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Taxes In Germany

Travelling to a New Country is always an exciting moment but as soon you start working and earning in Germany the most commonly heard word is TAX. The terms “Taxation” and “Tax Returns” bring so much fear and confusion to expats, especially when the system is not very straightforward and filled with complicated German words.

 

Vanakkam Germany & SHORTAX Team provides you all the necessary knowledge and information about the types of taxes in Germany, who should pay taxes, how to get maximum tax returns and much more. Keep reading to find out more about the topic of taxes and learn about the system of tax returns!

INTRODUCTION

Tax refers to the compulsory monetary contribution made to the revenue of a country that is levied on the residents – it comes from income of the workers, business profits, cost of goods, services and transactions.

In Germany, whether you are a citizen or resident, the law requires you to pay taxes. The Federal Government “Bundersregierung” is in charge of the tax collection, which is done locally by the tax offices called “Finanzamt”. If you are an expat, employed in Germany, you would have noticed the term “Lohnsteuer” on your paycheck. This deduction is the monthly tax on your income. However, if you have your business, second job or a freelancer, then you need to submit the annual tax return, so the government calculates the income tax that you need to pay.

Who Should pay taxes in Germany?

Almost everybody who lives in Germany pays taxes. Anybody who earns an income, either through employment, self-employment, capital investment, agriculture and many other revenues has to pay income tax. In short, those who receive an income (whatever the means) should pay tax to the government. Taxes are also paid by those who buy products and services. If you buy a house or car, then you need to pay different type of taxes. Read on to learn more about different types of taxes in Germany.

Tax Terms

Tax Submission

Tax Class

Tax Slabs

The tax system in Germany is progressive, which means higher the income, higher the taxation. The taxable income is calculated by subtracting the deductions and special expenses that are determined by the Finanzamt

 

The tax-free income limit for single persons is €9,744 and married couples is €18,816. If your income exceeds this limit, then you are liable to pay tax between 14% and 42%.

The tax slab for the year 2021 is as follows:

Tax Slab 2021

Income range Tax Rate
Up to €9,744 0%
€9,745–€57,918 14–42%
€57,919–€274,612 42%
€274,613 and above 45%

What is the First step to file tax?

Tax Submission Deadline

Payslips & Taxes

How To Submit Tax Return?

Tax Deductions

Double taxation

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Vincenz works in a very well-known tax firm in Munich and already advises well over 200 international citizens who are taxable in Germany as well as a large number of freelancers. Vincenz developed the idea of offering taxable private individuals the know-how and advantages of a renowned tax firm at an unbeatable price. Shortax is the result.

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