Especially if you're working and staying in Germany for a longer period of time, it can be worthwhile to familiarise yourself with the German tax system. Below we've listed some of the most common taxes.
Income Tax
- If you’re living and working in Hamburg, most sources of your income will be taxable.
- Everyone’s income is subject to a basic tax-free allowance ('Grundfreibetrag'). Up to this amount, your income is not subject to tax. You can find the current basic tax-free allowance on the website of the Federal Ministry of Finance (in German).
- The taxation rates vary from 14% to 45% of your income. The rule is: the higher your taxable income, the higher the rate of taxation.
- As an employee, your employer will automatically deduct the income tax ("Einkommenssteuer") from your wage and transfer it to the tax office.
- Self-employed persons have to pay their income tax themselves and are obliged to annually submit an income tax declaration.
Church Tax
- Anyone who is registered with a church or a religious community that charges church tax must pay this tax.
- Church tax ("Kirchensteuer") is a tax additional to income tax and is forwarded by the tax office.
- The taxation rates vary from 8% to 9% of your income tax, depending on the state. In Hamburg, the taxation rate is 9%.
Capital Gains Tax
- Capital gains tax is a tax on capital income (e.g. interest on call money, fixed interest, dividends).
- There is a savings allowance (Sparer-Pauschbetrag). Up to this amount, your capital gain is not subject to tax. You can find the current amount for savings allowance on the website of the Federal Ministry of Finance (in German).
- The amount of the capital gains tax is generally 25%.
- Capital gains tax is normally withheld by the paying credit institution.
Value Added Tax (Sales Tax)
- Consumers are exposed to VAT ("Mehrwertsteuer") in all transactions of daily life.
- It is generally 19% but for certain products such as food and books a reduced tax rate of 7% applies.
- The tax is already included in the prices charged in supermarkets, shops and restaurants etc.
Trade Tax
- All businesses that operate in Germany are liable to trade tax ("Gewerbesteuer").
- The tax is levied on business profits.
- Freelance work (for example as an actor) is not subject to trade tax.
- For further information, please contact a tax consultant or your local tax office. To find your tax office, please enter your registered address in the authority finder (Behördenfinder)
