Taxes in Germany

Employer Contributions in Germany

Employers must withhold income tax, solidarity tax and levies on social insurance schemes that cover pension, unemployment benefits, health insurance and long-term care insurance.

The split in the contribution is equally divided between the employer and the employee, except for the accident insurance paid solemnly by the employer. In total, the employer contributes 19.325% on top of the employee's salary to social security.

Social insurance

There are four components to the German Social Security System:

Employer social insurance tax 2022

		Contribution ceiling	Contribution ceiling
TYPE OF INSURANCE	CONTRIBUTION	WEST	EAST
Pension	9.30%	€7,050	€6,750
Health*	7.30%	58050 (annual)	58050 (annual)
Long-Term Care	1.53%	€3,290	€3,150
Unemployment	1.20%	€7,050	€6,750

*Employees who earn up to €56,250 annual gross wage must be insured by one of the public health insurance providers; those who earn above that threshold can choose between public or private insurers
*In addition, employers often provide additional supplementary insurance benefits

Other contributions

• Employee illness or treatment: depending on health insurance organisation, the contribution is between 0.90% and 4.1% and the reimbursement is between 50% and 80%
• Maternity leave: depending on health insurance organisation the contribution is between 0.14% and 0.88% and the reimbursement is 100%
• Contribution to the insolvency fund: 0.06%.
• Work accident scheme, which depends on the industrial sector, but is generally 1.6%

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Employee Contributions in Germany

All residents (those who spend more than 183 days out of the year in Germany, or who average 90 days a year for four years) have to pay tax on their worldwide income. Non-residents (those who spend less than 183 days in the country) pay tax only on income sourced from within Germany.

Social insurance

The contributions to the German Social Security System are split equally between the employer and the employee. In total, an employee can expect to contribute 19.325% of their gross salary to social security.

There are four elements to the Social Security System:

Employee social insurance tax 2022

		Contribution ceiling	Contribution ceiling
TYPE OF INSURANCE	CONTRIBUTION	WEST	EAST
Pension	9.30%	€7,050	€6,750
Health*	7.30%	58,050 (annual)	58,050 (annual)
Long-Term Care	1.53%	€3,290	€3,150
Unemployment	1.20%	€7,050	€6,750

 

**Employees who earn up to €64,350 annual gross wage must be insured by one of the public health insurance providers; those who earn above that threshold can choose between public or private insurers
**Employees aged 23 or older who do not have children contribute an additional 0.25% (1.775% in total)

German income tax 2022

 

PROGRESSIVE TAX RATE	TAX BAND FOR SINGLE TAXPAYER	TAX BAND FOR MARRIED TAXPAYER
0%	Up to €10,347	Up to €20,694
14% for the minimum amount, rising to 42% as income increases	€10,348 - €58,596	€20,695 to €117,192
42%	€58,597 - €277,825	€117,193 - €555,650
45%	Over €277,825	Over €555,650

Church tax

Employees who belong to a church have to pay church tax, which is withheld from their total monthly taxable income. The church tax varies by federal state and is 8% to 9%.

Solidarity tax

The Solidarity Tax (also known as Soli) was created in 1991 to aid Germany's economic reunification. The flat tax rate is 5.5% of the employee's gross income. As of 1 January 2021, the application of the solidarity surcharge tax has been substantially reduced.

Tax-Free Allowance in Germany

Child allowance (Kindergeld)

Child benefits are extended to all parents in Germany, regardless of their income, by the Family Benefits Office (Familienkasse) at the Federal Employment Agency.

The allowance depends on the number of children:

• €219 for the first two children
• €225 for the third child
• €250 for the fourth and each additional child

The child benefit can only be claimed by one of the parents, so married couples will need to decide who receives it. If they are separated, the parent who has primary custody should claim child benefit. If a child is living with someone who is not their parent, they can still claim child benefit.

Parents can continue to claim child benefits until:

• The child turns 18
• If the child is unemployed and registered as a job-seeker, up to the age of 21
• If the child is in education and training up to the age of 25
• If the child has a disability and cannot support themselves up to the age of 25

Supplementary child pay

Besides child benefits, some parents can claim a supplementary child allowance (Kinderzuschlag). Since 1st July 2022 amounts to €229 per month for each unmarried child under the age of 25 who lives in their household.

To qualify, the parent needs to fulfil the following conditions:

• Already receive child benefits
• Earn at least €900 per month before deductions; €600 for single parents
• Earn less than the maximum income limit, which varies according to the parents' cost of living and is calculated individually by the Family Benefits Office

Parents can also claim extra assistance for school trips, school supplies and school meals.

Child tax-free allowance

Under certain conditions, a tax-free child allowance (Kinderfreibetrag) may also be granted to parents. In 2021 and 2022, this is €8,388 per child for a married couple or €5,460 for a single parent. When assessing the parent's income tax, the tax office (Finanzamt) will compare the amount of child benefit they have already received with the amount they could save if the tax-free child allowance were granted. If the parent is granted the child allowance, the tax relief given will be offset against the child benefit pay already received.

Tax deductions for children

Parents can also make further tax savings by deducting 2/3 of their childcare expenses (max. €4,000/year) and 30% of school fees (max. €5,000/year). The tax relief from these allowances will also be balanced against the amount of child benefit already received.

Maintenance advance

There is an additional supplementary payment (Unterhaltsvorschuss) for single parents who receive no maintenance from the other parent to help cover costs. The amount of maintenance advance received depends on the child's age:

€177 per month for children up to 5 years old
€236 per month for children aged 6 to 11 (inclusive)
€314 per month for children age 12 to 17 (inclusive)*

* To qualify, children above the age of 12 and their parents must not receive unemployment benefit.

Federal parental allowance

New parents who fulfil certain conditions are also eligible for the parental allowance (Elterngeld). This income-replacement benefit is important for offsetting the loss of earnings caused by a child's birth, enabling parents to rest and spend time with their newborn children.

Child education (ausbildungsfreibetrag)

Parents make a tax deduction on their income based on their children's education, whether in Germany or abroad (with limitations). To be eligible, the child must be:

• Older than 18 years of age
• Living outside the parents' household

Deduction amounts to €924 per year. For children studying abroad, the amount may be reduced.

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