A 5.5% solidarity surcharge is imposed on the income tax liability of all taxpayers.

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1 Worldwide personal tax guide Germany Local information Tax Authority Website Tax Year Tax Return due date 31 May 2013 Is joint filing possible Are tax return extensions possible 2013 income tax rates German Finance Ministry, Local German tax office 1 January to 31 December Yes subject to election (for German residents only but with special rules for EU citizens and citizens of EEA countries) 31 December following (if the return will be prepared by a German tax consultant). Longer extensions given only in exceptional cases. Taxable Income Band National Income Tax Rates 0 8,130 0% 8,131 52, % 52, ,730 42% 250, % A 5.5% solidarity surcharge is imposed on the income tax liability of all taxpayers. If a German tax resident is a member of a church entitled to impose church tax, church tax is assessed at a rate of 8% or 9% on income tax liability, depending on the location. Investment income is tax-free in an amount of 801 per year for a single taxpayer ( 1,602 per year for a married couple filing jointly). Investment income is taxed at a flat tax rate of 25%, which must be withheld at source by the payer. Certain income that is not taxable is taken into account in determining the tax rate on German taxable income. This inclusion rule is known as the tax exemption under progression clause. For example, individuals who transfer to or leave Germany within the calendar year must take into account foreign income earned either before becoming a German resident or after leaving Germany in determining the tax rate on their German taxable income. This document has been prepared based on the legislation and practices of the country concerned as of 1 July 2013 by EY and published in its Worldwide personal tax guide, Tax legislation and administrative practices may change, and this document is a summary of potential issues to consider. This document should not be used as a substitute for professional tax advice which should be sought for the country of arrival and departure in advance of moving in order to discuss your circumstances. It is your responsibility to disclose your income to the tax authorities. This information is provided by EY in accordance with their Terms and Conditions. Neither HSBC nor EY accepts any responsibility for the accuracy of any of this information. By using this information you are accepting the terms under which EY is making the content available to you.

2 Who is liable? Individuals are subject to tax on their worldwide income if they meet either of the following conditions: They have a domicile in Germany for their personal use. They have a customary place of abode in Germany. This means that they are present in Germany for an uninterrupted period of 6 months that may fall in 2 calendar years. The citizenship of a taxpayer usually is not a consideration in determining residency. However, under the provisions of certain tax treaties entered into by Germany, citizenship may be one of the factors to consider if a taxpayer qualifies as a resident under the domestic laws of both Germany and the other treaty country. Non-residents may elect to be treated as residents if either their income subject to German taxation amounts to 90% or more of their worldwide income or their income not subject to German taxation does not exceed the amount of 8,130 per calendar year. This provision allows non-residents to file German income tax returns like residents and to claim all deductions and allowances normally granted to residents. Income subject to tax German income tax law distinguishes among several categories of income, including income from employment, self-employment, investment, business and real estate. Income from each of the categories may be combined, and taxable income is then determined by subtracting special deductions. However, income from investment is generally taxed at source with a flat tax rate. Employment income - Employed persons are subject to income tax on remuneration received from employment. Employment income includes the following: Salaries, wages, bonuses, profit participations, and other remuneration and benefits granted for services rendered in a public office or in private employment Pensions and other benefits received by a former employee, his or her surviving spouse, or descendants in consideration of services performed in the past Allowances paid to foreign employees working in Germany, including foreign-service allowances, cost-of-living allowances and housing allowances, are considered to be employment income and generally do not receive preferential tax treatment. Self-employment and business income - Business income includes income from activities performed through a commercial entity or partnership, while self-employment income includes primarily income from professional services rendered (for example, as doctors, dentists, attorneys, architects, journalists and tax consultants). In general all income attributable to self-employment or business, including gains from the sale of property used in a business or profession, is subject to income tax. Business income is subject both to income tax and to trade tax. Trade tax rates vary, from 7% to 17.5%, depending on location. Trade tax is not levied on income from self-employment or professional services. If a non-resident carries on a business through a permanent establishment in Germany, taxable income is computed in the same manner as for a resident individual and is taxed at the same income tax rates. However, the basic tax-free allowance in the amount of 8,130 is not considered.

3 Tax losses up to 1 million ( 2 million for married taxpayers filing jointly) may be carried forward indefinitely. For income and trade tax purposes, the loss carry forward exceeding 1 million is restricted to a maximum of 60% of taxable income. For income tax purposes (but not trade tax purposes), losses may be carried back for one year, subject to certain limitations that ensure minimum taxation. The overall maximum loss carry back amount is 511,500 ( 1,023,000 for married taxpayers filing jointly) annually. A taxpayer has a right to choose whether a loss is carried back or carried forward to the following years. Directors fees - Remuneration received as a supervisory board member of a corporation is treated as income from self-employment. A member of a supervisory board is regarded as an entrepreneur and is generally subject to value-added tax at a rate of 19% on fees received. Investment income - The flat withholding tax on investment income is the final tax. In general, investment income taxed at source does not have to be declared in the German income tax return. However, if the investment income was not subject to the flat tax withholding at source (in particular, capital investment income from foreign sources), the total annual investment income must be declared in the tax return. Taxpayers with an average personal income tax rate below 25% can apply the lower tax rate to the investment income that is declared in the German income tax return. A net investment loss can be carried forward to be credited against future positive investment income. A special loss consideration rule applies to capital gains derived from the sale of shares. Income from rentals and leases of real property located in Germany is taxed by assessment. Taxation of employer-provided stock options - Tradable and non-tradable stock options must be distinguished. In general, stock options provided by employers are non-tradable. For employer-provided nontradable stock options, the acceptable tax-filing position is taxation at the date of exercise. German law does not differentiate between qualified and nonqualified stock option plans. In general, the taxable event occurs at exercise, and an amount equal to the difference between the fair market value of the stock at the date of exercise and the exercise price must be included in employment income. The grant of non-tradable options is considered to be an additional incentive for future services. Consequently, such grant is considered to be compensation for services rendered during the period between the grant date and the date of vesting. Tradable options may result in taxation either at time of grant or exercise depending on the details of the stock option plan. In both cases, for expatriates, a certain portion might not be taxable in Germany and may qualify for treaty relief. Capital gains Real estate - Gains derived from the disposal of real estate held not more than 10 years are included in taxable income and taxed at the ordinary rates, unless the property was exclusively used by the taxpayer in the year of sale and the two preceding years. The gain from such disposal is tax-free if the total gains in the calendar year amount to less than 600. Sales of securities - Gains on the sale of shares are not subject to tax if all of the following conditions are satisfied: The shares were acquired before 1 January The vendor had a participation of less than 1% in the company. The shares were held by the vendor for more than one year.

4 Losses incurred on the sale of shares acquired before 2009 can be deducted from taxable gains from the sale of shares and certain other assets, particularly real estate, until the end of If losses incurred on the disposal of shares before 2009 are not balanced by 31 December 2013, they cannot be offset against gains from the sale of shares, and they may only be offset against gains from the sale of certain other assets (for example, real estate) as of Gains derived from the sale of shares acquired after 31 December 2008 are subject to a 25% withholding tax, regardless of the holding period. The gain is fully taxable. Sales of certain other assets - Gains derived from the disposal of certain other assets are not subject to tax in Germany if the individual holds them for more than one year. However, if the individual realises income on these assets in at least 1 calendar year, the tax-relevant period is extended to 10 years. Inheritance and gift taxes A tax is imposed on transfers of property at death or by gift. Decedents and donors are considered transferors, and beneficiaries and donees are considered transferees. Transfers of worldwide net property are taxable if either the transferor or the transferee is resident in Germany at the time of the decedent s death or at the date of the gift. If neither the transferor nor the transferee is resident in Germany, the tax applies only to transfers of property located in Germany. To prevent double taxation, Germany has entered into estate tax treaties with Denmark, France, Greece, Sweden, Switzerland and the United States. Germany is negotiating treaties with Finland and Italy. Social security Coverage - Social security taxes comprise the following 5 elements: Old-age pension Unemployment insurance Health insurance Nursing care insurance Accident insurance Old-age insurance, unemployment insurance, health insurance and nursing care insurance contributions are required for all employees, unless they are otherwise exempt under EU regulations or a social security totalization agreement. The same rule applies to accident insurance contributions, which are required to be paid by the employer only. Tax filing and payment procedures Employers must withhold income tax (known as wage tax) as well as solidarity surcharge and church tax, if applicable, on wages. In addition, social security contributions must be withheld. Non-residents may file an income tax return only if they have income that is not subject to withholding tax. If a non-resident s income is subject to withholding tax, such as income from dependent work or investment income, an income tax return generally cannot be filed. However, a non-resident can file a German income tax return if he or she is a citizen of an EU/EEA member state. Non-residents are subject to the individual income tax rates but the basic tax-free allowance in the amount of 8,130 does not apply to income other than employment income.

5 Income tax is assessed based on the tax return filed, and any additional amount due is charged by means of an assessment notice. The balance due must generally be paid within one month after receipt of the notice. Refunds are paid immediately after the issuance of the assessment. Quarterly tax prepayments are levied by the tax authorities based on the last assessed taxable income if the withholding is not sufficient to cover the annual income tax assessed or if the personal income subject to taxation is declared. Double tax relief and tax treaties German income tax law provides that foreign taxes, up to the amount of German income tax payable on foreign-source income taxable in Germany, may be credited against German income tax (foreign tax credit). This unilateral relief applies primarily to income from those countries with which Germany has not entered into a tax treaty. Tax treaty provisions override German income tax law, usually by excluding certain foreign-source income from German taxation. Germany has entered into double tax treaties with 91 countries.

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