CIT

Question 1

What are the different types of dividend distribution?

How much is (not) tax deductible?

How much of related expenses can we deduct?

How much tax on the profit?

1.
2.
3.
4.

Answer 1

1. a. Business Assets - Corporation: (Shareholder >= 10%, §8b I KStG): 5% of dividend taxable (§8b V KStG); 100% expenses deductible; 15% CIT (§23 I KStG) and solidarity surcharge
2. b. Business Assets - Corporation: (Shareholder below 10%, §8b IV KStG): 100% dividend taxable, 100% related expenses deductible; 15% CIT (§23 I KStG) and solidarity surcharge
3. Business Assets Individual (Partial Income Method); 60% of dividend taxable (§3 no. 40 lit. d EStG); 60% of expenses deductible (§3c II EStG) max 45% PIT and maybe soldarity surcharge
4. Private Assets Individual (Seperate Tax Scale); 100% dividend taxable (§20 I no. 1 EStG), related expenses NOT deductible! only savers lump sum §20 IX EStG; 25% income tax based on separate tax scale and maybe solidarity surcharge (§32d I EStG)

BA: >=10%; 5% dividend tax; <10% 100% tax; all expenses deductible; 15% CIT

BAI: 60% dividend taxable; 60% expenses DEDUCTIBLE; max 45% PIT

PAI: 100% dividend taxable; no expenses deductible only savers LS, PIT 25%

Question 2

What’s the checking scheme?

Answer 2

1. Personal Tax Liability
2. Material Tax Liability
   2.1 always income from business operations
   2.2 always profit determination acc to provisions of EStG and KStG
3. Tax liability: taxable income x tax rate (CIT - advanced payments of CIT - withheld cap gains (31) = final payment of refund (31))

Question 3

How do we do the accrual accounting method?

1.
2.
3. (4)
4.
5.
6.

Answer 3

(§§4 I, 5 EStG)

• Determine Tax balance sheet/ reconciliation (profit from comm. BS and maybe corrections)
• Corrections of contributions and withdrawals (any income not related to business - correct contribution | any expense not related to business- withdrawal)
• any operating expenses exempt from tax?
  Check: hidden distribution (§8 III 2 und 3)
  Check: non deductible operating expenses (§8b III)
  Check: tax exempt operating income (§8b I, II)
  Check: donations and membership subscription (§9 no 2 )
• loss deduction §8 I and §10d EStG
• • tax allowance pursuant to §24-25 ( not for corporation)

= taxable income

Question 4

What is…

1. The principle of seperation?
2. the principle of transparency?

Answer 4

1. corporation and shareholder strictly seperated for tax purposes; corporation = legal entity liable to CIT; CIT and TT imposed at lv of corporation; eg GmbH, AG, SE
2. partnerships and partners are not seperated for tax purposes, profit and losses taxed on partners lv (NP=PIT, LE=CIT); partnerhship subject to TT, eg KG, OHG

Question 5

What is dealing at an arms length?

Answer 5

• principle that applies to business contracts between shareholder and corporations

Question 6

4 characterisitcs of Hidden Contribution

1.
2.
3.
4.

Answer 6

1. shareholder or associated person with shareholder
2. outside the contributions under company law, no open contribution
3. a contributable pecuniary benefit (bc eg tangible fixed asset)
4. is caused by shareholder company relationship (third party)

Question 7

How to proceed when there is a hidden contribution in the exercise

Answer 7

1. check 4 conditions + conclusion
2. income determination (profit - HC (difference price and MV/BV)= taxable income
3. tax consequences (SH): BV of shares in SH have to be increased by HC difference (§6 VI); adjusting acquisition costs of the machine to MV

Question 8

Criteria for Hidden profit distribution?

1.
2.
3.
4.
5.

Answer 8

• asset reduction or prevented increase (bc of eg payment
• caused by shareholder company relationship (eg arms length xx < actual p)
• affects amount of difference /profit in meaning of §4 I 1 EStG, by xxx has reduced this difference / profit
• is not based on SH resolution

+ conclusion

Question 9

Whats the effect of a HPD on taxation of SH?

1.
2.

What happens if the shares in the company are part of SH´s…

3. Private assets?
4. Business Assets?

Answer 9

• so far SH generated income acc to §19 I 1 no 1 EStG (eg)
• due to HPD a reclassification of wages (§19 EStG) to a HPD (§20 I no1 s.2 EStG) occurs in the amount of the HPD

3. a seperate tax scale will be applied (§32d I EStG)
4. the partial income method has to be applied (§3 no. 4 lit. d EStG) as well as the progressive PIT tax rate acc to §32a EStG