Income tax in Germany

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income tax in Germany

income tax in Germany

The most significant tax that all employees and business owners in Germany have to pay is the income tax. People should pay the income according to the total income that they earn during a calendar year.

If you work as an employee for a company in Germany, you do not have to deal with income tax in person from the beginning. Your employer deducts this tax automatically as a wage tax (Lohnsteuer) from your gross salary and transfers it to the tax office on your behalf.

In addition, the employer in Germany is required to pay the Solidarity tax (Solidaritätszuschlag) as well as the church tax (Kirchensteuer) if you are a member of a religious society for which the tax is levied on your behalf.

Health, pension, care, and unemployment insurances in Germany are also deducted from your salary and provided to the tax office by the employer.

Depending on your payroll, you can see how much the employer pays to your account in gross terms each month, and how much your net monthly salary is after taxation.

How much is the payable income tax in Germany?

Everyone in Germany is covered by a Basic tax allowance. If your income is less than this basic tax allowance, you will not be required to pay income tax.

The amount of the basic tax allowance in Germany in 2021 for single people or those who are not in a civil partnership is equal to 9744 Euros. This amount reaches the threshold of 19488 Euros for married people or people who are in a civil partnership. If your income in Germany exceeds this amount, you must pay income tax on it.

Income tax rates in Germany range from 14% to 42%, As your taxable income increases, so will your tax rate.

However, the maximum income tax rate in Germany is 45% and is only payable if your annual income as a single person or a person in a civil partnership is more than € 275,613. The 45% tax rate is applied to couples or those in a civil partnership in Germany if they earn more than € 50,1462 annually.

Income tax return in Germany

As an income tax payer in Germany, you can ask the government at the end of a calendar year to check whether the amount of tax you have paid during the year is more than what you are required to pay or not. To do this, you must first submit your income tax return to the tax office. Based on the figures provided in the return regarding your actual income and financial expenses, the government can check whether you are entitled to a refund or not.

Completing a tax return in Germany can often be helpful for you; According to the Federal Statistical Office, 9 out of every 10 taxpayers in Germany receive a refund, which averages around € 1,000.

How do you fill your income tax return in Germany?

You must first obtain tax return forms from the relevant tax office or download and print them from the tax office’s website. You can also submit and file your tax return online at

If you are required to record and provide an income tax return in Germany, you must submit it to the tax office by the end of May next year. Reasons that require you to file an income tax return include:

– Selection of a combination of tax groups III and V (3 and 5)

– Receiving compensation of more than € 410 (for example, health insurance, unemployment benefits, or child benefits)

It is necessary to mention the following amounts that your employer is obliged to pay to the tax office on your behalf, in your tax return:

  • The amount of income in the past year
  • The amount of income tax
  • The amount of solidarity tax
  • If available, church tax

The employer will often notify you of these figures at the end of the calendar year in a separate return (a printable version of the electronic income tax certificate). You can then enter the required figures in your tax return.

Some expenses may reduce your tax amount. Therefore, you must include them in your tax return. These costs may include the following:

  • Expenses of traveling to work
  • Expenses related to private retirement plans
  • Home relocation costs for professional reasons, including relocation from abroad.
  • Expenses related to job application, which includes application from abroad.

It is important to keep copies of receipts related to your various expenses as evidence. Receipts should reflect the expenses you incurred from January 1 to December 31 of that year.

However, if you work in Germany where you are subject to income tax and have paid expenses for it in the previous year, you can report those expenses to the tax office to be deducted from your taxable income. To do this, you must also submit last year’s tax return to the tax office. The tax deduction is effective only for the year in which you earned money in Germany.

Is it better to fill in the tax return form yourself or ask a specialist to help you?

You can ask a tax advisor or the Income Tax Assistance Association (Lohnsteuerhilfeverein) in Germany to complete your tax return form. Although you will have to pay for the services of a tax specialist, getting help from an association or tax advisor can be helpful, especially if your income situation is complicated.

If you would like to complete the income tax return form yourself, you can find answers to any questions you may have in the tax office or on the Help and FAQ pages on the Elster website. Elster is an electronic form that allows you to file your tax return online with the tax office. In addition, you can provide software in this regard and install it on your personal computer. According to the instructions in the software, you can fill in your tax return and send it to the tax office.

It is difficult for most people, especially immigrants, to file an income tax return in Germany. You may forget to collect and store all your payrolls and other required receipts, or you may have difficulty understanding German technical and tax terminology, making it difficult for you to enter the correct information and data. It is therefore recommended. You can get the help of a tax advisor before completing and submitting your tax return. Wise Business Group is ready to serve you with the help of experienced tax consultants in Germany. Save on your taxes using the advice of our consultants.

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