Germany Accounting & Tax Glossary

Einkommensteuer (ESt) is Germany's progressive personal income tax applying to individuals. Rates range from 0% (below €11,604 basic allowance in 2025) to 45% (above €277,826). A 5.5% Solidaritätszuschlag applies above thresholds; Kirchensteuer (church tax) of 8–9% on the ESt amount applies to church members.

Gewerbesteuer (GewSt) is Germany's municipal trade tax levied on all commercial businesses. The base rate is 3.5% applied to adjusted taxable profit, then multiplied by the local Hebesatz (municipal multiplier, typically 300–500%). Effective rates range from ~10.5% to 17.5%.

The Investitionsabzugsbetrag (IAB) under §7g EStG allows businesses to deduct up to 50% of the planned cost of an asset (maximum €200,000 deduction per year) before the asset is purchased. The asset must be bought within 3 years. It is a powerful tax deferral tool for businesses planning capital investment.

Körperschaftsteuer (KSt) is Germany's corporate income tax at a flat rate of 15% on taxable profits, plus a 5.5% solidarity surcharge on the tax itself, giving an effective KSt rate of 15.825%. GmbHs and AGs also pay Gewerbesteuer separately.

Umsatzsteuer (USt) is Germany's VAT at 19% standard rate and 7% reduced rate (food, books, public transport, cultural events). All businesses above the Kleinunternehmerregelung threshold must register, charge, and file periodic Voranmeldungen via ELSTER.

Vorsteuer is the German term for input VAT — the Umsatzsteuer paid on business purchases that can be reclaimed against output VAT collected from customers. Only businesses registered for USt can deduct Vorsteuer. Claims are made on the periodic Umsatzsteuer-Voranmeldung via ELSTER.

GmbH (Gesellschaft mit beschränkter Haftung) is Germany's most common private limited company structure. It provides limited liability for shareholders, requires €25,000 minimum share capital (€12,500 paid up at formation), and must be formed by notarial deed and registered in the Handelsregister.

The Handelsregister is Germany's official commercial register maintained by local Amtsgerichte (district courts). GmbHs and AGs must register; Einzelkaufleute (sole traders meeting certain criteria) may also register. Registration is mandatory before a GmbH can legally exist.

The Kleinunternehmerregelung is Germany's small business VAT exemption under §19 UStG. Businesses below €22,000 turnover in the prior year and expecting no more than €50,000 in the current year can opt out of charging Umsatzsteuer. Updated thresholds apply from January 2025.

A Steuerberater is Germany's licensed tax advisor. The title is legally protected and requires passing state examinations. Most GmbHs use a Steuerberater to prepare accounts, file returns, and represent them at the Finanzamt. Steuerberater clients receive extended filing deadlines.

The Jahresabschluss is Germany's annual financial statements. GmbHs must prepare and file these under HGB (Handelsgesetzbuch) accounting rules. They include at minimum a Bilanz (balance sheet) and Gewinn- und Verlustrechnung (P&L). Must be filed with the Bundesanzeiger within 12 months of the financial year end.

Sozialversicherung covers Germany's five mandatory social insurance contributions: Krankenversicherung (health ~14.6%), Rentenversicherung (pension ~18.6%), Arbeitslosenversicherung (unemployment ~2.6%), Pflegeversicherung (care ~3.4%), and Unfallversicherung (accident ~1.3%). Total employer + employee burden is approximately 39–42%.