Due to the federal structure of the Federal Republic of Germany, tax administration is split between the Federal Government and the Federal States. Depending on the type of tax, it is levied by the financial authorities of the Federal Government, the Federal States or the local authorities. An exception to this rule are mine site and extraction royalties, which are levied by the mining authorities of the Federal States.
A company (which extracts natural resources) with the legal form of a limited company (in particular a limited liability company or public limited company) which has its head office or management in Germany is subject to unlimited corporation tax. Limited companies which do not have their head offices and management in Germany are subject to corporation tax on the income generated in Germany. In Germany, corporation tax amounts to 15% of the taxable income.
Companies and persons require a permit to prospect for “free-to-mine” mineral resources (§ 7 BBergG). Owners of this type of permit are required to pay an annual mine site royalty as per § 30 BBergG. Pursuant to § 30(3), first sentence, of the BBergG, this generally amounts to €5 per square kilometre of a mine site in the first year after the permit has been granted; the amount increases by €5 per year to a maximum of €25 per year, whereby the legislation of individual Federal States may provide for differing royalty amounts and even exemptions under certain conditions (see § 32(2), BBergG and the table on page 43– 51 of the D-EITI Report). The expenses incurred for prospecting are set off against the mine site royalties. Mine site royalties must be paid to the Federal State in which the licenced mine site is located.
If natural resources are found, a permit is required for their extraction. However, extraction is only possible if the necessary operating plan permit and any other permits such as water rights permits have already been granted. If the extracted natural resources can be used for financial gain, the permit holder must pay extraction royalties for the extracted free-to-mine natural resources as per § 31 BBergG. The standard rate for extraction royalties is 10% of the market value of the natural resources in question (§ 31(2), sentence 1 BBergG). Here too, individual Federal States may stipulate different regulations in their legislation for the calculation of mine site and extraction royalties under certain conditions (see § 32 BBergG and
the table on page 43 – 51 of the D-EITI Report).
Holders of so-called old rights are exempt from the extraction royalties under § 151(2) no. 2 BBergG (see Legal framwork). In practice, this mainly concerns lignite and (until the end of 2018) hard coal extraction as well as old rights awarded on granite, earth pigments, salt and brine. The operators of these extraction sites had already received unlimited, irrevocable and royalty-free mining rights before the BBergG 1982 came into force, and/or in the new Federal States they had acquired mine property under the old law in the course of privatisation. For this reason, they are not covered by the Federal State regulations on extraction royalties. Saxony and Saxony-Anhalt are excluded from this, because, due to special features under the German Unification Treaty, in these two Federal States new authorisations had to be applied for under the Federal Mining Act, which are subject to extraction royalties. For this reason, exemption clauses were created in the Extraction Royalties Ordinances of both Federal States (parliamentary advisory service of the Brandenburg Parliament, 2008).
Mine site and extraction royalties only apply to free- to-mine natural resources. While mine site royalties are appropriated into the respective Federal State’s budget, the revenue from extraction royalties is used for inter-state financial equalisation. Mine site and extraction royalties are levied by the mining authorities of the Federal States.
Trade tax is a real or object tax. The assessment of trade tax is carried out in a multi-stage procedure. The municipalities are responsible for collecting trade tax. It is levied by the municipality in which the enterprise is located. The purpose of the trade tax is to tax the objective earning potential of a commercial enterprise. However, unlike corporation tax, trade tax is not linked to economic performance. Additions and deductions correct the income of the commercial enterprise (§§ 8 and 9 GewStG). To calculate trade tax, the responsible tax office determines the taxable amount, which is 3.5% of the objective earning potential. The responsible municipality sets a uniform tax factor for all the companies in its area of jurisdiction – the tax factor must be at least 200% (§ 16(4), sentence 2 GewStG). The payable trade tax is calculated based on the taxable amount determined by the tax office and the tax factor of the respective municipality.
A company (which extracts natural resources) with the legal form of a partnership or limited company is subject to trade tax. If operating facilities are located in an area belonging to several municipalities or are operated in a number of municipalities, the assessment basis for trade tax is distributed among these individual municipalities (so-called “reallocation”). As a general rule, the wages in the individual operating facilities are used as a yardstick for the calculations. This means that each affected municipality can levy its share of the trade tax of an extractive company.
An overview of the trade tax assessment rates (2020) of the municipalities in Germany is available via the Federal Statistical Office.1 Commercial taxation is the main source of tax for municipalities, followed by land tax. The municipalities must pay a portion of their tax revenue to the Federal Government and the Federal State governments as trade tax apportionments. The part of the trade tax remaining with the municipalities flows into their general budgets, thus helping to finance the local infrastructure and to provide education and social services among other things.
In Germany, the extraction of natural resources is governed by the BBergG, if the resources concerned are free-to-mine or privately-owned natural resources. As per § 3(3), BBergG, free-to-mine natural resources include metals, salts and fossil fuels such as hydrocarbons, lignite and hard coal. The ownership of a property does not extend to free-to-mine natural resources, so in this respect the property rights of the landowner are limited. In contrast, privately-owned natural resources are the property of the landowner. The landowner may carry out prospecting and extract the resources if found, without the need for any additional special legal title in addition to the operating permit and other required public-law permits. Its inclusion in the scope of validity of the BBergG aims to make their extraction subject to a uniform legal framework throughout Germany and (in particular) to uniformly regulate natural resource extraction in underground mining and ensure uniformity in the management of mine inspection authorities.
In addition to privately-owned natural resources, there are the so-called “landowner’s natural resources”. These are bulk raw materials, such as gravel and sands, which are predominantly used as building materials and are extracted through opencast mining. Like the privately-owned natural resources, these are also the property of the landowner, but they are neither subject to mining law nor to mining inspection.
A company does not have to own the land to extract privately owned natural resources and landowners’ natural resources. If the owner of the land simply makes it available to the company on the basis of a legal private contract (e.g. through a lease agreement) – and this is often the case – that alone is sufficient. Such contractual arrangements may include fixed payments or payments that depend on the quantity extracted, or a combination of both variants. On the Federal State side, official bodies including lo- cal authorities (e. g. counties or municipalities) and forestry offices may have the roles of landowners and landlords. The revenues from the leaseholds are therefore transferred to municipal budgets or Federal State budgets, thus making it possible to finance statutory tasks (et alia).
Energy and electricity taxes are particularly relevant for companies in the natural resources sector, within the framework of excise duties. Like the other excise duties, energy and electricity taxes are explicitly excluded from the reporting obligation within the framework of the legal commercial (corporation) payment report, as per the EU Accounting Directive and its implementation in § 341r, No. 3b of the HGB (German Commercial Code).
The Energy and Electricity Tax Act is based on the harmonised provisions of the EU Energy Tax Directive 2003/96/EC of October 27, 2003. On April 1, 1999, the electricity tax was introduced in Germany within the framework of the law covering entry into the ecological tax reform, and the tax rates of the energy tax (at that time still called mineral oil tax) were gradually increased. This created incentives to reduce energy consumption and to develop resource-conserving products and production processes.
The Electricity Tax Act and the Electricity Tax Implementing Ordinance constitute the legal basis for levy- ing electricity tax. The Federal Government is entitled to electricity tax revenues, which amounted to €6.9 billion in 2018. The revenue from the electricity tax and the higher taxation of fuels and heating materials obtained in connection with the ecological tax reform contribute to keeping social insurance contributions at a manageable level. Administration and collection tasks are carried out by customs administration.
The electricity tax is levied for consumption, but it is usually levied as an indirect tax on the supplier and passed on to consumers via the electricity price for practical reasons. This means that companies in the extractive sector must also pay electricity tax. The statutory tax rate is €20.50 per megawatt hour. Reduced tax rates can be considered for various purposes, e.g. railway electricity, whereas the production industry can particularly benefit from tax relief (see State subsidies and tax concessions).
The energy tax is an excise duty on energy products. It is governed by Federal legislation, and levied to tax the use of energy products as fuels or heating fuels within the German tax territory. The Energy Tax Act defines energy products as being (in particular), petrol, diesel fuel, light and heavy fuel oil, liquefied petroleum gas, natural gas and coal as well as biodiesel, vegetable oil and energy products of a similar nature that are used as motor or heating fuels. The amount of the tax varies according to the energy product and its intended use and is regulated in the Energy Tax Act. Tax concessions are standardised in the Energy Tax Act for certain energy products and intended uses (see State subsidies and tax concessions). Like the electricity tax, energy tax is levied by the customs administration, and the revenues flow to the Federal Government. In 2018, energy tax revenues amounted to approx. €40.9 billion. The revenue from energy and electricity taxes is the third-largest source of income for the Federal Government, after income tax and VAT.
The sheer financial volume of electricity and energy tax payments by companies in the natural resources extractive sector, and the financial scale of electricity and energy tax concessions (see State subsidies and tax concessions) cannot be feasibly presented without a disproportionate amount of bureaucratic effort. No statistics showing the elec- tricity and energy tax payments for individual economic sectors exist as yet.2
2 In the MSG, there was no consensus on the extent to which energy and electricity tax payments were among the most important payment flows. Therefore, they are not part of the payment flows reported by companies.