The income surplus calculation is a simplified method for determining the taxable profit, which is especially available for freelancers and self-employed persons according to § 18 EStG, but also for owners of small businesses.
1. Legal basis of the income surplus calculation
2. Entitled to the income surplus calculation
3. Advantages of the simplified profit determination
4. Operating income
5. Operating expenses
The central legal basis for the simplified determination of profits by means of an income surplus calculation is Section 4 (3) EStG, according to which the profit of freelancers and similar self-employed persons is to be made by comparing operating income and operating expenses . This results in the EÜR annex, which must be submitted annually to the tax office.
1. Legal basis
The legal basis for the determination of profits by means of an income-surplus calculation can be found in Section 4, Paragraph 3 of the Income Tax Act . Here it says that taxpayers can determine their profit as the surplus of income over expenditure , provided they are not obliged by law to keep books and to make regular financial statements. The regulation in § 4 EStG also contains general principles for determining the taxable profit.
The Income Tax Act provides for various types of profit determination , whereby in the case of tradespeople who are required to keep accounts in accordance with Section 5 (1) of the Income Tax Act and according to the case law of the BFH, the determination of profits must be based on accounting in accordance with Section 4 (1) of the Income Tax Act. Only under certain conditions can taxpayers determine their profit using an income-surplus calculation.
There is a statutory accounting obligation in accordance with Section 5 (1) of the Income Tax Act for natural persons who are commercially active as merchants or optional merchants. In addition, for the partnerships OHG and KG, corporations such as AG and GmbH, cooperatives and other legal entities under private law. Finally, there is also an accounting obligation for those tradespeople whose turnover or profit exceeds the limits set out in Section 141 AO . For these groups, it is not possible to determine the profit by means of an excess income calculation.
If there is no accounting obligation according to §§ 140, 141 AO, the profit can be determined by comparing the income and expenditure in the style of an income-surplus calculation according to § 4 paragraph 3 EStG. This primarily affects freelancers and the self-employed according to § 18 EStG, regardless of the amount of profit and turnover.
In addition, small traders in the legal form of the commercial sole proprietorship or the GbR are entitled to determine profits by means of an income-surplus calculation, provided that these do not exceed the limits specified in § 141 AO.
3. Advantages of the simplified determination of profits
The determination of profits by means of an income-surplus calculation according to § 4 Abs. 3 EStG is much easier compared to the accounting , since no cash management, no inventory accounts and no inventory are required. This also reduces the costs of the annual profit determination, if this is done by a tax advisor.
Taxpayers only have to list income and expenses in their tax return , with taxpayers having the burden of determination and proof of business expenses and the operational cause. The EÜR annex (income-surplus calculation) is used for this purpose and submits the official form together with your income tax return to the responsible tax office.
Own usage records (for telephone, computer) are generally recognized, but logbooks for a vehicle used in the company must be formally and properly kept.
4. Operating income
First of all, the operating income must be listed in the income surplus calculation. As a rule, this is the inflow of money or other donations in monetary value. In addition to current income in cash, this also includes advances received and operating expenses that have been reimbursed or reimbursed by third parties, e.g. insurance compensation.
Other monetary benefits are benefits in kind as the equivalent of business services by the freelancer or self-employed person, for example remuneration in the form of a participation in a GmbH or the benefit of another economic asset. The value is determined by the market value of the asset received.
In the income surplus calculation, the point in time of taxation of operating income is based on the inflow , i.e. on the actual acquisition of power of disposal over the money or the asset.
5. Business expenses
The expenses related to the business represent business expenses , with the following 3 groups being distinguished.
- Expenditures for non-depreciable assets ,
- Expenditures on depreciable assets and
- immediately deductible business expenses .
In the group of immediately deductible business expenses, one should actually differentiate again between unlimited deductible business expenses and limited or non-deductible business expenses .
Expenditures are generally operationally initiated if the expenditure is actually or economically related to the freelance or self-employed activity and a private co-initiation is insignificant. Such expenses can be incurred even before starting the freelance or self-employed activity if there is sufficient connection with the later activity with the intention of making a profit. Examples of this are in particular financing costs, agency commissions, start-up costs and start-up costs, travel costs to visit potential locations, planning costs and expenses for a business plan .
a) Expenditures for non-depreciable assets
Expenses for non-depreciable fixed assets (assets) are only deductible as business expenses in the year of sale or removal from private assets. Examples of non-depreciable fixed assets are land, software, licenses, stocks and shares in corporations.
b) Expenditure on depreciable assets
Expenses for depreciable assets are not immediately deductible as business expenses. Here, the deduction takes place as operating expenses rather by way of depreciation, whereby a distinction must be made between
- Depreciation for buildings,
- Declarations for property, plant and equipment and
- Depreciation for low-value assets.
If freelancers or self-employed persons use a building, a condominium or part of it to generate income, the corresponding acquisition costs (or production costs) can be deducted from tax deductions for wear and tear (= depreciation) for a certain period of time as business expenses. The same applies to purchased or self-produced assets, the acquisition costs (or production costs) of which are to be allocated as operating expenses by way of depreciation over the expected useful life.
Attention: The depreciation is limited to the building or part of the building. Acquisition costs for land, on the other hand, are not deductible.
Only the civil or economic owner is entitled to depreciation, ie the person who has borne the acquisition costs and uses the building or part of the building with the intention of generating professional or self-employed income. The method of depreciation, especially for buildings, is based on the time of acquisition or completion, with a distinction being made between straight-line and degressive depreciation.
In addition, special depreciation regulations also apply to low-value assets .
c) Immediately deductible business expenses
All other operating expenses are deductible within the framework of the income surplus calculation if they have also been paid in the corresponding year, unless they are ” non-deductible or limited deductible operating expenses “.