Progressionsvorbehalt

English translation: exemption-with-progression method (Freistellung mit Progressionsvorbehalt

19:07 Feb 29, 2000
German to English translations [PRO]
Bus/Financial
German term or phrase: Progressionsvorbehalt
I'm working on a short document that examines how German and U.S. tax law would treat a native German who decides to become a member of a limited liability company organized in the State of Delaware. According to the tax experts who prepared the report, the ideal sitation for the German native would be if the company is considered a commercially active partnership in Germany and a partnership, as opposed to corporation, in the U.S. In explaining the exemption benefits of this setup, the text reads: "Besteuerung in Deutschland unter Progressionsvorbehalt freigestellt, sofern die LLC nach deutschem Steuerrecht als gewerblich tätige Personengesellschaft und nach amerikanischem Steuerrecht als Personengesellschaft einzuordnen ist."
What would the "Progressionsvorbehalt" be if the person is exempt from taxes under this situation? My Romain defines "Progressionsvorbehalt" as "reservation to apply progressive tax rate." Does this mean that even though tax-exempt, whatever the person earns from his or her membership interest in the LLC can be used to put him or her in a higher tax bracket?
Thanks for your help.
Cami Townsend (X)
English translation:exemption-with-progression method (Freistellung mit Progressionsvorbehalt
Explanation:
See especially: http://www.compuserve.de/recht/ressort1/internationales/tax1...
"Art. 23 A of the OECD Model Tax Convention provides for the so-called exemption-with-progression method (Freistellung mit Progressionsvorbehalt). According to this method, double taxation is prevented by means of exempting a taxpayer from his tax liability in one country with regard to foreign source income, whereas the other respective country is granted the full right to impose taxes on domestic source income. The tax base in the country where the taxpayer is resident or has its habitual abode, seat, or place of management is reduced in the amount of the respective foreign source income. However, the tax rate applicable in the country of residence will be determined by the worldwide income of the taxpayer before any reduction is made."
Selected response from:

Andrea Nemeth-Newhauser
Local time: 03:24
Grading comment
That's the direction I was going, too. Thanks for the help.
4 KudoZ points were awarded for this answer



Summary of answers provided
naexemption-with-progression method (Freistellung mit Progressionsvorbehalt
Andrea Nemeth-Newhauser
namaybe it's the other way around
Dan McCrosky (X)
nasee below
Dierk Seeburg


  

Answers


3 hrs
see below


Explanation:
Since nobody else wrote in I want to at least offer some educated guesses: How about 'conditional progression' or 'qualified progression' 'progression proviso'?
Cheerio,
Dierk

Dierk Seeburg
Local time: 04:24
Native speaker of: Native in GermanGerman
PRO pts in pair: 404
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4 hrs
maybe it's the other way around


Explanation:
The web site below gives the following explanation:

"Grundsätzlich ist jeder deutsche Steuerbürger mit seinem gesamten „Welteinkommen“ steuerpflichtig, egal wo es erwirtschaftet wurde („Universal-Steuerprinzip“). Auf die Staatsangehörigkeit kommt es dabei gar nicht an, als Steuerbürger zählt jeder Steuerpflichtige, der hier zu Lande wohnt.

Andere Staaten richten sich nach dem „Nationalprinzip“, z.B. die USA: Jeder amerikanische Staatsbürger – wo immer er sich aufhält – , ist in den USA steuerpflichtig. Lebt er gerade in Deutschland, wäre er mithin doppelt steuerpflichtig. Um das zu vermeiden, hat Deutschland mit den wichtigsten Staaten Doppelbesteuerungsabkommen abgeschlossen: Der deutsche Fiskus verzichtet darauf, das im Ausland versteuerte Einkommen hier noch einmal zu belasten – auch wenn der Steuersatz dort weit niedriger sein sollte.


Progressionsvorbehalt

Die Finanzbehörden behalten sich allerdings das Recht vor, die Auslands-Einkünfte fiktiv den inländischen Einnahmen hinzuzuschlagen. Für die deutschen Einkünfte kann sich daraus insgesamt ein höherer Satz ergeben."

My Hamblock & Wessels gives these two translations: - 1) provision concerning progression - 2) saving clause as to progression

My own feeling is that the most important sentence in your context is "Besteuerung in Deutschland unter Progressionsvorbehalt freigestellt..." because this means that the German tax department is not allowed in this case to exercise its normal right to apply the higher German progression.

I like your Romain translation better but we must not for get the word "freigestellt" - optional, in other words and only in this situation, the taxpayer can choose, not the tax department! Possible translation: "The application of the German progressive tax scale is at the taxpayer's option."




    Reference: http://finanzen.focus.de/D/DA/DAS/DAS10/das10.htm
Dan McCrosky (X)
Local time: 12:24
Native speaker of: Native in EnglishEnglish
PRO pts in pair: 1541
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11 hrs
exemption-with-progression method (Freistellung mit Progressionsvorbehalt


Explanation:
See especially: http://www.compuserve.de/recht/ressort1/internationales/tax1...
"Art. 23 A of the OECD Model Tax Convention provides for the so-called exemption-with-progression method (Freistellung mit Progressionsvorbehalt). According to this method, double taxation is prevented by means of exempting a taxpayer from his tax liability in one country with regard to foreign source income, whereas the other respective country is granted the full right to impose taxes on domestic source income. The tax base in the country where the taxpayer is resident or has its habitual abode, seat, or place of management is reduced in the amount of the respective foreign source income. However, the tax rate applicable in the country of residence will be determined by the worldwide income of the taxpayer before any reduction is made."


    Reference: http://www.welt.de/daten/1999/06/21/0621iw118529.htx
    Reference: http://www.fm.nrw.de/broschueren/online/estgesetz99/32bestg-...
Andrea Nemeth-Newhauser
Local time: 03:24
Native speaker of: Native in HungarianHungarian
PRO pts in pair: 53
Grading comment
That's the direction I was going, too. Thanks for the help.
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