Taxes

At a glance

Taxes are automatically deducted from your salary. Read the following information carefully to understand the basics of how taxes work in Germany.

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In Germany, income tax is automatically deducted from the monthly paycheck of all employees. Many employees, especially  unmarried people who have no other income, do not have to file a tax return. Unless you want to claim tax deductions.

Most scholarships also do not usually require you to pay tax or file a tax return unless you receive other income. Contact your scholarship provider to clarify the details.

However, you must file a tax return if you have other income, such as rental or business income and interest from bank accounts. This is also required if you want to claim tax deductions, for example for moving costs to Germany, childcare, maintenance of your house, etc.

If you invest your money for example in stocks, crypto currencies or funds, you usually have to pay tax on the profits with the final withholding tax. In this case, you should consult an expert tax advisor for your tax return.

Therefore Taxpayers have time until 31 October 2022 to submit their 2021 tax return to the tax office. The tax return for 2022 must be at the tax office by 30 September 2023 and the tax return for 2023 by 30 August 2024.

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 have to store all documents verifying your income and expenses and be prepared to submit them if requested. Even Germans often rely on special tax software packages, tax payer organizations 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 9,984 EUR/year do not have to pay taxes, the tax rate starts at 14% and increases up to 45% for incomes higher than 277,825 EUR/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 ID will be sent to you by mail within 2-4 weeks. If you have not received the letter with your tax ID, you can also ask for your tax ID at the Citizens' Registration Office (Bürgeramt). The letter looks innocuous - but is very important. Your employer needs that number to pay your salary and your taxes.

Please also note that your tax ID number remains the same for life. Even if you move or get married, your tax ID will not change.

 

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.

  • Class I is for singles
  • Class II is for singles with children
  • Classes III, IV and V are for married and registered same-sex couples. If both partners make about the same amount of money, they usually both choose class IV, otherwise the person with the greater income selects class III, while to person with the smaller income selects class V.
  • Class VI is for individuals with two or more separate employers.
How to change my Tax Group:

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. This also requires the presentation of a recognised marriage certificate. Your tax class is usually assigned to you when you get your tax number, but you can ask to have it changed.

Applications and declarations regarding the wage tax deduction features can also be transmitted electronically to the competent tax office. The transmission works nationwide via

  • the online portal "My ELSTER" under the menu item "Forms & Services" or
  • a transmission programme of your private provider.

The following applications and declarations can be transmitted electronically to the tax office:

  • Application for change of tax class,
  • Application for wage tax reduction
  • Declaration of permanent separation,
  • declaration on the resumption of marital or civil partnership union, and
  • Application for the electronic wage tax deduction features (ELStAM), e.g. change of your ELStAM data.

The current data on your wage tax deduction characteristics are transmitted by the tax office on the first of every month and automatically taken into account in your wage statement - also retroactively.  

 

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. When you register with the local authorities as you first move to Germany, you will be asked whether you belong to one of these religious groups. Check our Practical Advice - Religion page for further information.

In Baden-Württemberg, the church tax amounts to 8% of your income tax. It is automatically deducted from your monthly paycheck and transferred to your church account.

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 and a list showing these countries and the official German text of the treaties.

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.

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