Could cheap flights in Germany receive a ‘penalty tax’?

The CSU state group in the Bundestag is demanding a "penalty price tax" on cheap flights within Europe in order to cut carbon emissions, according to a Friday media report.

Could cheap flights in Germany receive a 'penalty tax'?
Photo: DPA

Want to fly from Berlin to Venice for €8? Budget airlines such as EasyJet and RyanAir have made this possible with very low fairs.

But now a paper, to be presented at a retreat of the CSU, the Bavarian sister party of Chancellor Angela Merkel's Christian Democrats (CDU) next Tuesday, is proposing that flights costing less than €50 be subject to a penalty tax, according to BILD.

The exact amount of the tax is not yet known. 

“I want climate protection instead of competitive prices,” CSU leader Alexander Dobrindt told the newspaper.

“€9 tickets for flights in Europe have nothing to do with a market economy or climate protection. We want real freedom of choice in mobility through sustainable pricing of offers.”

The CSU, Germany’s third largest political party and dominant party of Bavaria, therefore wants to introduce a minimum price for airline tickets, according to the newspaper. All flights under €50 would be subject to the penalty tax, to be paid by consumers.

“Flying needs a minimum price and rail travel needs a reduction in VAT (an added tax of 19 percent),” Dobrindt said.

The proposal follows on the heels of the Green party’s proposal to put a complete end domestic flights in Germany in order to cut carbon emissions and incentivize more people to travel by train.

READ ALSO: Trains instead of planes? Could domestic flights in Germany really become obsolete?

Hurting consumers?

The federal government's aviation commissioner, Thomas Jarzombek, rejected the CSU's demands, saying it would ultimately harm lower income passengers.

“We agreed in the coalition agreement not to increase taxes,” the CDU politician told DPA. “It must also be carefully examined whether such a regulation would simply lead to planes flying empty and people with low incomes losing mobility without saving CO2”. 

The Federal Association of the German Air Transport Industry (BDL) was open to the discussion, however. 

“In principle, there should be no objections if the politicians were to find an adequate way to put a stop to uneconomical low prices and artificially inflamed demand”, Chief Executive Matthias von Randow told DPA.

'Climate tax bonus'

The CSU is looking at additional incentives in order to cut carbon emissions, as CSU leader Markus Söder proposed a climate tax bonus of up to €10,000 on Friday.

 “We want a climate bonus, which means that climate protection measures should be tax-deductable up to a sum of €10,000,” said the Bavarian Prime Minister to the “Augsburger Allgemeine” on Friday. 

“Each person would be able to deduct 20 percent of the costs directly from income tax if he saves energy – for example by installing a climate-friendly heating system.”

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What freelancers in Norway need to know about tax

If you’re ready to venture out on your own as a freelancer, then it is essential to brush up on the tax rules and regulations in Norway.

People going over their taxes and finances.
Here's what freelancers in Norway need to know about taxes. Pictured are people going over their finances. Photo by Scott Graham on Unsplash

Are freelancing and being self-employed the same thing?

According to the Norwegian website for government dialogue, Altinn, “A freelancer receives payment for individual assignments without being a permanent or temporary employee of the organisation he or she is carrying out work for, but does not need to be self-employed.”

This is helpful to clarify. Because when you decide to work for yourself in Norway, you can do this in a matter of two ways. The two most common methods to register your freelance work or self-employed business is as an enkeltpersonforetak, or as an AS, which is an acronym for aksjeselskap. 

In English, an enkeltpersonforetak means “sole proprietorship”. And an aksjeselskap means “Private Limited Company”. 

Both enkeltpersonforetak and AS come with their own set of positives and negatives. Technically, you are NOT considered a freelancer if you have set up an AS. 

If you have set up an AS, then you are considered an employee of your own company. 

The two may often be compared to one another. But in the eyes of tax law and the rules that apply to your freelance work, they are very different. If you are setting up an AS, it is highly recommended that you hire an accountant as the tax rules are intricate and very specific to what type of business you run.

If you are a freelancer working as an enkeltpersonforetak 

For a sole proprietorship, you need to pay advance tax quarterly – or four times a year in Norway. This is done by the freelancer calculating how much profit they expect their work to earn within the taxing quarter. 

It may be difficult to predict, which is why you shouldn’t worry if you make more or less than your original registered claim.

For example: Let’s say freelancer Petter registered with skatteetaten, the Norwegian Tax Administration, that he would make 50,000 kroner in the first quarter of the year. Suddenly, Petter unexpectedly gets five new clients and happily makes double, earning 100,000 in the first quarter instead, all Petter has to do is log into his skatteetaten account and adjust his original tax claim so the amount he pays in taxes will be accurate. 

The Norwegian Tax Administration determines how much tax is to be paid based on the expected profit. 

In addition to quarterly registers, freelancers are responsible for sending invoices, keeping track of their accounts, and creating their own pension scheme. They are also responsible for the value-added services, or VAT.

What is VAT?

This is where it can get a little confusing with the terms. The Norwegian VAT officially uses the acronym MVA, for merverdiavgift. And if that wasn’t confusing enough, Norwegians have developed a slang word for this type of tax called moms

So, VAT = MVA = merverdiavgift = moms. All four terms refer to the same type of tax.

For freelancers that have earned more than 50,000 kroner over the course of a year, they need to register their VAT, which is the sales tax on goods and services.  

Again, this is when you should double-check to see if your line of work can be VAT exempt. Specific industries, such as education and arts and culture, are exempt from registering their VAT. This is because they don’t have to pay VAT. But most importantly, they are not allowed to charge their clients VAT for their services or goods.

However, freelancers who work in VAT exempt industries can electively register their VAT so they can both charge VAT and receive VAT deductibles. 

The VAT tax rate has held steady at approximately 25 percent over the past decade. When you have registered the tax on your goods and services, it is possible to request a VAT refund on purchases made up to three years back in time.

This is, again, a really good time to know what you can deduct or get back with VAT. 

For example: Let’s say Anna works as a freelance PR agent and takes a potential new client out for a “working lunch”. Unfortunately, she cannot register the lunch receipt as a work-related deductible as it is not allowed to apply for a VAT deductible on foods. 

However, let’s say Anna bought a printer that was necessary for her PR services. She could apply for a 25 percent VAT deduction on the printer’s costs as it is deemed necessary work equipment.

To register VAT for your goods and services, look here

Programmes and accountants can help with this.

Accounting programmes and actual accountants can help ensure you are managing the administration side of your business correctly. And even if you have both of these helpful options, you should still give yourself enough time each week, or month, to keep your accounts up to date if you are a freelancer. 

Managing your own accounts and taxes can be overwhelming. Luckily, there are some different options available.

Having an overview of your accounts with an accounting programme is cheaper than hiring an accountant and a great way to keep a 24/7 overview of your business.

If you are intimidated by the math side of things, or worse, making an honest tax mistake that is still illegal, don’t worry. The newest programmes have a reputation of being easy to learn and user friendly. 

Here is a list of the top accounting programmes recommended for small businesses in Norway. 

Remember, Google Docs and Word are not an option for creating your own invoices, as all invoices must be auto-numbered. 

There is peace of mind in letting a professional handle your accounts, but you will have to pay for it. The average price for an accountant in Norway is around 500 kroner per hour plus VAT (value-added tax). 

If you choose to hire an accountant to manage your firm’s books, here is a list of what the average accounting services can cost you. 

If you’re still unsure

Learning your adopted country’s tax laws is both time-consuming and filled with small intricacies and loopholes. If ever you come across a new billing or taxing situation you’re not completely sure about. You can reach out to the Norwegian Tax Authority for more clarity.