As a rule, everyone who lives and works in Germany is subject to income tax. You can find out what applies to you in this case here.
1. Tax liability
You have to pay tax on your income in Germany, if you
- have a residence in Germany or
- usually stay more than six months (183 days) per calendar year, in Germany.
The tax liability is regarding your total income. That means income from different types of income (e.g. wages, pensions and income from rentals). That also means income that you earn within and outside Germany (world income).
If you are an employee, your income will primarily be wages. The income tax is automatically deducted from your wages (so-called wages tax). In addition, a solidarity surcharge and, if you are a member of a religious community that collects such, church tax will be deducted. Your employer transfers these amounts directly to the Tax Office responsible. The employer also pays your contributions to the statutory Social security (unemployment, health, long-term care, pension and accident insurance). How much is deducted from your wages per month can be seen in your pay slip, which you receive from your employer.
Please note: If you have taken out private insurance, such as private health insurance, you have to pay the contributions for this insurance yourself.
2. The amount of income tax
The amount of income tax depends on the amount of your annual income. This is all your income for the calendar year minus certain amounts that are tax-free. There is a basic personal allowance on which you pay no tax. In 2021, this is € 9,744 for single persons and € 19,488 for married couples and registered partners. In addition, a tax-exempt lump sum employee fee of € 1000 per year applies to employees. If your annual income is above these or other tax-free amounts, you will pay income tax on the excess. The tax rate starts at 14% and increases as income increases. The maximum tax rate is 45%.
If you have income from investments from your bank in Germany, e.g. if you receive interest, taxes will also be charged on it. These are withheld directly by the bank and are paid to the Tax Office by way of the withholding tax. A uniform tax rate of 25% applies to the withholding tax.
Please note: If your interest does not exceed € 801 (or € 1,602 for a jointly assessed spouse or registered partner), you do not have to pay tax on it. Remember to apply to your bank for exemption from tax (exemption application).
Families and single parents receive certain tax advantages. By dividing them into the corresponding Filing status these advantages are already taken into account in the monthly deductions.
You can determine your expected tax burden with the wage and income tax calculator of the Federal Ministry of Finance.
3. Income tax return
In order to determine your taxable income, on which you ultimately have to pay income tax, the Tax Office needs several steps. First, it gets an overview of your income and checks what income you still had. In other words: Not only your salary as an employee is important, but also other income, e.g. from capital assets or renting and leasing. Any income-related expenses and allowances are deducted from this and a total amount of your income is calculated. The Tax Office then deducts your special expenses, extraordinary expenses and other items that you have entered in your income tax return from your income. If you have children, you are also entitled to a tax-free child allowance. This is also taken into account for tax purposes. Only then is your actual income determined, on which you have to pay taxes.
Please note: In some cases you are obliged to submit a tax return, for example if you had additional income in addition to your wages, received unemployment benefit, sick pay or short-time work allowance, had several employment relationships or had certain filing status combinations. You must then submit your tax return by 31 July of the following calendar year. You may have to pay additional taxes.
If you are not required to file a tax return, you have 4 years to do so voluntarily. It is worth applying for a refund of overpaid taxes.
The best way to declare your taxes is online via the Internet portal Elster. Registration is required to use Elster. You can also fill out the tax return as a form. In both cases you have to send the tax return to the Tax Office of the district in which you live. Your Tax Office provides regular office hours for general questions about tax returns - whether in person or by telephone.
If you need further assistance in completing the tax return, you can contact an accountant or lawyer. Costs are incurred for this. Income tax assistance associations can also help with tax issues. They are self-help organisations run by employees for employees and are usually more cost-effective than advice from accountants or lawyers.
It can be helpful, especially for EU citizens who have little knowledge of German, to use a tax program that is also offered in the foreign language. Currently, there are not many programs that make such an offer. The software is chargeable, i.e. you have to pay between 13 Euro and 40 Euro to download the software. Here you can find information about various software programs. Other software providers can be found on the Internet.
The only program that offers multilingual (Bosnian, English, Croatian, Polish, Romanian, Serbian, Russian) is SteuerGo.
The list does not claim to be complete. The use of the software is the personal responsibility of the user.