Sat, 21 November 2009
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Some of the few people in Germany not currently obsessed with the World Cup are the members of the Bundesrat, who are preparing to adopt the latest tax reform acts before the summer break. Expatica's tax advisor Martin Brune outlines the changes which will effect the pocket of almost every tax payer.Whereas most German football supporters these days are enjoying the World Cup, the members of the Federal Council of Germany (Bundesrat) are preparing to adopt the latest tax reform acts before the summer break. These tax reforms will influence the net-in-pocket of almost every taxpayer. Below is a description of the most important changes which are planned and which have already happened.
1. Accompanying budget law 2006 (Haushaltsbegleitgesetz 2006)
The draft of the tax reform act ( "Haushaltsbegleitgesetz 2006" ) was agreed on 22 February 2006 by the government. The tax reform act is to be adopted by the Federal Council of Germany (Bundesrat) on 16 June 2006. Most likely, the Bundesrat will agree to the tax changes mentioned below.
Income tax: Supplemental allowances for work performed on Sundays, on public holidays and during night time will remain tax free. However, these allowances will become liable to social security contributions if the hourly remuneration exceeds EUR 25. This change shall become effective on 1 July 2006.
Mini-Jobs: The lump sum contribution rate for so-called 400-Euro-Jobs (Mini-Jobs) shall rise from 25 percent to 30 percent, starting 01 July 2006. This lump sum contribution will then include 15 percent for pension insurance, 13 percent for health insurance and 2 percent lump sum tax.
Value Added Tax (Umsatzsteuer): The general rate for VAT shall rise from 16 percent to 19 percent, starting 1 January 2007. The reduced rate will remain at 7 percent. Due to the increase of VAT, the contribution to the unemployment insurance will be reduced from 6.5 percent to 4.5 percent.
Insurance tax (Versicherungssteuer): Following the VAT rate the insurance tax rate shall rise from 16 percent to 19 percent on 1 January 2007.
2. Tax reform act 2007 (Steueränderungsgesetz 2007)
The draft of the tax reform act 2007 was agreed upon on 10 May 2006. The tax reform act is to be adopted by the Federal Council of Germany (Bundesrat) on 7 July 2006.
All changes mentioned in the tax reform act 2007 will become effective on 1 January 2007.
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