Germany introduces investment friendly tax reforms

New Delhi, Nov 25 (UNI) The dream of Indian companies of setting their empires overseas will soon come true with the new German Corporate Tax reforms.

A major reform of corporation tax in Germany will come into effect in 2008. A draft bill for the reform of the German commercial law is likely to come into effect in 2009, with parts of it coming in force in 2008. Deregulation, reducing costs for small and medium enterprises (SMEs) and adopting many international accounting standards will be the highlights of the reform.

''The main aim is to reduce the tax burden for companies and thus make Germany more attractive to foreign investors,'' said Indo-German Chamber of Commerce Deputy Director General Ajay Singha.

The total income tax burden consisting of corporate income tax, trade tax and solidarity surcharge will be reduced to about 30 per cent, from the current 39 per cent. The corporate income tax-rate will be reduced from 25 per cent to 15 per cent and solidarity surcharge from 1.2 per cent to 0.8 per cent.

Changes in trade tax are also on the anvil, which will be 14 per cent on an average, depending on where the business is carried out.

In the big cities with excellent infrastructure, trade tax can be up to 16.1 per cent; whereas in some rural regions with very high unemployment, trade tax can be as low as seven per cent.

The tax base too will be enlarged. Starting in 2008, 25 per cent of interest expenses will be added to the trade tax base, but the tax base will then also cover other expenses like finance costs from payments for rent, leases, royalties, annuities, fixed monthly repayments, dividends to sleeping partners, bill and other receivables discount fees and interest on short-term debts.

Germany is becoming a very attractive market for Indian corporations. The gross domestic product (GDP) amounted to about 2.3 billion euro in 2006 was 28 per cent of the GDP of all countries of the European union.

UNI