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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 July 31 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 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 € 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.



Updated 09/09/2021 3:48pm