German income tax

The most important tax for jobholders in Germany is income tax. You pay income tax on all
your income for one calendar year – in your case, this will probably correspond primarily to
your income from your work as an employee. If you are employed by a company, you do
not even have to trouble yourself with the question of income tax at first, as your employer
will automatically deduct the income tax from your gross wage/salary in the form of wage
tax (Lohnsteuer) and transfer it to the tax office on your behalf. Your employer also
transfers the “solidarity surcharge” (Solidaritätszuschlag) and – if you are a member of a
religious community which levies it – the “church tax” (Kirchensteuer) as well. Your pension,
health, nursing and unemployment insurance are also deducted from your wages and paid
by your employer. You can see how much your employer transfers to your account and how
much your net salary amounts to every month from your wage or salary slip.

How much income tax you pay

In Germany, everyone’s earnings are subject to a basic tax allowance. Up to this amount,
your taxable income is not subject to tax. In 2018, this basic tax allowance is 9,000 euros if
you are unmarried and not in a civil partnership. For couples who are married or in a civil
partnership is 18,000. If your taxable income is higher than these amounts, you will pay
income tax on it. The taxation rates vary from 14 percent to 42 percent. The rule is: the
higher your taxable income, the higher the rate of taxation. However, the top tax rate of 42
percent is only payable on incomes of more than 250,731 euros a year if you are unmarried
and not in a civil partnership. For couples who are married or in a civil partnership, the
maximum tax rate is applicable for incomes of over 501,462 euros.

Income tax declaration

At the end of one calendar year, you can ask the government to check whether you have
paid too much income tax. To do so, you submit your Income tax declaration to the tax
office. On the basis of the figures you supply about your actual income and financial
charges, the government is able to check whether you are entitled to a refund. It usually
worthwhile filling in the tax declaration form: according to the data of the Federal Statistical
Office, nine out of ten taxpayers receive a refund. On average, they receive a refund of
around 900 euros.

How to fill in your income tax declaration

You can collect the tax declaration forms from your tax office, or download them from the
tax office Web site and print them out. You also have the possibility of making your tax
declaration online, at www.elster.de. If you are obliged to file an Income tax declaration,
either because you have chosen the combination of tax brackets III and V (3 and 5), or
have received indemnities (for example health insurance payments, unemployment benefit
or child benefit ) of more than 410 euros, you must hand it in to the tax office by the end of
May of the following year. In the tax declaration, you state how much you earned in the
past year and how much income tax, solidarity surcharge and, if applicable, church tax,
your employer has paid to the tax office on your behalf. Your employer will normally inform
you of these figures once the calendar year has ended in a separate statement (a print-out
of the electronic income tax certificate). You should then enter these figures in your tax
declaration.

Certain expenses may lower the amount of tax you have to pay. You should also enter these
in your tax declaration. They include, for example:

 Expenses for moving house for professional reasons, including from abroad
  The costs of applying for jobs, including from abroad
 Expenses for travel to work
 The costs of private pension schemes

For many kinds of expenses, it is important to keep copies of receipts as proof, and that the
expenses/costs were incurred between January 1 and December 31 of the year in question.
However, if you take up employment in Germany which makes you eligible for income tax,
and you incurred costs related to this during the previous year, you can declare them and
have them deducted from your taxable income. To do so, you must submit a tax declaration
for the previous year as well. The tax reduction is effective for the year during which you
earned income in Germany.

https://www.make-it-in-germany.com/en/for-qualified-professionals/working/guide/taxes

Taxation in Germany
Taxes in Germany are levied by the federal government (Bund), the states (Länder) as well as the
municipalities (Städte/Gemeinden). Many direct and indirect taxes exist in Germany; income
tax and VAT are the most significant. The German word for tax is die Steuerwhich originates from
the Old High German word stiura meaning help. The Financial Secrecy Index ranks Germany as the
8th safest tax haven in the world, ahead of Jersey but behind Lebanon.

Taxation principles[edit]

Tax revenues as a percentage of GDP for Germany in comparison to the OECD and the EU 15.

The German constitution (Grundgesetz) lays down the principles governing taxation in the following
articles:

 The ability-to-pay principle (Art. 3 para. 1 Grundgesetz)

 Equality in taxation (Art. 3 para. 1 Grundgesetz).
 The lawfulness of taxation (Art. 2 para. 1 and Art. 20 para. 3 Grundgesetz)
 The welfare state principle (Art. 20 Grundgesetz)
The right to decide on taxes is subdivided:
 The federation has the right on customs. (Art. 105 para. 1 Grundgesetz)
 The federation and the states decide together on most of the tax law. Formally, the states can
decide that there is no federal law. In practice, there are federal laws for all taxation issues. (Art.
105 para. 2 Grundgesetz)
 The states decide on local excise taxes. (Art. 105 para. 2a Grundgesetz)
 The municipalities and the districts (Kreise) can decide on some minor local taxes like the
taxation of dogs (Hundesteuer).
So even if Germany is a federal state, 95% of all taxes are imposed on a federal level. The income
of these taxes is allocated by the federation and the states as following (Art. 106 Grundgesetz):

 The federation receives exclusively the revenue of:

 Customs
 Taxes on alcopops, cars, distilled beverages, coffee, mineral oil products, sparkling wine,
electricity, tobacco, and insurance
 Supplement on income taxes so-called solidarity surcharge (Solidaritätszuschlag)
 The states receive exclusively the revenue of:
 Inheritance tax, real property transfer tax
 Taxes on beer and gambling
 Fire protection tax
 The municipalities and/or districts receive exclusively the revenue of:
 Real property tax
 Taxes on other beverages, dogs, and inns.
Most of the revenue is earned by income tax and VAT. The revenues of these taxes are distributed
between the federation and the states by quota. The municipalities receive a part of the income of
the states. In addition, there is a compensation between rich and poor states
(Länderfinanzausgleich, Art. 107 para. 2 Grundgesetz).

Structural organisation of fiscal administration[edit]

Germany’s fiscal administration is divided into federal tax authorities and state tax authorities. The
local tax offices (Finanzämter) belong to the latter. They administer the “shared taxes” for the
Federation and the States and process the tax returns. The number of tax offices in Germany totals
around 650.
As a result of discussions in 2006 and 2009 between Federation and States (Föderalismusreform)
the Federation will further on also administer some taxes. The competent authority is the Federal
Central Tax Office (German: Bundeszentralamt für Steuern, abbreviated: BZSt) which is also
competent authority for certain applications of tax refund from abroad. Since 2009, the BZSt
allocates an identification number for tax purposes to every taxable person.

Jurisdiction[edit]
There is normally at least one finance court in every state (Berlin and Brandenburg share a court,
in Cottbus). Appeal instance is the Federal Finance Court of Germany(Bundesfinanzhof) in Munich.

Fiscal Code[edit]
The common rules and procedures applying to all taxes are contained in the fiscal code
(Abgabenordnung) as so-called general tax law. The individual tax laws regulate in which case tax is
incurred.
Tax identification numbers[edit]
From 2009 onward, every German resident receives a personal tax identification number. In the
coming years,[when?] businesses will be receiving a business identification number. The competent
authority is the "Federal Central Tax Office" (Bundeszentralamt für Steuern).[1]

Tax revenue[edit]

German Tax Revenue 2007

In 2014, German tax revenue totaled €593 billion.[2]

Tax revenue is distributed to Germany’s three levels of government: the federation, the states, and
the municipalities. All of these are jointly entitled to the most important types of tax (i.e., value-added
tax and income tax). For this reason, these taxes are also known as “shared taxes”. Tax revenue is
distributed proportionately using a formula prescribed in the German constitution.

Income tax for residents[edit]

Individuals who are residents in Germany or have their normal place of abode there have full income
tax liability. All the income earned by these persons both at home and abroad is subject to German
tax (principle of world income).

Types of income[edit]
For the purposes of charging income tax in Germany, earnings are divided into seven different types
of income. A distinction is made between:

 Income from agriculture and forestry

 Income from business operations
 Income from self-employed work
 Income from employed work
 Income from capital
 Income from letting property
 Miscellaneous income.
If a taxpayer’s income does not fall into any of these categories, then it is not subject to income
tax. This includes winnings at a lottery, for example.

Income tax[edit]
German income tax rate in 2010 as a function of taxable income

The rate of income tax in Germany ranges from 0% to 45%. The German income tax is
a progressive tax, which means that the average tax rate (i.e., the ratio of tax and taxable
income) increases monotonically with increasing taxable income. Moreover, the German
taxation system warrants that an increase in taxable income never results in a decrease of
the net income after taxation. The latter property is due to the fact that the marginal tax rate (i.e.,
the tax paid on one euro additional taxable income) is always below 100%.
Income tax rate in 2015[edit]
No income tax is charged on the basic allowance, which is €8,354 for unmarried persons and
€16,708 for jointly assessed married couples. Beyond this threshold, the marginal tax rate
increases linearly from 14% to 24% for a taxable income of €13,469 (€26,938 for married
couples). In the subsequent interval up to a taxable income of €52,881 (€105,762 for married
couples), the marginal tax rate increases linearly from 24% to 42%. The last change of rates
occurs at a taxable income of €250,730 (€501,460 for married couples) when the marginal tax
rate jumps from 42% to 45%. The course of the marginal tax rate and the resulting average tax
rate are depicted in the graph to the right.
Solidarity surcharge[edit]
On top of income tax, the so-called solidarity surcharge (Solidaritätszuschlag or "Soli") is levied
at a rate of 5.5% of the income tax for higher incomes. The solidarity surcharge was introduced
in 1991 and, since 1995, has been used primarily to cover the costs of German reunification,
which include the debts and pension obligations of the East German government, as well as the
costs of upgrading infrastructure and environmental remediation in the new states of Germany.
Up to €972 (€1,944 for married couples) annual income tax, no solidarity surcharge is levied.
Above this threshold, the solidarity surcharge rate increases continuously[clarification needed] until it
reaches 5.5% when the annual income tax is €1,340.69 (€2,681.38 for married couples).
For example, if €10000 income tax result from a certain annual taxable income, a solidarity
surcharge of €550 will be levied on top. As a result, the tax payer owes the taxation office
€10550.
Tax on benefits in kind[edit]
Every individual has to pay for any perks or benefits they receive from an employer, which
includes, for example, the use of a car. This applies to private car usage too if the car is owned
by a company or a self-employed individual. In the case of cars, this is based on either a log-
book method or a flat-rate method, which depends on the gross-list-price of a car rounded down
to the next 100 EUR. This means the original list-price without any reduction or discount at the
time of first original use, whether or not the car is used or some years old. VAT and every extra
features (e.g. GPS, leather seats etc.) need to be included. Tax is paid on one per cent of this
basis is the taxable amount every month.
Example: Gross-list-price: 45,000 EUR Additional taxable income: 450 EUR each month (e.g.
30% tax rate causes 125 EUR tax payable)

Withholding taxes[edit]
Tax on income from employed work and tax on capital income are both retained by being
deducted at source (pay-as-you-earn tax, wages tax, or withholding tax). Here, an amount of tax
is retained directly by the employer or by the bank before the earnings are paid out.
The taxation at source for employment income will be carried out based in taxation classes
based on the personal status. Employers are also liable to deduct the contributions to the social
security system at source.
Taxation classes (tax groups, Lohnsteuerklasse aka Steuerklassen)[3]

 class I = single
 class II = single parent (living alone with the child/children)
 class III = married and spousehas no income or lower income [citation needed]
 class IV = married and similar income to spouse
 class V = opposite of class III, ie this is the class, your spouse has, if you have III
 class VI= for a second job or for deduction without proper employee information
The taxation at source for capital income will be done with a flat tax rate of 25% (add
solidarity surcharge of 5.5% of the amount of tax and, if applicable, church tax).

Property sales tax[edit]

Aside from standard yearly property taxes, known as Grundsteuer, On property sales in
Germany there is a state level sales tax on the declared purchase amount.
Transfer of German property is subject to a transfer tax (Grunderwerbsteuer)–the equivalent
of UK stamp duty. Since 2007 this tax is no longer set at federal level and comes under
authority of Lander (state) governments.The current level of property transfer tax is
Germany’s federal states is Baden-Württemberg 5% Bavaria: 3,5% Berlin: 6% Bremen: 5%
Brandenburg: 5% Hamburg: 4,5% Hessen:6% Mecklenburg-Vorpommern: 5% Lower
Saxony: 5% North Rhine-Westphalia: 6,5% Rhineland-Palatinate: 5% Saarland: 5,5%
Saxony: 3,5% Saxony-Anhalt: 5% Schleswig-Holstein: 6,5% Thuringia: 5% [4]
Vendor profit from real estate sales in Germany is considered capital gains, if the real estate
has been held for less than 10 years.[4]

Deductions[edit]
German income tax law allows a considerable number of taxpayer’s costs to be deducted
from income when computing taxable income. This applies in particular to costs immediately
related to earnings. Apart from this, other costs are also deductible, e.g., certain insurance
payments, costs incurred by sickness, costs for home help, and maintenance payments. In
addition to the possibility of deducting costs, there are also numerous allowances and lump-
sum amounts which reduce taxable income, e.g., an allowance for capital earnings currently
at €801 (€1,602 for married couples) and a lump sum of €1000 (earnings in 2011 or
onwards) is deducted from income from employed work.

Tax allowance for children[edit]

Expenditure on child support and on children’s vocational training is taken into account with
a special tax allowance, with allowances for costs expended on child supervision, education
and training, and with child benefit payments.

Flat rate tax on private income from capital and capital gains
("Abgeltungsteuer")[edit]
Since 2009-01-01 Germany levies a flat rate tax on private income from capital and capital
gains called the Abgeltungsteuer. The tax rate is 25% plus 5.5% solidarity surcharge. The
tax is levied at German sources as capital yields tax. A tax refund is possible if the personal
income tax rate is below 25%.
The Abgeltungsteuer replaces the earlier half revenue procedure (de) that had been in effect
in Germany since 2001.

Tax return[edit]
The obligation to file an income tax return does not apply to everybody. For example, single
assessed tax payers who exclusively earn income subject to withholding tax are exempt
from this obligation, because their tax debt is deemed to be at least settled by the
withholding tax. Nevertheless, any person having full tax liability is allowed to file a tax
return, taking into account the tax already withheld at the source and possible deductions. In
many cases, this may result in a tax refund.
Married couples can apply for joint assessment to be taxed at a more favourable rate. In this
case, they must file the annual tax return as it is possible that the tax paid through
withholding tax was not sufficient.

Income tax for non-residents[edit]

Individuals who are neither resident of Germany nor have their normal place of abode there
are only liable to pay tax in Germany if they earn income there which has a close domestic
(German) context. This includes in particular income from real estate in Germany or from
a permanent establishment in Germany.

Double taxation agreements[edit]

See also: International taxation
Germany has reached tax treaties with about 90 countries to avoid double taxation. These
agreements fall under public international law and aim to avoid that one taxpayer is charged
similar taxes more than once on the same income for the same period. The basic structure
of the double taxation agreements which Germany has signed follows the "Model Tax
Convention" drawn up by the OECD.

Social Security Contributions[edit]

Employment income earned in Germany is subject to different insurance contributions
covering health, pension, nursing and unemployment insurance. Contributions are levied as
a percent of income until a certain ceiling shared equally between employee and employer.
Table of contributions for 2018:[5]

Insurance policy Yearly ceiling Employer % Employee %

 West: 78,000.00 €/
Pension Insurance 9.30% 9.30%
East: 69,600.00 €

West: 78,000.00 €/
Unemployment Insurance 1.5% 1.5%
East: 69,600.00 €

1.175%-
Nursing Insurance 53,100.00 € 1.175%
1.425%

Health Insurance 53,100.00 € 7.3% 7.3%

Additional employee contribution

depending on health insurance up to 0.9%
company

see also Payroll tax / section Germany

Corporation tax[edit]

German Tax Rate on Corporate Income 1995-2009

Corporation tax is charged first and foremost on corporate enterprises, in particular public
and private limited companies, as well as other corporations such as e.g. cooperatives,
associations and foundations. Sole proprietorships and partnerships are not subject to
corporation tax: profits earned by these set-ups are attributed to their individual partners and
then taxed in the context of their personal income tax bills.
Corporations domiciled or managed in Germany are deemed to have full corporation tax
liability. This means that their domestic and foreign earnings are all taxable in Germany.
Some corporate enterprises are exempted from corporation tax, e.g. charitable foundations,
Church institutions, and sports clubs.
As of 1 January 2008, Germany’s corporation tax rate is 15%. Counting both the solidarity
surcharge (5.5% of corporation tax) and trade tax (averaging 14% as of 2008), tax on
corporations in Germany is just below 30%.
Assessment base[edit]

Ratio of German assets in tax havens to German GDP.[6] Havens in countries with tax information
sharing allowing for compliance enforcement have been in decline. The "Big 7" shown are Hong
Kong, Ireland, Lebanon, Liberia, Panama, Singapore, and Switzerland.

The assessment base for the corporation tax charged is the revenue which the corporate
enterprise has earned during the calendar year. Taxable profits are determined using the
result posted in the annual accounts (balance sheet and Income statement) drawn up under
the Commercial Code. What is deemed income under tax law sometimes diverges from the
way earnings are determined under commercial law, in which case tax law provisions
prevail.

Dividends[edit]
When dividends are paid to an individual person, capital yield tax at a rate of 25% is
charged. Since 1 January 2009, this tax is final for individuals who are residents of
Germany. Solidarity surcharge is also imposed on capital yields tax.
When dividends are paid to an enterprise with full corporation tax liability, the recipient
business is largely exempted from paying tax on these revenues. In its tax assessment,
merely 5% of the dividends are added to profits as non-deductible operating expenses. The
same applies if a taxable corporate enterprise sells shares in another company.
Deducting tax from dividends paid by a subsidiary with full tax liability to a foreign parent
domiciled in the EU is waived on certain conditions, e.g., the parent company has to have a
direct holding in the subsidiary of at least 15%.

Integrated fiscal units (group taxation)[edit]

Under German tax law, separate companies may be treated as integrated fiscal units for tax
purposes (Organschaft). In an integrated fiscal unit, a legally independent company (the
controlled company) agrees under a profit and loss pooling agreement to become
dependent on another business (the controlling company) in financial, economic and
organisational terms. The controlled company undertakes to pay over its entire profits to the
controlling company. Another requirement is that the controlling company has to hold the
majority of voting rights in the controlled company.
In tax terms, recognition of a fiscal unit means that the income of the controlled company is
allocated to the controlling company. This provides an opportunity to balance profits and
losses within the integrated fiscal unit.

Trade tax[edit]
Entrepreneurs engaging in business operations are subject to trade tax (Gewerbesteuer) as
well as income tax/corporation tax. In contrast to the latter, trade tax is charged by the local
authorities or municipalities, who are entitled to the entire amount. The rate levied is fixed by
each local authority separately within the range of rates prescribed by the central
government. As from 1 January 2008, the rate averages 14% of profits subject to trade tax.
Assessment procedure[edit]
The business entity has to file the trade tax return with the tax office, like its other tax
returns. Taking any allowances into account, the local tax office (Finanzamt) calculates the
trade earnings and then gives the applicable figure for a trade tax assessment to the local
authority collecting the tax. The underlying profit base, as well as the book-tax differences
for the local trade tax jurisdictions, may differ from that used for the corporation tax. On the
basis of the collecting rate (Hebesatz) in force in its area, the local authority calculates the
trade tax payable.

Unincorporated enterprises[edit]
One-man businesses and members of a partnership may deduct a large portion of trade tax
from their personal income tax bill.

Incorporated enterprises[edit]
As from 1 January 2008, corporate entities may no longer deduct trade tax from their taxable
profits.

Value-added tax[edit]
As a matter of principle, all services and products generated in Germany by a business
entity are subject to value-added tax (VAT). The German VAT is part of the European Union
value added tax system.

Exemptions[edit]
Certain goods and services are exempted from value-added tax by law; this applies for
German and foreign businesses alike.
For example, the following are exempted from German value-added tax:

 export deliveries[7]
 intra-Community supply of goods
 services provided by certain professional groups (e.g. doctors)
 financial services (e.g. granting loans)
 letting real estate in the long-term
 cultural services provided to the public (e.g. by public theatres, museums, zoos, etc.),
 value-added by certain institutions providing general education or vocational training
 services provided in an honorary or voluntary capacity.
Tax rate[edit]
The rate of value-added tax rate generally in force in Germany is 19%.[8] A reduced tax
rate of 7% applies e.g. on sales of certain foods, books and magazines, flowers and
transports.

Payment of the tax[edit]

Within 10 days of the end of each calendar quarter, the business entity has to send the
tax office an advance return in which it has to give its own computation of the tax for the
preceding calendar quarter. The amount payable is the value-added tax it has invoiced,
minus any amounts of deductible input tax. Deductible input tax is the value-added tax
which the entrepreneur has been charged by other business entities.
The amount thus calculated has to be paid to the tax office by way of an advance. By
this is meant that the amount due must be paid in full before the next fiscal quarter.
Larger businesses have to file the advance return every month. For entrepreneurs who
have only just taken up professional or commercial operations, the monthly reporting
period likewise applies during the first calendar year and in the year after that.
At the end of the calendar year, the entrepreneur has to file an annual tax return in
which it has again calculated the tax.

Small businesses[edit]
Entrepreneurs whose turnover (plus the value-added tax on it) has not exceeded EUR
17,500 in the preceding calendar year and is not expected to exceed EUR 50,000 in the
current year (small enterprises), do not need to pay value-added tax. However, these
small enterprises are not allowed to deduct the input tax they have been billed.

Real property tax[edit]

Municipalities levy a tax on real property (Grundsteuern). The tax rates vary because
they depend on the decision of the local parliament. The tax is payable every quarter. In
2018, the German Constitutional Court ruled the current property tax as not in line with
the constitution. This is because properties are taxed based on their value from the early
1960s (1930s in East Germany), violating the horizontal equity principle.

Real property transfer tax[edit]

Transfers of real property are taxable (Grunderwerbsteuer). The vendee and the vendor
are common debtors of the tax. In general the vendee has to pay the tax. The tax rate is
defined by the individual States. In general the tax rate is 3.5%, but all States except
Bavaria and Saxony have increased it since 2011. Most States now have a taxrate of
4.5% or 5%, the highest are North Rhine-Westphalia, Saarland and Schleswig-Holstein
with 6.5%.
Real estate investors are also impacted by the speculation tax (Spekulationssteuer).
This tax applies to gains generated on real estate investments, if sold less than 10 years
after purchase. Depreciation deductions of prior years are added to the sales price of
the home, to derive a higher taxable gain.[9]

Inheritance and gift tax[edit]

A single law regulates both inheritance tax and gift tax, requiring the payment of rates
from 7% to 50% both on transfers following death and on gifts among the living.
Deductions as high as 100% apply to cases such as family houses and the possessions
of entrepreneurs.

Capital gains tax[edit]

In Germany there is no special capital gains tax. Only under certain conditions gains
from private disposal may be taxed. Since 2009-01-01 Germany levies a final tax
(Abgeltungsteuer) amounting to 25% that may take effect like a capital gains tax for
resident persons e.g. disposal of shares.

Aviation Tax[edit]
Main article: German air passenger taxes
From 2011-01-01 on, all passenger flights departing from Germany will be subject to the
aviation tax. The amount of tax to be paid depends on the distance to the final
destination. Flights to a destination up to 2,500 km away will incur a tax of €8 per
passenger. The amount increases to €25 for distances of up to 6,000 km and €45 for
distances beyond this. The distance taken into account is that for the entire journey as
booked. For flights involving a transfer or short stopover, this means that the tax only
becomes chargeable on the initial departure.

Motor vehicle tax[edit]

A tax is imposed on the owners of motor vehicles. It is levied depending on the type of
vehicle (car, motorcycle, commercial truck, trailer, motorhome, etc.). The tax is due
annually after the registration of the vehicle.
With cars, the tax is different for gasoline and diesel engines. Diesel powered cars are
taxed higher. The tax amount also depends on the emissions class (Euro 1 - Euro 6),
whether a diesel car has a soot particle filter, and the initial date of vehicle registration.

Tax free CO2

Initial registration Taxation based on
threshold

- 30.06.2009 displacement in cc -

01.07.2009 - displacement in cc + CO2

120g/km
31.12.2011 emission

01.01.2012 - displacement in cc + CO2

110g/km
31.12.2013 emission

displacement in cc + CO2
01.01.2014 - 95g/km
emission

Purely electric vehicles are exempt from taxes for at least five years after initial
registration.[10]

Financial crisis 2009[edit]

Existing depreciations e.g. for certain private housekeeping expenses and for small and
medium-sized enterprises have been enhanced. A declining depreciation for
movable assetshas been reintroduced for two years (2009-2010). Businesses are
allowed to carry back losses and to claim refund of paid corporation / income tax. As a
result, they get liquidity improvement. From 2010-01-01 on the VAT tax rate concerning
hotel accommodation is reduced from 19% to 7%.
. https://en.wikipedia.org/wiki/Taxation_in_Germany

How much are the taxes in Germany?

In 2018, this basic tax allowance is 9,000 euros if you are unmarried and not in a civil
partnership. For couples who are married or in a civil partnership is 18,000. If your
taxable income is higher than these amounts, you will pay income tax on it. The taxation
rates vary from 14 percent to 42 percent.

Does Germany have income tax?

There is also a solidarity surcharge, equivalent to 5.5 % of your income tax. You must
also pay church tax if you are affiliated to a religious community that charges it.
Church tax is based on your income tax bill – it amounts to 8% of your income taxin
Bavaria and Baden-Württemberg, and 9% in other parts of Germany.

Individual Income Taxes

For 2017 a taxable income of less than €8,820 was tax-free for a single person
(€17,640 for a married couple). Incomes up to €54,058 for a single person (€108,116 for
a couple) were then taxed with a rate progressively increasing from 14% to 42%.
Incomes from €54,058 (€108,116) up to €256,304 (€512,608) were taxed at 42%.
Incomes over €255,304 for a singe person and €510,608 for a married couple were
taxed at 45%. For 2018 the taxable income amounts have increased a bit. Taxable
income of less than €9,000 is tax-free for a single person (€18,000 for a married
couple). Incomes up to €54,949 for a single person (€109,898 for a couple) are taxed
with a rate progressively increasing from 14% to 42%. Incomes from €54,950
(€109,990) up to €260,532 (€521,064) are taxed at 42%. Incomes over €260,533 for a
singe person and €521,066 for a married couple are taxed at 45%. In addition to this
there is the “solidarity surcharge” of 5.5% of the tax, to cover the continuing costs of
integrating the states of the former East Germany.

As in many other countries, Germany allows a variety of deductions that can lower
taxable income. Deductions are granted for circumstances such as children under 18
(or under 27 if still attending school and without earnings), specified insurance
premiums, charitable and political contributions to German entities up to certain limits
and unavoidable extraordinary expenses above a certain limit (such as illness).

Deductions from compensation are also made for four social programs: retirement,
unemployment, health insurance and long-term nursing care. Payments for these
programs are normally borne equally by the employer and the employee. The
employer's share of contributions is not considered as taxable income to the employee
and the employee's portion is tax deductible up to a certain limit. A tax adviser can tell
you more about other deductions and the requirements to earn them. For more
information go to our article on German Social Security and Employee Benefits.
If an individual is subject to German tax, generally most sources of income are then
taxable. The Lohnsteuer (wage tax), which alone accounts for a third of the German
government's revenue, is withheld at source from compensation. Income from other
sources (e. g. self-employment, fees for services, rent collections, investments and the
like) are covered by the Einkommensteuer (income tax).
The Lohnsteuer differs from the Einkommensteuer only by the method of collection.
The Lohnsteueris collected at source and paid directly to the Finanzamt (tax office) by
the employer while the individual must pay the Einkommensteuer himself.
Based primarily on your final payment for the previous year, the Finanzamt will estimate
your tax for the current year and require you to make prepayments (Vorauszahlungen)
of a quarter of the tax on March 10, June 10, September 10 and December 10. The total
tax liability is determined by filing an income tax return, which includes all types of
income from all sources. Wage tax withholding as well as provisional payments are
deducted from this total tax liability so that a refund or final tax payment is assessed.
The tax assessment is usually issued by the Finanzamt between two and six months
from the date the return is filed. No payment will be due before receipts of the tax
assessment notice.
Every tax return is under audit, therefore if the tax assessment is issued and is not
preliminary, the assessment can only be changed in the future by the occurrence of
extraordinary circumstances (e. g. tax evasion).

As a rule, the income tax return (Einkommensteuererklärung) should be filed by May 31

of the year following the one in which the income was received. If you use the
assistance of a tax consultant, you have an automatic extension to file until December
31. In some circumstances that date can even be extended to February 28. There may
be penalties and interest assessed if the return is filed late.
There are a few situations where the taxpayer is required to pay taxes even though the
income is less than the personal allowance, especially when tax-exempt income (such
as foreign-sourced income) must be considered for the determination of the applicable
income tax rate (progression clause). Taxes are then assessed based on a sliding
scale.

There is an "unofficial" tax calculator available online that can give you an idea of what
your “wage tax” or Lohnsteuer might be. Click here for the calculator.
Other Taxes
In addition to the various forms of income tax there is also a series of sales taxes that
significantly impact both individuals and businesses. The major tax is
the Mehrwertsteuer (value added tax), which accounts for a quarter of the government's
revenue and is second only to the Lohnsteuer in this regard.
The Mehrwertsteuer assesses a levy on each step in the production and delivery of
most items available for purchase. It applies to services as well as goods and the
standard current rate is 19%. A reduced rate of 7% currently applies to certain products,
including food and printed material. Medical and insurance services are generally
exempt, as are exports of goods abroad and services rendered abroad.
Numerous other items, including gasoline, alcoholic beverages, tobacco products, tea
and coffee, carry sales taxes in addition to the Mehrwertsteuer. There is also a church
tax (Kirchensteuer), of 8% to 9% of the Einkommensteuer/Lohnsteuer. But you are not
required to pay the tax unless you wish to be officially affiliated with one of Germany's
established churches; usually Catholic or Protestant (Evangelisch).
All in all there are approximately 30 different types of taxes, including taxes on
inheritances, real estate and motor vehicles. There is even a tax on the gross amounts
received by the state-run lotteries, though the distributions to the lucky lottery winners
are tax-free.