Ø-Company Taxation (2018)[Unternehmensbesteuerung] (Business) |
29%; DAX30 Ø 24,9% On average German companies paid 29% company tax in 2018. The leading (so called) DAX30 companies paid an average of 24,9%. |
Withholding Tax[Abgeltungssteuer] (Business) |
On Profits which are distributed to private stock-holders a capital gains tax of 25% accrues. |
Import Turnover Tax[Einfuhrumsatzsteuer] (Business) |
If, for instance, a German company buys goods from a company located in a non-EU country, it has to pay 19% or 7% import turnover tax. The tax is paid to the customs authority. |
Personal Income Tax[Einkommenssteuer] (Business) |
Applies to all persons (and partnerships) who earn more money through their work than they spend. The higher the income, the higher the personal income tax rate. The progressive tax rate ranges from 14% up to 42% depending on the respective annual income (starting from €9,169 to €55,961 annual income; a tax rate of 45% applies on annual income of €265,327 and more). Annual income which does not exceed the tax free allowance of €9,168 is exempt from personal income tax. |
Acquisition Tax[Erwerbsteuer] (Business) |
Trade within the European Union is free of customs. Instead Acquisition tax applies. It is based on the VAT rate of the respective country. In Germany 19%. If a German company buys goods from a company in Italy, it has to pay 19% acquisition tax in Germany. |
Trade Tax[Gewerbesteuer] (Business) |
A tax, that all commercial business operations have to pay in Germany - the type of their legal form does not matter.
Trade tax is levied by municipalities. It varies, as the local authorities use different multipliers (see link). “The corresponding rate of trade tax depends on two components:
Example calculation (for 2018): Corporate income is €250,000 Respective Tax free allowance is deducted 250,000 - 24,500 = €225,500 250,000 - 5,000 = €245,500 Tax base rate is applied, the result is the tax base amount 3.5% of €225,500 = €7,892.50 3.5% of €245,500 = €8,575 The multiplier is applied to the respective tax base amount, the result is the trade tax burden in Duisburg (520%): €7,892.50 x 5.2 = €41,041 in Zossen (Brandenburg) (200%): €7,892.50 x 2.0 = €15,785 in Munich (490%): €8,575 x 4.9 = €42,017.50 in Leuna (Saxony-Anhalt) (263%): €8,575 x 2.63 = €22,552.25 As a result of the varying multipliers, a partnership pays more trade tax in (e.g.) Duisburg than in Zossen in Brandenburg or a corporation more in Munich than in Leuna (Saxony-Anhalt). On national average the trade tax burden for the company (in this example) is €31,096.45 or €33,785.50. |
Real Property Tax[Grundsteuer] (Business) |
Real property tax applies to every property owner (in Germany). Real property tax A to properties used for agriculture or forestry, real property tax B to any other properties.
It is levied by
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Real Property Transfer Tax[Grunderwerbsteuer] (Business) |
If a property is sold or transferred a real property transfer tax of 3.5% up to 6.5% (depending on the federal state) of the purchase price has to be paid once. |
Capital Gains Tax[Kapitalertragssteuer] (Business) |
Is a German subsidiary company distributing profits to its foreign corporate parent company, the subsidiary company has to pay a 25% capital gains tax in Germany.
In 2009, the capital gains tax [Kapitalertragsteuer] was changed to withholding tax [Abgeltungssteuer] |
Corporate Income Tax (Rate)[Körperschaftssteuer] (Business) |
Tax for all corporations (such as such as the limited liability company (GmbH) or the stock corporation (AG)) on globally generated income. Throughout Germany it amounts 15%. It is to be paid on distributed and retained profits. Corporate Income Tax applies to all corporations which are based in or have an executive board in Germany. Corporations which are not based in or have no executive board in Germany are subjected to pay the tax on income generated within Germany. |
Solidarity Tax[Solidaritätszuschlag] (Business) |
All taxpayers have to pay 5.5% of their respective income tax rate. If your personal income tax rate is for instance 30% - it is 5.5 from 30, therefore 1.65%. So your personal income tax rate including solidarity tax is 31.65%.
Taxpayers who pay less than €972 (single) or €1,944 (married couple) personal income tax per year are exempt from solidarity tax.
For (personal income) tax-payments up to €1,340 (single) or €2,680 (married couple) per year a reduced percentage rate applies. For all payments above €1,340 or €2,680 per year, the rate is 5.5%.
Find out more about this subject and our solidarity tax calculator here. |
Value Added Tax (VAT)[Umsatzsteuer] (Business) |
Value-added tax (VAT) accrues on purchase and sale of goods and services. The regular VAT tax rate is 19%. For certain goods and services (such as food or public transport) a reduced rate of 7% applies. For some services (e.g. banking and health services) VAT doesn’t apply. |
Company Taxation[Unternehmenssteuer] (Business) |
Company Taxation is levied in two steps. First step is corporate income tax and personal income tax. Corporate income tax is paid by Corporations (such as the limited liability company (GmbH) or the stock corporation (AG)). Personal income tax is paid by partnerships. Second step is Trade tax. All companies (irrespective of their legal form) are subjected to pay trade tax. |
VAT deduction[Vorsteuer] (Business) |
“On purchasing goods or making use of services, companies regularly have to pay value-added tax themselves. The taxes collected and paid can be balanced out in the input VAT deduction.” (GTAI) |
Withholding Tax[Abgeltungssteuer] (Private) |
Withholding tax is a special form of the collection of personal income tax. In 2009, the capital gains tax [Kapitalertragssteuer] was changed to withholding tax [Abgeltungssteuer]. 25% have to be paid on any interest, dividends, and profits from securities and funds. The sum is automatically withheld and transferred to the tax authority by your bank. Exact figures you usually find on your tax assessment notice from your Bank. Gains up to €801 for singles and €1,602 for married couples are tax-free. But beware: you have to set up an exemption order [Freistellungsauftrag] with your bank in order to avoid the automatic transfer to the tax authority. If you don’t set up an exemption order, you have to reclaim any paid tax on sums up to €801 (or €1,602) with your tax declaration. |
Spouse Splitting[Ehegattensplitting] (Private) |
In the case of spouse splitting, married couples and registered partners submit a joint tax return. For tax purposes, they then count as one person. Usually the so-called joint assessment can save income tax. Especially, if the partners earn significantly different incomes. |
Personal Income Tax[Einkommenssteuer] (Private) |
Applies to all persons (and partnerships) who earn more money through their work than they spend. The higher the income, the higher the personal income tax rate. The progressive tax rate ranges from 14% up to 42% depending on the respective annual income (starting from €9,169 to €55,961 annual income; a tax rate of 45% applies on annual income of €265,327 and more). Annual income which does not exceed the tax free allowance of €9,168 is exempt from personal income tax. |
Payroll Tax[Lohnsteuer] (Private) |
The payroll tax only differs from the personal income tax in how it is levied. The payroll tax rate is the same. All employees have to pay payroll tax, which is automatically deducted from their monthly salary. Self-employed pay personal income tax. It is not automatically deducted, but has to be personally calculated and reported to the tax office. |
Inheritance Tax[Erbschaftssteuer] (Private) |
Inheriting e.g. money or real estate, you have to pay inheritance tax. But - good news - not always. The amount of inheritance tax depends both on the value or the sum of the inheritance and on your relationship to the decedent. The closer the relationship is, the higher is the tax free allowance - less inheritance tax has to be paid. Furthermore there are tax classes (not the same as with personal income tax), which define the inheritance tax tax rate. |
Basic Tax-Free Allowance[Grundfreibetrag] (Private) |
Every annual income up to the sum of the basic allowance is tax-free. In 2019 this will be €9,168, in 2020 it will be €9,408. This means that taxes must only be paid on annual earnings above the sum of the basic allowance. |
Real Property Tax[Grundsteuer] (Private) |
Real property tax applies to every property owner (in Germany). Real property tax A to properties used for agriculture or forestry, real property tax B to any other properties.
It is levied by
|
Real Property Transfer Tax[Grunderwerbsteuer] (Private) |
If a property is sold or transferred a real property transfer tax of 3.5% up to 6.5% (depending on the federal state) of the purchase price has to be paid once. |
Vehicle Tax[KFZ-Steuer] (Private) |
For vehicles registered until 2009, the vehicle tax is calculated on the basis of the engine capacity. For new registrations from 2009 onwards, based on engine capacity and CO2 emissions. With the registration, cars are automatically registered for the motor vehicle tax. The tax is debited from the customs once a year. |
Children & Taxes(Private) |
Having kids you either get child benefit [Kindergeld] or can use tax-free child allowance [Kinderfreibetrag]. For most of the parents getting the monthly paid child benefit is worth more than the child allowance. Child benefit is €204 per month per child (for the 1st and 2nd born; 3 children = €210, every + child €235). The child allowance for 2019 is €7,620 (for a joint tax return) or €3,810 per parent. Handing in your tax declaration the tax office will automatically check whether it is more favourable for you to get child benefit or apply tax-free child allowance. This means that it is worth first of all applying for child benefit and waiting for your tax declaration. |
Child Allowance[Kinderfreibetrag] (Private) |
The child allowance for 2019 is €7 620 (for a joint tax return) or €3 810 per parent. For 2018 it is €7 428 or €3 714. For 2017 it is €7 356 or €3 678. |
Supplementary Child Allowance[Kinderzuschlag] (Private) |
Low-income earners can get an additional monthly supplementary child allowance for each child of up to €185. |
Church Tax[Kirchensteuer] (Private) |
The church tax amounts to 9% or 8% of your personal income tax, depending on the federal state. In Bavaria and Baden-Wurttemberg it is 8%, in the other federal states 9%. |
Commuter Allowance[Pendlerpauschale] (Private) |
There is a certain tax allowance for all employees not working from home - it’s called commuter allowance. So if u drive to work every day - whether by car, public transport or bike - you can claim 30 cents per kilometre as professional expenses in your tax declaration. An example: If you drive a total of 30k to work every day on 225 (working) days a year, you can claim €2,025 (30 x 0.3 x 225 = 2,025). Even if you walk the 30 kilometers. Please note: Only if you drive by car you can claim sums up to any amount. For all other means of transport you can only claim a sum up to €4,500 per year. |
Gift Tax[Schenkungssteuer] (Private) |
Gift tax and inheritance tax are basically the same. There is no difference in how it is levied. However there are some tricks to avoid taxes if e.g. money or real estate is given (instead of inherited). The tax free allowance can be used every 10 years. So every 10 years, for instance, parents can give their children €400,000 without their children having to pay gift tax. |
Solidarity Tax[Solidaritätszuschlag] (Private) |
All taxpayers have to pay 5.5% of their respective income tax rate. If your personal income tax rate is for instance 30% - it is 5.5 from 30, therefore 1.65%. So your personal income tax rate including solidarity tax is 31.65%. Taxpayers who pay less than €972 (single) or €1,944 (married couple) (personal) income tax per year are exempt from the solidarity tax. For (personal income) tax-payments up to €1,340 (single) or €2,680 (married couple) per year a reduced percentage rate applies. For all payments above €1,340 or €2,680 per year, the rate is 5.5%.
Find out more about this subject and our solidarity tax calculator here. |
Special Expenses[Sonderausgaben] (Private) |
Some private expenses can be declared as “special expenses” and taken into account for tax reduction. Pension contributions and contributions to nursing and health insurance apply as utility expenses [Versorgungsaufwendungen]. Expenses such as donations or alimony are considered as “regular special expenses” [reguläre Sonderausgaben]. You don’t have to hand in receipts (etc.) with your tax declaration. Nevertheless you should keep them. (→ see “Which receipts have to be handed in?”) |
Tax Allowance[Steuerfreibetrag] (Private) |
Not to be confused with basic allowance [Grundfreibetrag]. If you have regular costs that are tax-deductible, you can register them with the tax office before filing your tax return. If a tax-free amount is noted, the employer automatically deducts less money from the monthly salary. In order to register a tax allowance, you must submit an application to the tax office by November. |
Tax Category[Steuerklasse] (Private) |
There are six tax categories in Germany. Which tax category you belong to, depends on your marital status and if you have more than one employer. You can find out which tax category you belong to, by, for example, checking your payslip or tax assessment notice, or you can use the following table for orientation: Tax Category I applies to you if you are single, divorced, or a widow* (*in the year of death and in the following year category III applies). Tax Category II applies to you if you are married, have a registered civil partner or single parent. As a single parent, you need to be living with at least one child and must request a change to tax category II. Tax Category III applies to you if you are married or have a registered civil partner, and your partner chose tax category V, is unemployed or earns less than you. Tax Category IV applies to you if you are married or have a registered civil partner, and your partner chose tax category IV or is unemployed. Tax Category V applies to you if you are married or have a registered civil partner, and your partner chose tax category III. Tax Category VI applies to you if you have more than one employer. |
Value Added Tax (VAT)[Umsatzsteuer] (Private) |
Value-added tax (VAT) accrues on purchase and sale of goods and services. The regular VAT tax rate is 19%. For certain goods and services (such as food or public transport) a reduced rate of 7% applies. For some services (e.g. banking and health services) VAT doesn’t apply. |
Professional Expenses[Werbungskosten] (Private) |
Expenses for transport, workwear, a new laptop (and others) - working not only earns you money but costs you money as well. Many expenses, linked to your job, can be claimed as professional expenses in your annual tax declaration. There is an automatic tax free allowance of €1,000 granted from the tax authorities. All expenses exceeding €1,000 must be declared separately. Professional expenses are declared in “Anlage N” of your tax declaration. You don’t have to hand in receipts (etc.) with your tax declaration. Nevertheless you should keep them. (→ see “Which receipts have to be handed in?”) |
Source Tax[Quellensteuer] (Private) |
Source tax is a tax that is automatically transferred to the tax authorities by e.g. your employer (personal income tax [Lohnsteuer]) or Bank (capital gains tax [Abgeltungssteuer]). |
Which receipts have to be handed in?(Private) |
Since 2018, you don’t have to hand in any receipts with your tax declaration. Only if the tax office is demanding certain receipts you have to hand them in later. Since this can always happen, it is good to keep them until the whole tax declaration process (for one year) is finished (and you got your tax refund(s)). It also helps if you give as detailed information as possible in your tax declaration. The tax authority of Brandenburg has some tips on that on their webpage (only in German). |