Financial Accounting according to German GAAP and Tax Law
Accounting obligations arise from commercial and tax law. Our services at a glance:
Financial and payroll accounting
Preparation of current financial accounting in fully digitalized processes by posting on the document image instead of paper management, coupled with regular meaningful evaluations.
Determination of taxable Income and Annual Financial Statements
Ongoing consulting during the year for the tax-optimized structuring of your business transactions, so that the result of the annual financial statement according to commercial and tax law will not be a surprise.
Private and corporate tax returns
On the basis of the profit determination, the operating result is corrected off-balance sheet, supplemented by tax options and transferred into tax forms for declaration. As a rule, if accounting is mandatory, we prepare two separate annual financial statements: one for commercial purposes and one for tax purposes. Thus, the areas are separated.
Accounting obligation under commercial law
Merchants who operate a commercial enterprise within the meaning of the German Commercial Code (Handelsgesetzbuch) are subject to the original accounting obligation. A commercial enterprise is any business operation, unless the nature or scope of the business does not require a business operation set up in a commercial manner. The limits at which a commercially established business operation is assumed are defined by law: anyone who generates more than 600,000 euros in sales (net) and more than 60,000 euros in profits on two consecutive closing dates is operating a commercial enterprise. Excluded from this are the catalog income (freelancers i.e. consultants, doctors, architects, lawyers, etc.) These are not subject to commercial accounting. With the possibility of registering a sole proprietorship in the Commercial Register A, optional accounting obligations arise, regardless of the value limits. Other accounting obligations arise from tax laws.
Derivative tax law accounting obligation
Anyone who is obliged to keep accounts under commercial law must also fulfill this obligation vis-à-vis the tax office. This is the so-called derivative accounting obligation.
Original tax accounting obligation
Commercial entrepreneurs as well as farmers and foresters who achieve more than 600,000 euros in sales per calendar year or more than 60,000 euros in profit per year are subject to an original accounting obligation under the tax laws. The same applies to taxpayers with self-managed agricultural and forestry areas with an economic value of more than 25,000 euros.
German Statutory Audit
Should you pass two out of three of the follwing thresholds, a Certified Public Accountant (CPA) must be tasked with auditing your corporate financials:
- Balance Sheet sum above 20 Mio. Euro;
- 40 Mio. Euro annual revenue;
- On average 250 employees throughout the reporting year.
Record-keeping obligations under the Value Added Tax Act
Anyone who is not already required to keep accounts under commercial or tax law is generally subject to recording obligations under the Value Added Tax Act. In this way, the legislator has practically created a general accounting obligation, even though this is merely headed as an obligation to keep records.
The following information must be evident from the records to be kept in accordance with the Value Added Tax Act:
- the agreed remuneration for the supplies and other services performed by the entrepreneur. It must be made clear how the remuneration is divided between taxable sales, separated according to tax rates, and tax-exempt sales. The records must also show which transactions the entrepreneur treats as subject to VAT. Remuneration reductions (bonuses, discounts) must be recorded separately and proof of their agreement must be verifiable in advance (e.g. on the invoice or the offer).
- The received payments and partial payments for deliveries and other services not yet performed (advances). It must be made clear how the payments and partial payments are divided between taxable sales, separated according to tax rates, and tax-exempt sales.
- The assessment basis for withdrawals from the business (goods, services) subject to VAT;
Note: The withdrawal of a business motor vehicle is not a VAT-exempt transaction. If a vehicle purchased second-hand without input tax deduction and later transferred from private assets to the business is subsequently withdrawn again, this withdrawal is generally subject to VAT, even if no claim to input tax could be made. For example, in addition to his VAT-exempt sales as a doctor, a medical doctor will often regularly exceed the small business limit of no more than 22,000 euros and expected sales subject to VAT of less than 50,000 euros in the current year with the one sale from the withdrawal of the business motor vehicle and will have to pay VAT if the business transactions take place in quick succession without any major change in the value of the item. An individual consultation in the apron protects against property disadvantages by access traps of the tax office.
- the tax amounts owed due to incorrect tax display and due to unjustified tax display;
- the consideration for taxable supplies of goods and services made to the entrepreneur for his business and the consideration and partial consideration paid prior to the performance of such transactions, to the extent that tax arises on such transactions pursuant to Section 13 (1) No. 1 (a) sentence 4, as well as the amounts of tax due on the consideration and partial consideration;
- the bases of assessment for the importation of goods imported for the entrepreneur's business, as well as the import turnover tax incurred thereon;
- the bases of assessment for the intra-Community acquisition of goods, as well as the amounts of tax due thereon;
- in cases of reverse charge on the recipient of the service (e.g. construction services or intra-Community situations), the information in accordance with points 1 and 2. The service provider must record the information in accordance with points 1 and 2 separately;
- the taxable amount for transactions in connection with a VAT warehouse (e.g. for tea, coffee, complete list) as well as the tax amounts due thereon;
- in the cases of Import One Stop Shop (import of goods with a value of up to 150 euros), the names and addresses of the consignors and consignees, the bases of assessment for the import of goods, the information received in this regard from the consignors, consignees and third parties, as well as the consignments, the consignments delivered to the respective consignees in the past calendar month, the amounts of import VAT collected per consignment, the consignments that have not yet been delivered and are still in the control of the person presenting them, as well as the consignments that have been re-exported or destroyed or otherwise disposed of under customs supervision.
- §§ Sections 1, 8, 238 et seq. German Commercial Code (HGB)
- § Section 140 of the German Fiscal Code (AO)
- § Section 141 of the German Fiscal Code (AO)
- § 22 Value Added Tax Act (UStG)