An analysys of the assessment of taxable earnings in Germany

Stephan Meyering, Matthias Groene

Abstract


The assessment of taxable earnings is of fundamental importance for the corporate tax burden. Therefore it is often subject of political discussions and is either witnessing a constant process of change. Against this background, the aim of this paper is to analyse the structure of the assessment of taxable earnings in Germany. This can be used to obtain information on the possibilities for future national developments in Russia. We start with an overview of the areas of application of the different methods for the assessment of earnings. It shows that the complete comparison of a company’s operating assets (so-called tax balance sheet) and the statement based on the net income method are the most important methods. The fundamental difference between this two methods: the statement based on the net income method is controlled by the inflow and outflow principle (flow value statement), the stock value statement, which makes it necessary to draw up two balance sheets (one at the start of the year and one at the end of the year, underlies the comparison of the company’s operating assets. Therefore the analysis focuses on these two methods. It shows, that the complete comparison of a company’s operating assets is more accurate but although much more costly than the statement based on the net income method. The analysis is supported by practical examples, which are also used to illustrate the differences between the two main methods.

Highlights

  1. The complete comparison of a company’s operating assets (so-called tax balance sheet) and the statement based on the net income method are the most important methods of the assessment of taxable earnings in Germany
  2. The complete comparison of a company’s operating assets is more accurate but although much more costly than the statement based on the net income method
  3. The inventory of the structure of the assessment of taxable earnings in Germany can be used to obtain information on the possibilities for future national developments in Russia

For citation

Meyering S., Groene M. An analysys of the assessment of taxable earnings in Germany. Journal of Tax Reform, 2017, vol. 3, no. 1, pp. 18–28. DOI: 10.15826/jtr.2017.3.1.028

Article info

Received January 25, 2017; accepted March 4, 2017


Keywords


taxes; taxable earnings; balance sheet; German income tax act; statement based on the net income method

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DOI: http://dx.doi.org/10.15826/jtr.2017.3.1.028

Copyright (c) 2017 Stephan Meyering, Matthias Groene

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