In this article, we will provide you with details on the different tax classes and tax types. Moreover, we have answered the all-essential questions like “How to calculate the taxable amount?”, “What is the income rate in Germany?” and “What is the tax refund and how to apply for it?”.
- 1 Individual Income Taxes in Germany
- 2 What is Income Tax?
- 3 A Sample Calculation Of Wage Tax Rates In 2022
- 4 Progressive Tax: A Definition
- 5 How Much I Will Make After Taxes?
- 6 German Tax Classes
- 7 How Can I Identify My Tax Class In Germany?
- 8 How Can I Pay Less Tax In Germany?
- 9 When Do I Have To Change My Tax Class?
- 10 Change of Tax Class After Marriage
- 11 German Tax Calculator
- 12 How Can I Change My Tax Class?
- 13 Filling Out The Antrag Auf Steuerklassenwechsel Bei Ehegatten
- 14 Other Taxes
- 15 Seconded employees in Germany
Individual Income Taxes in Germany
Before we begin working in Germany, we should get enough knowledge about income tax, tax class and other taxes briefly.
The individual income tax (Einkommensteuer) applies to everyone who is either living in Germany or employed there. Though, there is up to €9,169 minimum untaxed allowance.
What is Income Tax?
The amount paid to the government from your earnings is Income Tax. This amount is automatically deducted from your gross paycheck. This is then paid to the German Tax Office. The employers also deduct any social security contributions.
The tax-free income (Grundfreibetrag) for 2022 is up to €9,984. An income tax rate of 42% is charged for amounts exceeding €58,597. The rich tax (Reichensteuer) is 45% which begins at an income of €277,826. In the process of calculating your income tax, you have to differentiate between marginal tax rate and average tax rate. The resultant amount is the actual one which you pay. Usually, it is lower than the marginal tax rate.
A Sample Calculation Of Wage Tax Rates In 2022
|Gross Income (Taxable)||Income Tax Rate (Marginal)||Income Tax Rate (Average)||Tax Amount||Remaining
Progressive Tax: A Definition
Germany has a progressive taxation system. A country with a progressive tax system such as Germany charges more tax to higher earners on a sliding scale.
How Much I Will Make After Taxes?
First you have to calculate your weekly wage or monthly wage in this scenario. After that, you will deduct the income tax and contributions related to social security. This is based on the bracket you fall into.
If you are looking for a hassle-free option, an online German income tax calculator can help you finding out the take-home amount after tax and related deductions.
German Tax Classes
|German Tax Class||Marital Status|
|Tax Class 1||You are single, widowed,
|Tax Class 2||You are a single parent, living separately|
|Tax Class 3||You are married (or widowed within the first year of the spouse’s death) with a significantly higher income than your partner in tax class 5|
|Tax Class 4||You are married with both spouses earning similar income|
|Tax Class 5||You are married with a significantly lower income than your partner in tax class 3|
|Tax Class 6||The tax class for second and side jobs (regardless of marital status)|
In the case of married couples, the combination of tax classes 3 and 5 is possible only if both spouses are living in Germany.
In this case, if the spouse is living in their home country, tax class 1 will be applied to you. Once your spouse gets registered in Germany, then you can go apply for a tax class change.
How Can I Identify My Tax Class In Germany?
After registering in Germany, you will get the tax ID within six weeks. This ID will then go to your employer. In addition, you are assigned a tax class based on marital status. Likewise, the employer is informed by tax authorities.
Once the tax ID and tax class is informed to the employer, they can calculate the deductions. till that time, you are taxed with the highest tax rate in the German Tax System. The tax class can be seen on the payslip under SKI (Steuerklasse).
How Can I Pay Less Tax In Germany?
An annual tax declaration needs to be filed by self-employed people. For such assistance, opting for a “Steuerberater” is recommended.
A tax return is not compulsory for employed individuals. Though, it is sometimes wise to go for it. You may be entitled to a tax refund if you haven’t been in Germany for a complete tax year.
31st May is the deadline for submitting your tax returns in Germany. The tax years goes parallel with the calendar year of Germany.
When Do I Have To Change My Tax Class?
Change in tax class is required when family circumstances change. which is, divorce or marriage if done in Germany. This needs to be communicated by the registry office automatically to the financial authorities.
Reasons For Changing Tax Class
- Marriage: After marriage, the tax class changes to tax class 4
- Separation/divorce: In case of separation or a divorce, the tax class changes. If you don’t have children or children without full custody, it changes to tax class 1. If you are a single parent and you have sole custody, it changes to tax class 2.
- Birth of a child and you will have sole custody: For this reason, your tax class changes to tax class 2
- Death of a spouse: The death of your spouse results in change to tax class 3 for the two years after death. Afterwards, it changes to tax class 1 or 2
Change of Tax Class After Marriage
Congratulations if you recently got married. In this scenario, the registration office will automatically forward your changes to the concerned authorities. After a wedding, the Finanzamt will change both spouses’ tax class to tax class 4 by default. Doesn’t matter whether one spouse is not earning any income or significantly less than the other.
There are people who wish to switch between tax classes 3 and 5. For this purpose, a change can be requested via the form. If a married couple wants a switch to either tax class 3 or 5, it is only logical if one of them is earning at least 60% of the total income of their household. There are multiple times in a year when the married couple can change their tax classes. This is applicable from 2020. Before this period, only one change per year was allowed.
German Tax Calculator
A German tax class calculator can be used for a quick estimation. This tool can assist you in deciding whether you should opt for tax class change to 3 and 5. In the calculator, you will provide the gross salaries of both spouses. If you have children, tick the relevant box for that too.
Note: The above-mentioned calculator is for assistance only. It provides a rough estimate only. If you are looking for an accurate and qualified answer, you should visit a certified tax consultant.
How Can I Change My Tax Class?
It is easy to change your tax class as a married couple. In Germany, it requires only one bureaucratic document.
- First you have to fill out the form of tax class change for married people (Antrag auf Steuerklassenwechsel bei Ehegatten).
- Save that form as a PDF file.
- Make a hard copy of that and take signature of both spouses.
- Send it to your responsible tax office (Finanzamt).
Once you change to tax classes 3 and 5, you are automatically obligated to file a joint tax declaration at the end of the year.
Filling Out The Antrag Auf Steuerklassenwechsel Bei Ehegatten
Field 1 Steuernummer :
Your local tax office (Finanzamt) assigns you an individual tax number. You can easily locate that on your tax assessment (Steuerbescheid) if you have done a tax declaration previously. If in case you are unable to find it, leave the space empty.
Field 2 - An das Finanzamt:
Your responsible tax office or the name of your city.
Field 3 - Bei Wohnsitzwechsel: bisheriges Finanzamt
The name of your former assigned tax office, in case you have moved.
Field 5-6: Name & Vorname
Last name & First name
Field 6 - 9: Staße, Hausnummer, Postleitzahl & Wohnort
Street, House Number, Postcode & City
Field 10: Verheiratet/Verpartnert seit, Verwitwet seit, Geschieden/Lebenspart. aufgehoben seit, Verheiratet/Verpartnert seit Verwitwet seit Dauernd getrennt lebend seit
Permanently separated since
Field 11 - Identifikationsnummer (IdNr.):
The other partner’s Tax ID
Field 12 - 15 - Name, Vorname, Straße, Hausnummer, PLZ, Wohnort
Last Name, First Name
Street, House number, Postal Code & City (If different)
Field 17 - Bisherige Steuerklassenkombination:
Here you can tick the current tax class of you and your spouse: If you are doing it first time then it is IV/IV
Field 31 - 42- Angaben zum Faktorberfahren für 20__
You can leave this part
Field 43 - Der Antrag ist von beiden Ehegatten/Lebenspartnern zu unterschreiben
Both spouses have to sign; the partner filing the request signs first.
There are several other taxes in Germany which are significant. If you are living in Germany, it’s better that you are aware of them. This includes solidarity tax, church tax, and VAT.
What is Solidarity Tax in Germany?
The solidarity tax (Solidaritätszuschlag) couples up with the income tax. It applies to everyone earning more than €972. These people have to pay a contribution of up to 5.5%. It is then removed from your wages. After the reunification, this tax was introduced back in 1991. The purpose was to invest and rebuild Eastern Germany. The Solidarity Tax still helps in financing the recurring costs related to a unified Germany.
What is Church Tax in Germany?
Every registered member, of a Christian or Jewish congregation, is bound to pay the Church Tax (Kirchensteuer). The tax amount is collected from your gross salary. It is collected along with social security contributions and income tax. Out of your gross salary, around 8 to 9% is charged as Church Tax.
How much is VAT in Germany?
The VAT or Value Added Tax (Mehrwertsteuer) is paid by registered members for all of the non-essential and luxury items. The standard VAT is currently rated at 19%. There is a reduced rate of 17% VAT for items like flowers and books.
Seconded employees in Germany
What to consider if working as a seconded employee in Germany?
Many people who move to Germany do so for work because they are seconded, either at their own request or that of their employer. The seconded employees remain employed with the same company. This makes sure that the seconded employees are still active on the payroll of their home country. This way, they pay tax at home.
Therefore, paying tax in Germany is required by them. For those who are paid in their home country by their employers, they are also not obliged to make contributions to social security inside Germany. This rule applies in all EEA (European Economic Area) countries. On the other hand, there are some other countries that have the same agreement as Germany. The rule of secondment usually applies to 2-year secondments. While there is still a possibility of increasing the tenure up to 5 years.
Tax class in Germany is decided by your marital status. The choice of tax class is allowed only after getting married. The income of both spouses can decide if a change in tax class makes sense. If it makes sense, they receive a temporary tax advantage on their monthly income. With this in mind, remember that the income tax amount per year remains identical.