In Germany, income tax is automatically deducted from the monthly paycheck of all employees. If you have no other income and do not want to claim any deductions, you do not have to do anything else.
Most scholarships cover only the amount required for basic subsistence, and, therefore, if scholarship holders have no additional income, they do not have to pay taxes or file a tax return. Check with your scholarship organization for details.
However, if you have other income, such as interest from bank accounts or shares (greater than approximately € 800/year), rental income or income from a business, you need to file a tax return. The same is true if you want to claim deductions, such as expenses for moving to start your job in Germany, child care, house maintenance or several other categories. Then you need to file an income tax return by May 31 of the following year.
A German income tax return consists of a basic form (Mantelbogen ESt 1) and, depending on your personal circumstances, any number of additional annex forms. You may also have to submit additional calculations and documents verifying your expenses. Even Germans often rely on special tax software packages, tax payer organisations or tax attorneys to properly submit their tax return.
Keep in mind: Germany has progressive taxation, which means that while employees earning less than about € 8,500/year do not have to pay taxes, the tax rate starts at 14% and increases up to 45% for incomes greater than € 250,000/year. Thus, reducing your income a small amount may save you a substantial sum.
Below, you will find basic information about special considerations regarding the German tax system.
|Tax Identification Number (Steuer-ID)|
|When you register as a resident, you automatically get your personal 11-digit tax ID number from the tax office (Finanzamt). Your tax number will be sent to you by mail within 2-4 weeks. The letter looks innocuous - but is very important. Your employer needs that number to pay your salary and your taxes. What may be confusing is that we also still have the old style tax case numbers (Steuernummern), which included codes for the state and city in which you file your taxes.|
|Tax Group (Steuerklasse)|
According to the German tax system, married couples and families with children carry a reduced tax burden. The tax class identifies your family status and affects how much money is automatically deducted from your monthly paycheck. Your tax class is usually assigned to you when you get your tax number, but you can ask to have it changed.
|Solidarity Tax (Solidaritätszuschlag; "Soli")|
|Additional charge of 5.5% of your income tax, charged as special payment to finance German unification.|
|Church Tax (Kirchensteuer)|
|Germany is unique in the fact that the tax office collects taxes for several churches and religious groups. These include the Roman Catholic, Lutheran (evangelische Kirche) and several free Christian Churches, as well as the Jewish Community. In Baden-Württemberg, if you are a registered member of one of these churches, an additional 8% of your income tax is automatically deducted from your monthly paycheck and transferred to your church account. If you are not religious and do not want to pay this tax, you need to indicate this when you register with the local authorities when you first move to Germany. Check our Practical Advice - Religion page for further information.|
|Double Taxation Agreements|
Double taxation agreements are official treaties between different countries dealing with people that have income in two countries. The goal is to prevent taxpayers from having to pay taxes twice on the same income.
Germany has signed many such treaties and is currently preparing more. The German Ministry of Finance publishes a map where these countries are marked and the official German text of the treaties (German only).
Each treaty is a bit different. if you are in the position of receiving income from Germany and another country in one year, you should look into the treaty that applies to you or consult a tax specialist before filing your German income tax return.
Updated 30/01/2017 2:03pm