Shares given as perks or bonuses are also subject to taxes. Company cars are taxed at 1% of the car’s list price, including VAT. You may also be obliged to pay tax on anything deemed a “benefit in kind” - that is, perks or benefits you receive from your employer, such as the use of a car. The total contribution for social security generally amounts to around 20 - 22% of your salary up to a specified maximum limit. Your share of contributions will be withheld from your salary and transferred to the relevant organisations.

These payments are usually shared between you and your employer, with your employer typically contributing 50%. Unemployment insurance ( Arbeitlosenversicherung).Long-term care insurance ( Plegeversicherung).Pension insurance ( Rentenversicherung).Health insurance ( Krankenversicherung).The withholding tax levy comprises a tax on your salary ( Lohnsteuer), national insurance contributions, taxes on “benefits in kind”, a solidarity surcharge, and a church tax: Social security payments ( Krankenversicherung, Rentenversicherung, Pflegeversicherung & Arbeitlosenversicherung)Īny employment income earned in Germany is subject to compulsory social security contributions covering the following areas: There is a large difference between your gross salary and your net salary once taxes have been paid. When discussing salary and employment contract terms for a new job, it is important to be aware of this deduction. The withholding tax is taken from your pay each month. If this is your only source of income, you are not obliged to submit a tax declaration. This will apply to the vast majority of expats in Germany and means your rate of income tax has already been worked out and paid for you. Withholding or payroll tax is income tax and other contributions that your employer withholds from your salary. Here are the income tax rates for previous years: Income tax rates 2023 Income The income tax brackets for 2024 are as follows: Income If you have multiple professions, run your own business or are self-employed in Germany, you will be required to submit an annual tax return to work out your income tax (see below). Most people will pay income tax through payroll deductions by their employer. The German tax system operates a progressive tax rate in which the tax rate increases with taxable income. If you earn money in Germany, you are required to pay tax on your income. Tax revenue, derived from income tax, VAT, corporation tax and various other streams, is distributed between the federal government, states and municipalities. Tax administration is shared between two taxation authorities: the Federal Central Tax Office ( Bundeszentralamt für Steuern) and the approximately 650 regional tax offices ( Finanzämter). Taxes are levied by the federal government ( Bundesregierung), federal states ( Bundesländer) and municipalities ( Gemeinden). Whether you’re a German citizen or an expat, you are required by law to pay taxes if you earn money while living or working in Germany.

Income tax brackets 2021 federal