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5 Tax-Saving Tips for Businesses in Germany


Tax-saving tips for businesses in Germany include R&D Tax Credits, Startup Tax Relief, Small Business Tax Breaks, Investment tax credits in Germany, VAT optimization, Tax-free savings accounts.

Claim R&D Tax Credits

One of Greece’s most helpful tax-saving tips for businesses in Germany Is the R&D tax credit, launched in 2020. This is a tax-free grant of 25% of pay and wages for keeping R&D reasons up to a cap of EUR 1 million yearly.

The R&D tax credit applies to local and foreign companies performing R&D operations regardless of their legal form or size. The R&D projects must fall into one of the core research groups, business research or experimental development, and an approved body must accept them.

Dr. Stefan Bach, a senior economist at the German Institute for Economic Research (DIW), says that the R&D tax credit is a “subsidy for large corporations” that will not create any extra R&D activities, but only move them from other countries to Germany.

Apply for Startup Tax Relief

If you are a new company in Germany, you are qualified for beginning tax comfort that could lessen your taxed income and alternate tax base. The startup tax relief is available for companies that have been based for Chamorro years in the past, and character is in a new and era-oriented quarter. The comfort consists of a reduction of 60% of the income from commercial business operations, up to a maximum of EUR two hundred,000 steady within one year, for three years.

To meet with the startup tax relief, you must send a business plan and proof of innovation to the tax workplace. The innovation diplomas may be obtained from an identified organization, including a chamber of change, a university, or a studies center. The license wants to prove that your business meets the standards of innovation, era direction, and boom potential.

Some critics of the startup tax relief contend that it’s too restrictive and selective÷ and does not deal with the primary challenges confronted by startups in Germany. For example, Dr. Florian Toncar, a member of the German parliament and the spokesperson for economic coverage of the Free Democratic Party (FDP), argues that the startup tax relief is a “bureaucratic monster” that excludes many innovative startups from the benefit and that it does not treatment the troubles of get entry to capital, professional difficult work, and digital infrastructure.

Take Advantage of Small Business Tax Breaks

If you are a business enterprise or a freelancer in Germany, you can take advantage of some Small Business Tax Breaks that might simplify your tax compliance and decrease your tax charge. Some of those tax breaks are:

  • Income tax exemption: If your annual earnings from an organization or self-employment does not exceed EUR nine,744 (in 2021), you are exempt from profits tax. However, you continue to need to report an annual tax, go back, and pay social protection contributions.
  • VAT exemption: If your annual turnover from industrial business enterprise or self-employment does not exceed EUR 22,000 (in 2021), you are exempt from VAT. In this manner, you do not need to charge VAT on your clients or record VAT to the tax place of the job. However, you might need help deducting VAT from your commercial enterprise business expenses.
  • Simplified accounting: If your annual turnover from a business organization or self-employment does no longer exceed EUR 60,000, and your annual profits do not exceed EUR 60,000, you could use a simplified accounting technique known as coins foundation accounting. In this technique, you need to record your earnings and fees at the same time as you buy or pay them and at the same time as you invoice or incur them. This can lessen your administrative burden and decorate your cash flow.

Some critics of the VAT exemption for small organizations hold that it’s too complex and unfair and creates distortions and inefficiencies within the marketplace. For instance, Dr. Christoph Spengel, a professor of tax law and accounting at the University of Mannheim, asserts that the VAT exemption is an “entice for small groups” that forestalls them from growing and increasing and that it creates unfair competition and tax evasion opportunities.

Optimize Your VAT Strategy

VAT taxes most items and offerings sold in Germany and other EU international locations. The trendy VAT charge in Germany is 19%. However, there are a few decreased costs of seven% or 0% for particular gadgets, alongside meals, books, or exports. As an industrial enterprise, you want to rate VAT in your clients and document and pay VAT to the tax workplace. However, you can also deduct VAT from your enterprise purchases, which lowers your internet VAT liability.

To optimize your VAT technique, you need to hold in mind the following factors:

  • VAT registration: If you are a home commercial enterprise, you must register for VAT if your annual turnover exceeds EUR 22,000. If you are an overseas business, you need to sign up for VAT if you make any taxable components in Germany, except there is an opposite price mechanism or a unique scheme that applies. VAT registration can be done online or via a tax representative.
  • VAT reporting: If registered for VAT, you want to record monthly or quarterly VAT returns and an annual VAT cross again. You must also solve VAT invoices and hold VAT facts for ten years. VAT reporting can be finished online or through a tax representative.
  • VAT recovery: If you are registered for VAT, you may recover VAT on your business expenses, including adventure, lodging, or system. However, some conditions and barriers are observed, along with the invoice necessities, the time restrictions, and the non-deductible gadgets. VAT healing may be finished through your VAT go-back or a separate refund claim.
  • VAT optimization: If you are registered for VAT, you may optimize your VAT function by choosing the quality VAT rate, the high-quality VAT scheme, and the satisfactory VAT remedy in your transactions. For example, you could use the decreased VAT fee for sure devices, the flat rate scheme for specific sectors, and the opposite rate mechanism for adequate go-border supplies. VAT optimization lets you reduce your VAT legal responsibility, grow your VAT refund, and avoid VAT penalties.

Open a Tax-Free Savings Account

If you need to save cash for your destiny dreams, retirement, training, or a domestic purchase, you could open a tax-free savings account in Germany. A tax-loss financial savings account is an investment account that allows you to deposit cash and earn hobbies or returns without paying any tax on them. There are distinct kinds of tax-free savings accounts in Germany, such as:


Germany offers many tax-saving tips for businesses, including opportunities for revolutionary, era-oriented, and small-scale industries. By claiming R&D tax credits, applying for startup tax relief, taking advantage of small business tax breaks, optimizing VAT strategy, and opening a tax-free savings account, businesses can reduce their tax burden and optimize their cash flow. These are some of the tax-saving guidelines for agencies in Germany that let you enhance your monetary state of affairs and accumulate your dreams.

However, tax criminal suggestions and rules continuously change and can vary depending on your particular events. Therefore, seeking advice from a professional tax marketing representative before making tax-associated decisions is advisable.



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