Tax System in Germany

Self-Employment in Germany
April 8, 2020
Changing the Name and Structure of your Company
May 4, 2020

What is the tax benefit for married people and parents without a spouse in Germany?

The amount of tax paid by you in Germany is not only dependent on your income, rather your marital status and number of children are also determinants in this case. All taxpayers in Germany are classified into 6 main groups as follows:

  1. Class I: Single/widowed/civil partnership/divorced and Married persons not in tax classes II, III or IV  (i.e. if you are single but not a single parent. People who are permanently from their spouse or partner are also considered in this category)
  2. Class II: Single but entitled to single parent allowance. (i.e. is a parent who is single and living only with her/his kids and no adult. This person is entitled to pay less tax when compared to the class I due to the fact she/he accepts the custody of the children) 
  3. Class III: Married but spouse does not earn wages/is classified under tax category V/recently deceased (i.e it includes employed or self-employed people who are married or are in an official relationship and his/her spouse is unemployed and has no or very little source of income compared to her/his partner. In this case, the spouse with very low income will be considered in tax class V.)
  4. Class IV: Married (not separated); both earning and residing in Germany. (if the partners are both employed/self employed and both have close incomes, then they will be classified in this tax group. In this way, they can exploit the German tax benefits meaning that the partner with higher income will pay tax based on the tax rate of the spouse with lower income. For example, if one partner pays his tax with 30% rate and another one should pay with 35% rate. Both will pay with 30% rate)
  5. Class V: Married but one spouse is classified under tax class III (i.e. the spouse of a person in tax class 3 will be in this gourp)
  6. Class VI: Individuals on multiple wages from more than one employer. (i.e. this tax class usually covers those people who have multiple jobs)

At the end of the fiscal year, you can ask your local tax office in Germany (finanzamt) to check your tax payment and if you had already paid more than you were supposed to (based on your tax prepayments/ steuervorauszahlung) the difference will be reimbursed to you and vice versa.

The application form for tax declaration could be requested personally from the local tax office or downloaded from their website. However, it is highly recommended that you assign a tax consultant or an official bookkeeper based in Germany to take care of it on your behalf. The deadline for submitting the yearly income declaration for each fiscal year in Germany is till  the end of May of the next fiscal year. In this statement, you will declare how much income you have made and how much you are supposed to pay as an income tax.

Of course there is a bit a difference between submitting the income tax declaration of an employee and a self -employed.  In future articles, we will explain more the taxation system in Germany especially for investors and self employed people in Germany,

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