You have to pay tax on your income in Germany if you
- have a residence in Germany, or
- have a habitual abode in Germany, or in other words stay in Germany for more than six months (183 days) of a calendar year.
You are liable to pay tax on your entire income. This means income from different types of sources (e.g. wages, pensions and rental income). It also means income which you receive within or outside Germany (worldwide income).
If you are an employee, you main source of income will be your wages. Income tax (Einkommensteuer) is automatically withheld from your wages (this is known as wages tax (Lohnsteuer)). A solidarity surcharge (Solidaritätszuschlag) is also deducted, as well as a church tax (Kirchensteuer) if you are a member of a religious community which levies a church tax. Your employer remits these taxes directly to the competent Tax Office (Finanzamt). Your employer also remits your contributions to the statutory social insurance systems (unemployment, health, long-term care, pension and accident insurance). The amount deducted from your wages each month is stated in the payslip you receive from your employer.
Please note: If you have taken out private insurance, such as private health insurance, you must pay the premiums for these insurance policies independently.
The amount of income tax you pay depends on your annual income. This refers to all of your income in a calendar year, minus certain deductible amounts which are tax-exempt. There is a basic personal allowance (Grundfreibetrag) on which you pay no tax. In 2017, this is 8820 euros for single persons, and 17,640 euros for married couples and civil partners. For employees, there is also an additional, tax-exempt, flat-rate allowance of 1000 euros a year. If your annual income exceeds these allowances or any other tax-free allowances, you pay income tax on the excess. The tax rate begins at 14% and rises as your income does. The maximum tax rate is 45%.
Taxes are also paid on any income from capital you receive from your bank in Germany, e.g. interest. The taxes are withheld directly by the bank and remitted to the Tax Office. A single tax rate of 25% applies to income from capital.
Please note: You do not need to pay tax on interest if the interest does not exceed 801 euros (or 1602 euros in the case of married couples and civil partners whose income tax is assessed jointly). Be sure to submit an application for exemption from this tax to your bank (Freistellungsantrag).
Families and single parents receive certain tax advantages. On the basis of your filing status (Steuerklasse), these advantages are already taken into account in the amount deducted from your wages each month.
You can work out your probable tax liability using the wages tax and income tax calculator provided by the Federal Ministry of Finance.
After the end of a calendar year, you can file an income tax return (Einkommensteuererklärung) so that the Tax Office can check whether you have paid too much or too little in taxes. It is often worthwhile for employees to file a tax return. You may potentially be able to claim deductible amounts.
Please note: In some cases, you are required to file a tax return, for example if you had additional sources of income besides your wages, if you received unemployment benefit (Arbeitslosengeld), sickness benefit (Krankengeld) or a short-time work allowance (Kurzarbeitergeld), if you had more than one job, or in the case of certain combinations of filing statuses. If this is the case, you must file a tax return by 31 May of the following calendar year. It is possible that you will have to pay more tax.
If you are not required to file a tax return, you can do so voluntarily within 4 years.
The best way to file your tax return is online using the Elster site. You will have to register in order to use Elster. You can also file your tax return by completing a form. In both cases, you must send the tax return to the Tax Office for the area where you live. If you have general questions about the tax return, your Tax Office offers regular opening hours for enquiries – whether in person or by telephone.
If you need additional assistance in completing your tax return, you can consult a tax adviser or a lawyer. You will have to pay for their services. There are also self-help organisations (Lohnsteuerhilfevereine) run by workers, for workers, which offer assistance in matters concerning wages tax. They can help you with tax-related questions, and are usually less expensive than consulting a tax adviser or lawyer.
You probably spend some of your income on work-related expenses, provident expenses or certain other obligations. As these portions of your income are not freely at your disposal, they are not supposed to be taxed. Certain expenses can therefore be deducted when calculating your taxes. This reduces your taxable income and the amount you have to pay in tax. The most important deductible amounts are:
Income-related expenses (Werbungskosten): These are expenses which are closely related to your work. They include, for example, job application expenses, expenses for work clothing, expenses for work equipment (e.g. tools, specialist literature, office supplies), trade union fees, expenses for travel between your workplace (first place of work) and your home in the form of the allowance for commuters (Entfernungspauschale) or higher expenses for public transport if actually incurred, and the costs of maintaining dual households.
Tip: Income-related expenses of 1000 euros per year are automatically taken into account for every employee. If your income-related expenses do not exceed this amount, you do not need to individually specify and provide evidence of them. If your expenses are greater than 1000 euros per year, for example if you require a second home for professional reasons (known as “dual households” (doppelte Haushaltsführung)) because you live and work in different locations, you can state this in your tax return.
- Special expenses: These include, for example, provident expenses (Vorsorgeaufwendungen), i.e. the premiums on provident insurance policies, as well as spending on supplementary pension plans and donations.
- Allowances for people with one or more children: The tax-free child allowance (Kinderfreibetrag) and the allowance for the child’s childcare, education or vocational training needs.
- Extraordinary financial burdens: These are unusually high expenses necessarily incurred by the taxpayer, i.e. which the taxpayer is unable to avoid. For example, particularly high medical expenses or expenses paid by the taxpayer to support a dependant and for the dependant’s vocational training.
In Germany, there are 6 filing statuses for the deduction of income tax from wages (wages tax). These filing statuses only apply to employees. The filing status determines how much is withheld from your wages in the form of wages tax each month and remitted by your employer to the Tax Office (Finanzamt). The wages-tax deduction is an advance payment towards your annual income tax. The amount deducted is intended to match the amount of income tax you have to pay for that year as accurately as possible, to minimise the need to pay additional taxes and the need for tax refunds. This is achieved by giving employees a filing status. The filing statuses reflect various types of marital status and distributions of income between married couples or civil partners.
If you no longer have the documents concerning a tax identification number (Steuer-Identifikationsnummer) which was issued to you in the past, you can contact the Federal Central Tax Office (Bundeszentralamt für Steuern). You should also do this if you were issued a tax identification number during a previous stay in Germany, as it remains valid throughout your lifetime and does not change.
On the Federal Central Tax Office’s website, you can arrange for your tax identification number to be sent to you again. You can also contact the Office by telephone on +49 (0)228 406 1240 from Monday to Friday from 8:00 a.m. to 4:00 p.m., or enquire in writing. For all enquiries, please give your full name and complete address, as well as your date and place of birth.
If you are not registered in Germany but nonetheless pay taxes here, your tax identification number is issued when your income tax return is processed. You will receive written notification of it a short time later.
Cross-border workers are employees who live near a country’s border (in a specifically defined border zone), but are employed (not self-employed) in a neighbouring country and routinely cross the border to their workplace in the morning and return home in the evening. Special international agreements apply to cross-border workers.
If you do not have a residence or habitual abode in Germany and are only working here for up to 6 months, for example as a seasonal worker or posted worker, you are normally subject to limited tax liability on your income. This means that you only need to pay tax in Germany on certain types of income which you receive in Germany. This includes earnings from non-self-employed work, such as your wages for work which is carried out or commercially exploited in Germany. If you are employed by a domestic employer, whose management, for example, is in Germany, or by a foreign temporary work agency, your employer withholds the payable wages tax from your wages and remits it to the Tax Office (Finanzamt). The tax is then deemed to have been paid. If the wages are your sole source of income, you normally do not need to file a tax return. As a citizen of an EU country, Iceland, Liechtenstein or Norway who is a resident of one of these countries, you also have the option of applying for assessment for income tax (Veranlagung zur Einkommensteuer). In this case, you must file an income tax return which you have personally signed. This is a worthwhile option if, for example, you would like to claim deductible amounts or if the German right to tax is limited by a double taxation agreement, i.e. if your wages in Germany should not be taxed at all, or only to a limited extent. You can find out on the website of the Federal Finance Ministry whether Germany has concluded a double taxation agreement (Doppelbesteuerungsabkommen) with your country of residence. It publishes a constantly updated list of the double taxation agreements and other tax-related agreements, as well as an annual list of negotiations on agreements. In addition, you can also obtain information on the treatment of wages for tax purposes under double taxation agreements on the following webpage.
From the time when you cease to have your residence or habitual abode in Germany, you are only liable to pay tax in Germany on income received within Germany. This includes, for example, wages for work carried out in Germany and income from renting out properties located in Germany. If you are required to file a tax return or if you do so voluntarily, these sources of income must also be declared.
There are 6 filing statuses in Germany for income tax on wages (wages tax). Your filing status depends in particular on your marital status and, if you are married or in a civil partnership, on the distribution of the two incomes. In some cases, it is possible to choose between different filing statuses. A filing status fits best if it most accurately reflects your personal circumstances (marital status and distribution of income). Here is an overview:
Filing status I …
… applies to single persons, i.e. unmarried, separated, divorced or widowed employees.
Filing status II …
… applies to single persons with at least one child in their household. If you choose filing status II, you receive tax relief amounting to 1908 euros per year (plus 240 euros for every further child as a tax-free allowance). You only receive filing status II if you meet the statutory conditions and submit an application.
Filing status III …
… can only be chosen by employees who are married or in a civil partnership, who are not permanently separated, and who are subject to unlimited income tax liability. This filing status is worthwhile for you if your spouse or civil partner does not work or earns much less than you. If you choose filing status III and your spouse or civil partner is also an employee, he or she is given filing status V.
Filing status IV …
… is the standard status for employees who are married or in a civil partnership. If you and your spouse or civil partner earn roughly the same amount, this is the appropriate filing status for you.
Filing status V …
… is the counterpart of filing status III. This is the filing status given to an employee whose spouse or civil partner has filing status III.
Filing status VI …
… applies to employees who have multiple jobs at once and receive wages from multiple employers. Your wages from your primary job are taxed according to the appropriate status from filing statuses I to V, while wages from another job are taxed according to filing status VI.
If you are self-employed, run a business or operate an agricultural and forestry holding, tax is not automatically deducted from your income. The tax is subsequently assessed for the entire year on the basis of the tax return you file. You are required to file a tax return once your income exceeds certain levels. To avoid a large tax bill, you should make advance payments to the Tax Office (Finanzamt) during the year which reflect your estimated amount of annual tax. You can obtain information on both of these issues from your Tax Office.
As soon as you first register your residence in Germany with the registration office (Meldebehörde) of your town or municipality, you will be automatically issued a tax identification number. You will receive written notification of it a short time later.
If you have already been resident in Germany in the period since 1 July 2007 and registered your residence with a registration office, you have already received a tax identification number. This remains valid throughout your lifetime and does not change, and so it has to be reused.