must be done monthly
 If it is less than 1,000€, once a year is enough.
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II. VALUE ADDED TAX
D. VAT REPORTING AND PAYMENT METHOD

16. II. VALUE ADDED TAX
E. REGULAR & REDUCED VAT RATES IN GERMANY
 Regular rate is 19% for all products
 Reduced rate is 7% for the following goods and services :
 Groceries
 Books, newspapers and other products of the graphics industry, except E-Books
 Entry tickets for theatres, concerts and museums
 Short-term (i.e. less than six months) rental of residential and sleeping premises
 Furthermore, there are other special tax rates for farmers at 5.50 percent and 10.70
percent.
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17. II. VALUE ADDED TAX
F. VAT EXEMPTIONS
 There are exemptions from VAT in Germany for the following goods and
services, among others:
 Export deliveries to (non-EU states)
 EU internal deliveries
 Brokering of loans and other financial transactions
 Long-term (more than six months) rental of residential and sleeping premises
 Medical treatment by doctors.
 Buying and selling of property
 Small entrepreneur (Kleinunternehmer)
(annual turnover not exceed €17,500 and will presumably not exceed an
amount of €50,000 in the current calendar year).
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18.  In 2018, Germany passed a law on online
trader and came into effect on January 1st,
2019
 As a result, online sellers on online trading
platforms must comply with new VAT
regulations
 Sellers need a Tax-Registration and a
Germany Tax-ID and must apply for a Tax-
Certificate to forward selling on Amazon &
Ebay
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II. VALUE ADDED TAX
G. VAT ON ONLINE SELLER IN GERMANY

19. Tourist or visitor
 A ‘tourist or visitor’ is any person who permanently
habitually lives in a country outside the EU
 EU citizens permanently living in non-EU countries
also eligible for the VAT refund
 Short living in EU countries may also defined as
‘visitor’
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II. VALUE ADDED TAX
H. WHO IS ELIGIBLE FOR VAT REFUND IN GERMANY

20. II. VALUE ADDED TAX
I. STEPS FOR VAT REFUND IN GERMANY
 original receipt
 purchased goods
(in its original packaging and with price tag)
 your passport together with proof of residency
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21. II. VALUE ADDED TAX
L. VAT ADVANTAGE AND DISADVANTAGE
 Pros: Hard to escape
 Cons: Costlier to implement
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22. III. ECOLOGICAL TAXES AND EXCISE DUTY
A. ECOLOGICAL TAXES
Current measures
 2011  Energiewende
 Taxation on polluting cars
 Taxation on polluting businesses
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23. III. ECOLOGICAL TAXES AND EXCISE DUTY
A. ECOLOGICAL TAXES
Proposal
 Deterring role  increase expenses
 Tax meat at a normal rate  to reduce meat consumption
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EXPENSES
19
%

24. III. ECOLOGICAL TAXES AND EXCISE DUTY
B. EXCISE DUTY
 Same legislation in EU since 1993  to facilitate to Single Market
 Deterrent function  increase the price.
 Only specific products
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25. III. ECOLOGICAL TAXES AND EXCISE DUTY
B. EXCISE DUTY
 The rate depending on the use of the product and the user
 Example :
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Motor fuel
motor fuels (for
commercial and
industrial use)
heating and electricity
Rate for business Rate for non-business
Rate
expressed per
Euro per
gigajoule
2.6 0.3 0.15 0.3

26. III. ECOLOGICAL TAXES AND EXCISE DUTY
B. EXCISE DUTY
 Some examples
 Alcohol :
 Beer : the rate depending on the alcohol degree
 Wine : no minimal rate
 Tabaco :
 Cigarettes : at least 90€ for 1000 cigarettes
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27. REFERENCES
 https://www.economicsonline.co.uk/Definitions/Indirect_taxes.html
 https://www.brainkart.com/article/Differences-between-Direct-Taxes-and-Indirect-Taxes_35030/
 https://in.finance.yahoo.com/news/basics-explained--what-are-direct-and-indirect-taxes-
064840748.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQA
AAJZ6_zvf1jQ0acyfPh923vKtCYsQS36x11qBiqw-
YvU9aPdCGblqokiNQF2Ts0mmCTbWWjD0CHNUeL3uwu3uW3m9Oz4YTAMkQfQsdhkDw6hUyo0pwl2BusTRX4_I4
Lv93hN4gr6k1h5q_WF8FA9_dNXNdTOcfLssP3xpSsSz2mpB
 https://www.pwc.de/de/internationale-maerkte/doing-business-in-germany-guide-2018.pdf
 https://www.export.gov/article?id=Germany-VAT
 https://www.germany.info/us-en/service/09-Taxes/vat-refund/906296
 https://www.investopedia.com/ask/answers/071114/how-do-changes-working-capital-affect-companys-cash-
flow.asp
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28. REFERENCES
 https://www.companyformationgermany.com/vat-in-germany
 http://www.worldwide-tax.com/germany/ger_other.asp
 https://wwkn.de/en/about-german-taxes/value-added-tax-vat/
 https://sirelo.fr/allemagne/les-impots-en-allemagne/
 https://ec.europa.eu/taxation_customs/sites/taxation/files/resources/documents/taxation/excise_duties/alcoho
lic_beverages/rates/excise_duties-part_i_alcohol_en.pdf
 https://ec.europa.eu/taxation_customs/business/excise-duties-alcohol-tobacco-energy_en
 https://www.strategie.gouv.fr/publications/transition-energetique-allemande-fin-ambitions
 https://fr.wikipedia.org/wiki/Environnement_en_Allemagne
 https://www.fioulmarket.fr/actualites/transition-energetique-en-allemagne
 https://programmevoltaire.wordpress.com/2017/01/13/lallemagne-et-sa-transition-energetique/comment-
page-1/
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29. THANK YOU FOR YOUR ATTENTION
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