Material Tax Liability - Income from self employment

Question 1

§ 18 I

Answer 1

§ 18 I EStG contains neither a legal definition nor an exhaustive enumeration:
no. 1 Revenues from a professional activity

Question 2

§ 18 III

Answer 2

Revenues from the disposal of (business) assets, an independent part of the assets or shares in the assets, that serve self-employed work (distinction from § 16 EStG).

Question 3

A self-employed activity within the meaning of § 18 no. 1 EStG is to be affirmed if the following conditions are fulfilled

Answer 3

> “to be affirmed”-conditions of § 15 II s. 1 EStG and
deployment of own manpower
based on own expertise
acting executive and autonomous
and
pursuit of a profession within the meaning of § 18 EStG

Question 4

§ 18 no. 1 EStG can be divided into 3 categories

Answer 4

> Adjective occupations (independently practiced scientific, artistic,
literary, teaching and educational activity)
Catalogue occupations (e. g. tax consultant, architect, medical professions etc.)
Occupations similar to catalogue occupations
If income within the meaning of § 18 EStG is available, there is no trade tax liability.
employment

Question 5

Income determination for income from self-employment

Answer 5

Cash accounting method (§ 4 III EStG)

Accrual Accounting Method (§§ 4 I, 5 EStG)

Question 6

Cash accounting method (§ 4 III EStG)

Answer 6

Neither obliged to keep books nor voluntarily keeping books and a commercially established business is not required
• Income from self-employment (§ 18 EStG)

Question 7

Accrual Accounting Method (§§ 4 I, 5 EStG)

Answer 7

• If obliged to keep books or if voluntarily keeping books

* Within the personal income tax especially applied if income from business operations (§§ 15 ff. EStG)

Question 8

Operating expenses (OE):

Answer 8

Expenditures caused by business operations (§ 4 IV EStG)

tax deductible if the tax low does not provide for a prohibition of the deduction.
In the case of income from self-employment, for example, the following prohibitions exist:
> Gifts(§4Vno.1EStG)
> Entertainment costs (§ 4 V no. 2 EStG)
> Fines/compensation payments, bribe money (§ 4 V no. 8, 10 EStG)
> Cost for private living (§ 12 no. 1 EStG)
> Income taxes (§ 12 no. 3 EStG)
> Fines ordered in criminal proceedings (§ 12 no.
4 EStG)

Question 9

Operating income (OI):

Answer 9

Income caused by business operations (Reversion of § 4 IV EStG)

taxable if the tax law does not exempt it from taxation.
In the case of income from self- employment, for example, the following business income is tax-free:
> Start-up subsidy (§ 3 no. 2 lit. a EStG)
> Sickness benefit/private daily allowance insurance (§ 3 no. 1 lit. a-d EStG)

Question 10

Cash accounting method

Answer 10

Operating income

./. Operating expenses = Profit

Question 11

inflow-outflow-principle (§ 11 EStG)

Answer 11

The accrual allocation is (mainly) carried out acc. to it

Expenses are not included in the profit determination when they are incurred but when they are paid
(the matching principle is generally not applied).

Question 12

Cash Accounting Method (Exception inflow-outflow)

Answer 12

> § 11 I 2 EStG: Exception for regularly recurring income and expenses received or spent shortly (max. 10 days) before or after the end of the year
Regulations on depreciation (§ 4 III 3 EStG i. c. w. §§ 7 ff. EStG) are to be applied
Consideration of acquisition / production costs for current and non-current assets, e.g. land and shares in corporations, as operating expenses only upon disposal / withdrawal of the assets (§ 4 III 4 EStG)