Capital 2 Flashcards
How is the schedular income tax in Germany?
Accrual Method:
(1) Income from agriculture and forestry
(2) Income from trade or business
(3) Income from independent professional services
Cash method (Standard income):
(4) Income from employment, including compensation
from past employment
(5) Income from capital investment
(6) Rental income from immovable property and income
from royalties
(7) Other income, i.e. gains from private transactions,
alimony, annuities
Schedular income tax: Germany:
What are tax breaks and the restriction of loss compensation?
Tax breaks:
- Different for different categories of income
- Example: category (4) = €1,230, category (5) = €801
Restriction of loss-compensation
- Losses from capital investments cannot be compensated with positive income from other categories
- Income from capital investments cannot be compensated with losses from other categories (exceptions)
Schedular income tax: Germany:
What are the tax rates and tax assessment?
Tax rates
- Income from capital investments (5) is subject to a final withholding tax at a rate of 25%
- All other categories of income are taxed progressively at a rate of 14% to 45%
Schedular income tax: Germany:
What are the tax rates and tax assessment?
Tax assessment
- Income from categories (4) and (5) is taxed at source; withholding tax might be credited against tax due
- Filing of a tax return for all other categories of income
What is the Schedular income tax in United Kingdom
a) Income from employment (Part 2 of the considered Income Tax Act)
b) Pension income (Part 9)
c) Social security income (Part 10)
d) Trading income (Part 2)
e) Property income (Part 3)
f) Savings and investment income (Part 4)
g) Miscellaneous income (Part 5)
h) Charitable Trusts (Part 10)
i) Accrued Income Profits (Part 12)
j) Tax Avoidance (Part 13)
Scheudlar income tax: United Kingdom:: Tax breaks?
Tax breaks
- Different for different categories of income
- Example: part of interest from individual savings account is tax exempt
Scheudlar income tax: United Kingdom:: Restrictions of loss compensation?
- Sometimes losses arising under a particular schedule are deductible only in computing profits from the same source
- Losses in a trade, profession or vocation (trading and profit income (Part 2)) can be deducted optionally from total income before deducting personal reliefs
- Capital gains are taxed separately
Scheudlar income tax: United Kingdom:: Tax rates?
- Dividends: 8.75% - 39.35%– Savings: 0% - 45%
- Other income: 20% - 45%
- Capital gains: 10% - 20% (up to 28% on gains related to residential property)
Scheudlar income tax: United Kingdom:: Tax assessment?
Tax assessment
- Income from employment, in many cases savings (e.g. interest paid by banks) and certain other categories is taxed at source; withholding tax is credited against tax due
- Filing of a tax return for all other categories of income
What is the concept of the Accrual method (comprehensive income, accrual 2: only realised capital gains)?
- Income defined as profit
- Profit as difference between the net assets at the end of the tax year and the end of the proceeding tax year
- Gains and losses related to business generally fully included in the tax base and taxed at ordinary tax rates upon realisation
What is the cash method (standard income)? Regarding income and capital gains
- Income is defined as the differences between earnings over expenditures to acquire, secure and/or maintain revenue
- Capital gains or losses from the disposition of private assets are generally not subject to income tax
NB: capital gains and capital losses are subject to tax if a capital gains tax exists
What is the timing difference between cash method and accrual method?
Cash method
- Income (earnings and expenditure) in general recognized upon payment
- Cash method does not apply in case of acquisition of assets: acquisition costs (expenditure) capitalised and deducted as capital allowances, e.g. acquisition costs for buildings in case of rental income
What is the timing in accrual method?
Accrual method: income is based on accounting profits, income and expenditure in the year they occur regardless of actual payment
- Realisation principle
- Imparity principle (prudence)
- Interest and liquidity effects due to different tax payments in different years; effect is increased by progressive tax schedules
What are the two repercussions (Auswirkungen) in a global income tax, whenever an individual, partnership or company makes a loss?
- Any year of assessment using as its basis period one in which the loss was incurred will have a nil tax assessment
- The loss is, in tax terms, an asset which may be used to cancel out or relieve tax assessments of that
- or other years, so that the taxpayer will either pay less, or he will be able to claim a reimbursement of taxes
What is the loss compenstion under a schedular income tax system?
= loss compensation may be limited
- Losses arising under a particular schedule are deductible only in computing profits from the same source
