Properly organizing the tax and revenue office as a prerequisite for founding a company: 10 tips for bureaucracy

One of the most important Tasks of founders is to get involved with Taxes, Finance and know about bureaucracy. 10 tips at a glance.

German tax laws – anything but entrepreneur-friendly

German tax laws are anything but easy to apply, especially for entrepreneurs. Nevertheless, everyone should Founders deal with the subject in detail - because even if you have a good tax advisor, it is important to know the most important regulations on the subject yourself.

The tax office first decides whether a founder is a tradesman or a freelancer. Every trader must first register with the public order office or trade office in his municipality. The municipality then automatically contacts the responsible tax office and the form for registering with the tax office is automatically sent to you.

Freelance or commercial?

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Some freelancers, such as lawyers, doctors, journalists, educators, Adviser or artists, are considered freelancers. Section 18 of the Income Tax Act defines which occupational groups these are. Accordingly, freelancers provide a personal, intellectual and creative service based on a high level of expertise, Vocational Training and/or talent.

In contrast, traders deal in mass-produced goods. In special cases, the tax office decides. If you are classified as a freelancer, you do not have to register a business but apply for a tax number directly with the tax office.

How do you get your tax number?

In order to obtain a tax number, one must in any case fill out the questionnaire for tax registration. There are several copies of this: The questionnaire for tax registration for starting a commercial, self-employed (freelance) or agricultural and forestry activity is filled out by anyone who wants to found a partnership as a sole proprietor.

On the other hand, if you want to participate in a partnership, fill out the appropriate form. There is also a separate form for founding a partnership/community. Who, on the other hand, would like to set up a corporation, such as one Society with limited liability, a limited or a corporation to plan, must fill out a separate questionnaire for tax registration.

Small business owner or not?

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Anyone who becomes self-employed must also ask themselves the question of whether they can separate themselves from the Value added tax can be freed. Because as long as he was less than 17.500 euros in the previous year Turnover per year, an exemption is possible. Although the exemption saves some bureaucratic effort, it can be cash Money costs.

Because entrepreneurs give the sales tax that they from customers received (depending on the goods or services 7 percent or 19 percent) to the tax office, but you may deduct the input tax from it, i.e. the sales tax that you paid yourself for your goods and your work equipment. The effort with the sales tax is simplified by the fact that many professional groups can calculate their input tax in a simplified way according to §§ 69 and 70 of the sales tax implementation regulation according to a certain percentage of the turnover.

10 tips: The most important things about taxes and the tax office

For many, German tax laws are a closed book. Nevertheless, as an entrepreneur you have to deal with it. You can find detailed information from Simone Janson, 8 steps for a successful start-up (Redline Wirtschaftsverlag). We will briefly show you the most important points here.

1. Commercial or Freelance? Ask the tax office whether your entrepreneurial activity is considered freelance. Because as a tradesman you have some disadvantages: You have to become a compulsory member of the Chamber of Industry and Commerce and pay trade tax from a certain income limit.
2. Registration with the tax office: Fill out the questionnaire for tax registration in good time. Don't forget the following documents: the declaration of participation in the direct debit procedure, the power of attorney to receive, the contracts in the case of takeover or conversion of a company, the opening balance sheet and the commercial register extract for merchants, the articles of association when founding a GbR, OHG, partner company or corporation.
3. Income tax: The most important tax is income tax: you have to pay income tax on your profit if it is above a certain allowance. In addition, there are other types of income that are also taxable, such as income from capital assets or your salary that you receive if you are a full-time or part-time employee.
4. Determine Profit: Profit is the amount after deducting your business expenses. Actually quite simple, because in principle these are all costs related to generating your income. In practice, there are sometimes very complicated regulations for deducting these costs. The following applies: The self-employed can only deduct such amounts as operating expenses that they have actually and verifiably spent. They must prove this with appropriate documents.
5. Deduct special expenses: Provisional expenses and expenses for health care can be claimed as special expenses, just like as an employee. The decisive factor for recognition as a business expense is that the respective expenditure was professional and not attributable to private life.
6. Losses: It is best to avoid tax losses altogether if possible. Because even if the tax office accepts a time when only losses occur (e.g. because you have made high investments): If the tax office still does not recognize any intention to generate income after several years, they can declare your online shop a hobby.
7. The income tax return: The tax return consists of several forms. The most important are the forms for the income tax return (»ESt« form), for income from commercial operations and self-employment (»GSE« appendix) and for the income surplus calculation (»EÜR« appendix).
8. The municipal tax: The municipal tax, better known as trade tax, is a municipal tax. Every trader has to pay them. However, the municipal business tax only applies to sole proprietors and partnerships if their profit exceeds EUR 24.500. Some of the other companies – especially non-profit ones – receive an exemption.
9. Sales tax: As a self-employed person, you are usually subject to sales tax. You then have to levy 19 percent VAT on all goods and services, or just 7 percent depending on the industry and product, and pay it to the tax office. Small entrepreneurs whose turnover in the previous year was no more than €17.500 are automatically exempt from VAT. However, you can also waive this exemption. However, this decision is binding for five years. In this case, you are not allowed to show any sales tax separately and you cannot claim any input tax.
10. The tax return: The income tax return for the previous year must be submitted without being asked. You can also informally apply to the tax office for an extension of the deadline. You also have to submit a sales tax return for the previous year and, in contrast to income tax, pay the tax liability without being asked by the tax office – no later than one month after submitting the tax return. If your sales tax liability in the previous year exceeds a certain amount, the tax office requires a quarterly or monthly input tax return, which you can only submit via the Internet.

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