The tax and duty landscape in Germany has changed enormously in the last ten years. The black and yellow federal government had originally started to simplify taxation. Do you still hear the tenor: “Tax rates down – tax bases up”? The sales tax rate has increased from 16 to 19 percent since 2007, which corresponds to an increase of almost a fifth. There was essentially a real relief in the case of capital gains taxation of private investors!
Trade tax calculation when taking out a loan
Unfortunately, neither the 2008 tax reform – and the subsequent changes – have brought about a fundamental improvement in looking at credit as an operating expense. For loans as business expenses and also leasing models, a business tax calculation in several steps still applies.
There are many items in the calculation of commercial income that can be posted relatively easily and logically. Paid wages and salaries as well as their non-wage costs are indisputable operating expenses and reduce trade tax income. The same applies, for example, to the rent paid for a shop, hall or office.
It becomes more difficult with machines and systems that cross the border of low-value assets. These cannot be fully sold in the year of acquisition, but must be a generally valid table can be depreciated over several years.
In the case of car financing and leasing, the payments to the lessor may be deducted, but in the next step these are partially and incomprehensibly added.
The subsequent correction posting: Loans as operating expenses cannot be deducted at full cost
Section 8 of the Local Business Tax Act describes the process of addition. This applies to all companies where the deduction of the various costs for leasing and loans was over 100,000 dollars. A quarter of the previously correctly deducted interest and bank fees for loans as business expenses must be added back. In the case of leasing expenses, it would be a fifth for “movable goods” (e.g. commercial vehicles), half for non-movable goods of the fixed assets. Since the trade income is increased again by these positions, the question “deducting loans as business expenses – error or truth?” Cannot be answered with a clear yes or no. Interest or leasing fees can only be deducted in part in accordance with the tax regulations. The amount of interest that can be deducted is limited
Although there was certainly a good reason to limit the amount of interest that can be deducted (keyword: shifting profits to foreign financial holdings), this regulation affects SMEs in particular. By adding interest and leasing expenses to income, a fictitious profit component is created.
The entrepreneur therefore pays trade tax on amounts that have not “arrived” at his profit. The logic of the non-deductibility of trade tax is similarly strange: since 2008, this tax paid can no longer be deducted as an operating expense.
Criticism: Control effect of the partial non-deductibility of interest on loans as business expenses
Reports from the OECD or the IMF rightly complain about the very high tax burden in Germany in many areas. In addition, taxes should be levied in such a way that they have no artificial steering effect in one direction or the other.
If you compare the interest burden for a new data center, for example, with the fully deductible costs for the purchase of IT services from a “cloud service provider”, the tax regulations may even distort the internal “make or buy” decision. This raises the question of why the ownership of infrastructure should be handled differently from the simple rental / commissioning!
In addition, the no longer full deductibility of leasing fees reverses the decades-long view of business development! In the past, leasing of aircraft or ships was even promoted in the form of grants or tax relief.