Progression reservation
Progression reservation is a term from tax law. It describes the process that certain tax-free income can increase the tax rate .
There is a progression proviso in the income tax law of Germany , Austria , Switzerland and other countries.
purpose
The progression proviso is justified by the principle of performance-based taxation. Tax-free income also increases tax performance. According to current legislation and case law, this justifies a higher tax rate.
Probably the most common case of tax-free income that is subject to the progression proviso is the receipt of unemployment benefit I.
calculation
In the first step, the income tax and the average tax rate are determined for the income including the tax-free income. In the second step, the tax rate determined in this way is applied to the income without the tax-free income.
Germany
taxable income (E) |
tax-free income (s) |
additional tax |
as a percentage of e |
---|---|---|---|
3475 |
EUR 0 to EUR 4997 EUR | 0 EUR | 0% |
increasing | |||
8472 EUR | 596 EUR | almost 12%
|
|
13,469 EUR | 658 EUR | almost 14 % | |
falling | |||
24553 EUR
|
22593 EUR to 595 EUR | almost 12% | |
increasing | |||
47,884 EUR | 722 EUR | almost 15 % | |
52,881 EUR | 713 EUR | almost 15 % | |
falling | |||
245,733 EUR | 164 EUR | almost | 4%|
250 730 EUR | 307 EUR | almost | 7%|
falling | |||
999978 EUR to 999999 EUR |
78 EUR | almost | 2%|
13,469 EUR | 39,412 EUR | 2615 EUR | almost | 7%
52,881 EUR | 3584 EUR | almost 10% | |
falling | |||
206321 EUR | 1346 EUR | almost | 6%|
245,733 EUR | 2215 EUR | almost | 6%|
falling | |||
EUR 998000 to EUR 999999 |
608 EUR | almost | 2%
Tax-free income subject to progression
According to German income tax law, the progression proviso is u. a. the following tax-exempt income / receipts:
- Unemployment benefit (ALG I), but not unemployment benefit II
- Age transition allowance (benefits according to the partial retirement law )
- Statutory health insurance sick pay
- Injury benefit , but not injury pension
- Income that is tax-exempt under an agreement to avoid double taxation or another international agreement, but for which this agreement provides for the progression proviso in Germany. As of 2008, this only applies to a limited extent within the EU / EEA: here, both positive and negative progression reservations are in some cases no longer applied if they result from income from agriculture and forestry , commercial operations , renting and leasing or leasing of ships.
Concrete calculation
If, in addition to the taxable income , there is also income subject to the progression proviso ( ), a fictitious collectively agreed income tax is first determined for an income of . This results in the "special tax rate"
This is the average tax rate on a taxable income of . With this , the tax for the originally taxable income is calculated as
- .
When adding (e) the employee lump sum is taken into account (deducted from e), unless it was already deducted when determining the income from employment (as part of E).
The fictional and actual income tax and is in each case rounded to whole Euro and the rate ( ) to four decimal places (when expressed as a percentage) is rounded.
Example of a calculation
Tax without tax-free income |
Tax on tax-free income |
Control with progression reserve |
|
---|---|---|---|
Taxable income (zvE1 = E) | € 50,000 | € 50,000 | € 50,000 |
Income subject to the progression clause (e) | 0 € | € 6,000 | 0 € |
Relevant taxable income (zvE2 = E + e) | € 50,000 | € 56,000 | € 50,000 |
Rounded down to full euros | € 50,000 | € 56,000 | € 50,000 |
Applicable tax according to the basic table | € 12,432 | € 14,898 | |
Average tax rate in percent | 24.864% | 26.60357% | |
Truncated after the fourth place after the comma | 26.6035% | ||
Applicable tax rate in percent | 26.6035% | 26.6035% | |
Tax = applicable tax rate x zvE1 | € 12,432 | € 13,302 | |
Additional tax burden: | € 870 |
Conclusion: The € 6000 tax-free income leads to an income tax of € 870 higher.
Mathematical peculiarities
The formula for the rounding is:
Due to these roundings deviates by up to one euro. This can result in a slight reduction in the tax burden for small .
The more tax to be paid through tax progression is:
The following tax function has been used in Germany since 2002
Using this one gets:
The resulting increase in tax can now be compared to the tax-free income (e).
This then gives an average tax rate as follows:
The actual marginal tax rate for additional tax-free income is calculated accordingly
For the zones of the tax function in which there is, the marginal tax rate is falling in : the higher the taxable income , the less tax is to be paid on each additional euro tax-free income with progression proviso. In the zones in which there are opposing effects, the marginal tax rate has exactly one local and at the same time global extreme for these parameters. Depending on the parameters, these are inside / outside the zone. The details of the current parameters are shown in the table below.
The simplification cannot be applied if the calculation of the tax of e and that of e + E takes place in different zones of the tax function.
ZvE area (benchmarks) |
Legal stipulation | Marginal tax rate on tax-free income | |||||||
---|---|---|---|---|---|---|---|---|---|
from [€] |
to [€] |
a [1 / €] |
b |
c [€] |
d [€] |
(b-ad) d - c [€] |
Zone start | course | End of zone |
0 | 8652 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
8653 | 13669 | 993.62 10 −8 | 0.14 | 0 | 8652 | 15427/33 | 14% | increasing up to | 17.0018% |
13670 | 53665 | 225.4 10 −8 | 0.2397 | 952.48 | 13669 | 2323.9793 | 17.0018% | falling to the minimum of 13% at 29,055 euros rising again to
|
15.6418% |
53666 | 254446 | 0 | 0.42 | −8394.14 | 0 | 8394.14 | 15.6418% | falling up to | 3.2989% |
254447 | ∞ | 0 | 0.45 | −16027.52 | 0 | 16027.52 | 6.2989% | falling up to | almost 0% |
See also
Web links
- Bayer's progression reservation calculator. State Office for Taxes (for the last six years up to and including the current year)
Austria
Austria basically knows the progression proviso in two forms:
1. If the respective double taxation agreement provides for it, the foreign income (converted to Austrian tax law) is initially taxed and an arithmetical average rate is determined. The taxable income in Austria is then taxed at this average rate.
2. In the case of certain domestic issues, the most important of which are periods of unemployment, the income from the rest of the period (in which no tax-free income components were received) is extrapolated to 365 days and the tax is calculated from this notional income. Here, too, an average rate is determined (fictitious tax divided by fictitious income), by which the taxable income is then multiplied. At the same time, a control calculation is carried out to determine which tax would result if the tax-free income components were taxable. The result that is more favorable for the taxpayer is used. This is particularly applicable if the wage replacement benefits are very low in relation to the taxable income components.
Individual evidence
- ↑ according to § 32b EStG
- ↑ § 32b Paragraph 1 Clause 2 No. 1 to No. 5 Income Tax Act (EStG) must be observed.
- ↑ Wording from Section 32b EStG
- ↑ Section 32a (1) EStG in the version dated January 1, 2016