How to pay taxes in Germany as a foreigner

When you move to Germany, you must pay German taxes such as income tax, solidarity surcharge, church tax and TV tax.

Marle

3 minute read

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Updated on 5 Aug 2024

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Living

Germany is not just famous for its picturesque landscapes and rich history; it's also known for its well-structured tax system. Whether you're a resident, an expatriate, or simply curious about German taxation, this article aims to make the complex topic of taxes in Germany accessible and understandable. We'll cover crucial aspects such as tax rates, income brackets, church tax, and more.

Foreigners working in Germany are subject to the same tax regulations as residents.

Germany employs a progressive tax system, where your tax rate increases with higher earnings. Here are the current tax rates for 2023:

• Personal income tax: 0% – 45%
• Solidarity surcharge: 5,5%
• Social Security contributions: 20-25%
• Church tax: Between 8% – 9%.
• TV tax: €18.36 per month
• Dog tax: €90 – 150

To pay income tax in Germany as a foreigner, you'll need to start by obtaining a tax identification number (TIN). You can acquire this number by registering your address with the local authorities, a process known as Anmeldung.

Usually, when you work in Germany, your employer automatically deducts your income tax, solidarity surcharge, and church tax (if applicable) directly from your monthly salary. But, if you're juggling different income streams, running your own business, or going the freelancing route in Germany, you'll need to tackle that annual tax return. This is where you figure out and square away your income tax responsibilities. It's like your tax homework for the year!

Additionally, it's worth noting that even if you're not obligated to do so, it can be financially beneficial to file an annual tax return. Why? Because it allows you to claim deductions and credits that may result in a potential tax refund, offering a valuable financial advantage.

The income tax brackets for 2023 in Germany are as follows:

Double taxation

For foreigners planning to move and work in Germany, it's essential to understand the concept of double taxation. Double taxation can occur when your income is subject to taxation both in Germany and your home country, which can significantly impact your finances.

However, Germany has double taxation treaties with many countries to prevent or minimize this issue. These treaties determine which country has the primary right to tax specific types of income, ensuring you don't pay taxes on the same income twice.

The solidarity surcharge, known as Solidaritätszuschlag or Soli is applied to income tax, capital gains tax, and corporate tax and is paid by both individuals and businesses. Its rate is a fixed 5.50% of your tax payment, and you don't need a separate tax return for it; it's usually paid alongside your regular taxes.

In Germany, social security isn't a tax but a mandatory contribution from your gross income, typically around 20-25%. This contribution covers health, pension, unemployment, long-term care, and accident insurance. It's automatically deducted from your salary and provides substantial benefits and financial security, vital to Germany's social welfare system.

During the registration process in Germany, known as Anmeldung, you'll be asked to declare your religion. That's because if you are a member of a recognized religious community in the country, you'll be obligated to pay the church tax, referred to as Kirchensteuer. Typically, this tax amounts to around 9% of your income tax and is collected by the government.

If you wish to stop paying the church tax, you can choose to leave the church officially. It's important to note that even if you were baptized abroad and identify as an atheist in Germany, you might still be subject to this tax. So, understanding your church affiliation is crucial when considering your taxes in Germany.

Germany has a unique tax, the Rundfunkbeitrag, which supports public broadcasting services. It's usually levied on households rather than individuals.

In Germany, there's something called Hundesteuer, which is essentially a tax for dog owners. Different municipalities have their own rates, depending on the number of dogs you have, their breed, and why you keep them. The first dog usually costs around €90 to 150 per year. This tax helps support local services like animal shelters and parks while also encouraging responsible dog ownership. So, if you're bringing your dog to Germany, remember to register your furry friend at the local tax office and pay the Hundesteuer each year to support your local community!

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