Exercises how to approach Flashcards
Should income be classified as income from trade or business?
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- criteria for this + all negotiations (farming, self employment, asset management)
- yes it is under §15 I 1 nr. 1 EstG
Is it income from self employed work?
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- check catalogue: §18 I no. 1 EStG
- deployment of own expertise/ exclusively and anonousmly
- criteria (4)
- conclusion
Analyze MTL (self employed xy)
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- occupation xy paragraph “”” i.c.w. parapgrah “””
- income (eg fee as operating revenue §4 IV) -> tax free or not? inflow?
- expenses (eg insurance §4 IV)
income - deductible expenses + leave out everything not paid in the respective year
Determine the surplus/ profit for 01
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- class of income (eg deoendent = bound to instructions, has contract etc)
- income in meaning of §8 I EStG -> what? exempt? inflow?
- income related expenses §9 I EStG -> what? deduct? outflow?
- determine surplus of income over income related expenses (§§8-9a) (also, gifts under 60 euro not taken as income)
Two companies. A is 100% shareholder of B. B sold A house for 7000 even though it was worth 9000.
In BS of A its recorded at acquisition cost 7000.
Annual profit A = 340000
-> Determine the Material Tax Liability of A for corporate tax purposes. Caclulate the taxable income for corporate tax purposes as well as the corporate tax.
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- A = corporation -> income Business operations
- income determination in accordance with EStG and KStG
- assess: do we have a hidden dividend distribution? (4 characteristics with reasoning)
- conclusion: yes or no
- increase in acquisition costs of the property bought by A of 2000 (DR machine DR profit)
- hidden distributions fully tax exempt §8b I KStG i.c.w. §20 I no 1,2 EStG
- 5% non deductible business expense §8b KStG
- taxable income: 340000 + 2000 - 2000 + 100 = 340100
- tax liability: CIT of 15%Wh
What are the 4 characterisitcs of Hidden Dividend Distributions?
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- asset reduction or prevented asset increase
- …which is caused by the shareholder - company relationship
- affects the profit of company to its disadvantage
- no shareholder resolution (mostly no clues in facts)
ALWAYS REASON
Whats the subjective net principle and objective net principle (+ examples)?
- objective: income is reduced by income related expenses or operating expenses; e.g. professional liability insurance
- subjective: the part of the income used for the essential living requirements of a person must be excluded from the tax base (tax exemption of the subsistence minimum). deductibility must be explicitly mentioned in the tax code; e.g. private health insurance
How are the following treated in Tax Accounting?
- Capitalizing Internally produced intangible fixed assets
- Threatened Losses
- prohibited to cap, (§5 II EStG) -> tax BS different to commercial BS; DR expense CR cash
- acc to §5 IVa EStG, can only be recognised on tax BS when the happen -> no difference to commercial BS DR expense CR Bank
What does the realization principle state?
increases in value exceeding the prodution costs may only be recognized as income if they have been realized through sales; profit recorded in the year of payment and delivery
VAT
F buys services from C for his company for 119 Euros.
F sells C an office chair for 350 Euros.
what are the amounts of output and input VAT of F?
How high is the overall VAT refund to F, respectively, the Value added tax payment of F?
- Input VAT: (Gross purchase price * tax rate) / (100 + tax rate) -> 119 * 19 / 119
-> this is the amount that F can deduct as input VAT - output VAT: net sales price * tax rate% -> 350*0.19 = 66,5
-> F issues an invoice to C with output VAT in this amount - F has to pay office 66.5-19= 47.5
How to account for these in the tax BS?
- Capitalising intangible assets
- A provision of threatened losses of 2000€ was recorded in the commercial BS in 20x1. In 20x2 the claim - for which the provision was recorded in 20x1 - is made and 2000€ have to be transferred to the party making the claim.
- How to calculate the new profit for the tax BS?
- prohibition of cap; DR expense, CR expense
- Provision for threatened losses cannot be recognized on the BS in 20x1. BC of the realization of the threatened losses in 20x2, the expenses have to be recognized in the tax BS in 20x2. (no difference from commercial BS); DR expense CR bank
- profit in commercial BS - reverse cap - expenses for realized threatened losses = profit in Tax BS
VAT | Plumber repairs (other service: §3 IX UStG) heating system in the office of entrepreneur in Aachen. Is this a taxable transaction?
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F2ESPCSC
- according to facts: §3 IX USG
- two parties P and C (no internal sales)
- P = entrepreneur (§2 I UStG) according to facts
- other service from entrepreneur (P) to entrepreneur (C) / B2B
- place of other service = cologne = germany (as defined by §1 II UStG) because the service is rendered where the recipient (C) operated his business (§3 a II UStG)
- for a consideration (§10 UStG) accorording to facts xxx
- P repairs heating = main activity of a plumber (§2 I 2 UStG) = within the scope of his business
- conclusion: turnover taxable according to §1 I 1 No. 1 UStG
VAT | F is a furniture dealer and C is engineer. Both are entrepreneurs in the meaning of § 2 UStG and both provide taxable services according to §1 I no. 1 UStG. F buys services from C for his company in the amount of 119€ gross (§12 I UStG). The requirements of §15 I no. I UStG are fulfilled. F sells an office chair to C for 350 net (§12 I UStG)
Determine amount of output and input VAT of F. How high is the overall VAT refund to F, respectively, the value added tax payment of F?
- input VAT: g(ross purchase price * tax rate ) / 100+tax rate = 119*19 / (100+19) =19 (F can deduct input VAt in this amount
- output VAT 350 * 0,19 = 66,5 (net sales price * tax rate / 100 -> F issues an invoice to C with output VAT in this amount
- F has to pay to tax office 66.5-19 = 47.5
Someone with dependent employment. Determine surplus /profit of year
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- class of income (contract = employed; bound to instructions)
- income within the meaning of §8 I EStG (gifts below 60 not taxable)
- income related expenses in meaning of §) I EStG
- determination of surplus of income over income related expenses (§§8-9a EStG)
Capital Gains tax
- what is the person has filed for an exemption?
- what if they havent?
- deduct savers lump sum (§20 IX EStG). income - lump sum = surplus. on surplus you pay tax. the bank withholds the tax and only the surplus - tax is credited to account
- dont decut savers lump sum
How to ALWAYS proceed when its i.e. Income from capital investment?
- interest in meaning of xxx, and are there tax exemptions?
- check subsidiary
- §§2 II no. 2 §§8 ff. EStG
- seperate tax scale (§32d I 1 EStG)
What paragraph and what
Other income class
Check yes or no
inflow outflow
conclusion!!!!
Losses form sale of shares may not be offset… but…
… with other income
… can be carried forward
Is there an employees lump sum allowance?
- ya
- §9a s.1 no 1a EStG
BB stays in hotel for 10 months.
- according to facts lives elsewhere so not in domestic territory
- hotel room NOT dwelling because he is not free to use at any time -> he stays for 10 months (over 6) -> ordinary stay within the meaning of §9AO
- subject to unlimited taxation
§23 private sales transactions What do these paragraphs state
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- taxable if period between acquisition and sale <10 years
- not taxable if period > 1 year
