Taxation in Germany
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 several of the most common taxes.
- 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 allowance. Up to this amount, your income is not subject to tax. The basic tax allowance for the year 2018 is 9,000 EUR for single persons and 17,000 EUR for married persons.
- 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.
- 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. The savings allowance for the year 2018 is EUR 801 for single persons and EUR 1,602 for married persons.
- 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.
- 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, German only).