Personal Tax Liability and (bisschen) material tax liability Flashcards
Taxable subject
The tax subject is the natural or legal person who is obliged by tax laws (e.g. to pay tax, file a tax return, etc.). The tax object and the associated tax liability are attributed to this person.
Each natural person receives a tax identification number that remains unchanged for the rest of his or her life. (§ 139b Fiscal Code).
Taxable object / object of taxation
The tax object is the characteristic with which the tax standard links the tax liability. A tax object can be a transaction (e. g. transfer of assets), a condition (e. g. the keeping of a dog), or a thing (e. g. property).
Tax debtor
Tax debtor is the natural or legal person against whom the main claim of the tax liability relationship is directed. The different tax laws define the tax debtor for each type of tax
Tax payer
Generally, the taxpayer is the tax debtor. In exceptional cases, deviations may occur if the taxpayer pays the tax on behalf of another party (the tax debtor). For example, wage tax is paid by the employer to the tax office on behalf of the employee.
Subject bearing the ultimate tax burden
This person is generally identical with the tax payer. In exceptional cases the person paying the tax is not the one bearing the tax burden (e.g. in the case of value added tax the owner of the business pays the taxes collected from the customer to the tax authorities but the customer bears the tax burden).
Assessment basis
The assessment basis is the variable that quantifies the tax object (e.g. amount of taxable income, amount of trade income, value of the estate).
Tax rate
The tax rate may be independent of the amount of the tax base (constant tax rate) or vary with its amount (variable tax rate). Progressive tax rates are used for personal income tax, whereas a constant tax rate is used for corporate income tax.
Checking Scheme (Personal Income Tax)
I. Personal tax liability (§ 1 EStG)
II. Material Tax Liability (§ 2 I i. c. w. §§ 13 et seq. EStG)
III. Consideration of tax losses ( §§ 2 III, 10d EStG)
IV. Tax liability (§§ 32a et seqq. EStG)
V. Tax assessment (§§ 25 et seqq. EStG)
Personnel/subject tax
Is tailored to the person and take the personal circumstances of the tax debtor into account.
> Family status
> Economic situation > etc.
Income Tax
Based on the generated income
Direct Tax
It is levied on the person who bears the economic burden of the tax.
Subject bearing the ultimate tax burden (natural person) = tax debtor
(natural person)
Indicator for the ability to pay
Income
Tax object
Generation of income
Assessment basis
taxable income
Unlimited tax liability
(sec. 1 par. 1 sentence 1 EStG): Subject to German taxation are all items of income, regardless of whether they are derived from domestic or from foreign sources → taxation of the worldwide income.
Limited tax liability
(sec. 1 par. 4 EStG): Subject to German taxation are all items of income, if derived from domestic sources. Domestic sources are conclusively defined in sec. 49 EStG → taxation of the domestic income.
Double taxation
> If a taxpayer is liable to tax in several states, double taxation may occur.
Avoidance of double taxation
through bilateral double taxation agreements
Allocation of the right to levy taxes on certain types of income to one state or another
The waiving state exempts income from tax or credits foreign tax against domestic tax
Unilateralmeasures,e.g.§34cEStG
Taxation per time period
> Income tax is determined for a specific time period → Twelve-month period
The income determination period is usually the calendar year or the business year.
The business year may differ from the calendar year.
Net principle
According to the net principle, only the income generated by a gainful activity as defined by the income tax law is taxed.
Objective net principle
Reduction of income by expenses
operating expenses or income-related expenses
Subjective net principle
The part of the income used for the essential living requirements must be excluded from the tax base (tax exemption of the subsistence minimum)
Special expenses
> Costs typically arising for all tax subjects
Final enumeration in §§ 10 - 10b EStG
Examples
Church tax (§ 10 I no. 4 EStG)
Insurance contributions (§ 10 I no. 3 EStG)
Costs of vocational training up to 6,000 € (§ 10 I no. 7 EStG)
donations / member’s
contributions (§ 10b EStG)
Extraordinary expenses
> Inevitable expenses incurred by a taxpayer, which are not incurred by the vast majority of taxpayers (§ 33 I EStG)
Examples
Medical costs (§ 33 EStG)
Maintenance payments (§ 33a EStG)
Irrelevance of costs for private living
> The private lifestyle is generally irrelevant for the income determination
§ 12 EStG → no deduction of private expenditures
This also includes indispensable expenses for the private lifestyle. These are already covered by the exemption of the minimum subsistence level (basic allowance, special and extraordinary expenses). This also applies, for example, to bourgeois clothing used for work.
If costs are partly privately and partly caused by a gainful activity, a division rule applies. The part caused by the gainful activity is generally deductible. The part of the privately induced costs is not deductible.
