4 ms·

This argument is brought up over and over, but people forget that companies in Germany pay roughly 30% (depending on county) tax on their profits. As a solo ent

This argument is brought up over and over, but people forget that companies in Germany pay roughly 30% (depending on county) tax on their profits. As a solo entrepreneur with a registered company, that would mean if I make 100€ of profit, 30€ company tax are deducted, and then 25% of the remaining 70€ as capital gains tax when I pay myself the dividends - so I am left with ~53€. That is 47% tax in total, which is actually higher than the maximum personal income tax bracket (42%).

chii 4y ago
yes, this is double taxation, which i don't personally like. In australia, there's franked dividends, which basically passes the tax credits down to shareholders (effectively, companies pay a 30% tax, but give that same dollar amount as credits to shareholders, who can then use it as tax paid in lieu). See https://www.investopedia.com/terms/f/frankeddividend.asp https://www.investopedia.com/terms/f/frankeddividend.asp
leipert 4y ago
But if you get dividends or profits from stock as a private person that doesn’t apply and you just pay capital gains. If you have a company or are a solo entrepreneur you can also reduce your profits by expensing things via the company (tech, cars, etc.) or investing further.
- littlecranky67 4y ago
  I does apply equally if you got stocks - at least on a national level as AG (Aktiengesellschaft in Germany) pay equal amount of corporate taxes. But yes, it got kind of skewed with international companies like amazon etc. paying no taxes at all. But we should fix that (them not paying any corporate tax), and not punish small shops like me (again, I am a solo-enterpreneur/developer - if you tax me 30% corporate tax + 42% on dividends, I will leave germany next day).
  - leipert 4y ago
    I am just wondering which kind of „Selbstständigkeit“/incorporation you are talking about. If you are solo-selbstständig no special tax of 30% applies, maybe Gewerbesteuer which is much lower. If you are running a GmbH or UG or GbR things might be different, but then why don’t you keep assets inside of the entity? Then the entity could grow its assets and you could only take what you need and save some assets for the future. (Assuming you make more than what you need to maintain your lifestyle)
    - littlecranky67 4y ago
      Yes, a "Selbstständiger" is taxed with personal income tax, but as I wrote, I am incorporated ("1-Mann GmbH"). I was tax "Selbstständig" for over 5 years and moved to a GmbH (=LLC) for various reasons completely unrelated to tax discussions (mostly protection of private assets and limited liability but also other reasons). Edit: Corporate tax in Germany consists of two parts, Gewerbesteuer and Körperschaftssteuer. Those vary depending on where you are incorporated in Germany (Hebesatz), but 30% is a good rough estimate.
- littlecranky67 4y ago
  Regarding cars: Yes, it is cheaper to run business cars but its pretty limited. There is the 1% rule in germany, then a monthly of 1% of the cars shop-price (we use the nice word Bruttolistenneupreis) is considered income and taxed regularly. If a car costs 30.000€, that means you have to add 300€/monthly (virtually) onto your tax bill that is taxed as personal income. There are limits to the "you can tax deduct everything as a business" in Germany.

chii 4y ago

yes, this is double taxation, which i don't personally like. In australia, there's franked dividends, which basically passes the tax credits down to shareholders (effectively, companies pay a 30% tax, but give that same dollar amount as credits to shareholders, who can then use it as tax paid in lieu). See https://www.investopedia.com/terms/f/frankeddividend.asp https://www.investopedia.com/terms/f/frankeddividend.asp

leipert 4y ago

But if you get dividends or profits from stock as a private person that doesn’t apply and you just pay capital gains. If you have a company or are a solo entrepreneur you can also reduce your profits by expensing things via the company (tech, cars, etc.) or investing further.

littlecranky67 4y ago
I does apply equally if you got stocks - at least on a national level as AG (Aktiengesellschaft in Germany) pay equal amount of corporate taxes. But yes, it got kind of skewed with international companies like amazon etc. paying no taxes at all. But we should fix that (them not paying any corporate tax), and not punish small shops like me (again, I am a solo-enterpreneur/developer - if you tax me 30% corporate tax + 42% on dividends, I will leave germany next day).
- leipert 4y ago
  I am just wondering which kind of „Selbstständigkeit“/incorporation you are talking about. If you are solo-selbstständig no special tax of 30% applies, maybe Gewerbesteuer which is much lower. If you are running a GmbH or UG or GbR things might be different, but then why don’t you keep assets inside of the entity? Then the entity could grow its assets and you could only take what you need and save some assets for the future. (Assuming you make more than what you need to maintain your lifestyle)
  - littlecranky67 4y ago
    Yes, a "Selbstständiger" is taxed with personal income tax, but as I wrote, I am incorporated ("1-Mann GmbH"). I was tax "Selbstständig" for over 5 years and moved to a GmbH (=LLC) for various reasons completely unrelated to tax discussions (mostly protection of private assets and limited liability but also other reasons). Edit: Corporate tax in Germany consists of two parts, Gewerbesteuer and Körperschaftssteuer. Those vary depending on where you are incorporated in Germany (Hebesatz), but 30% is a good rough estimate.
littlecranky67 4y ago
Regarding cars: Yes, it is cheaper to run business cars but its pretty limited. There is the 1% rule in germany, then a monthly of 1% of the cars shop-price (we use the nice word Bruttolistenneupreis) is considered income and taxed regularly. If a car costs 30.000€, that means you have to add 300€/monthly (virtually) onto your tax bill that is taxed as personal income. There are limits to the "you can tax deduct everything as a business" in Germany.