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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 19.60% on top of the employee's salary to social security.
There are four components to the German Social Security System:
| Contribution ceiling | Contribution ceiling | ||
| TYPE OF INSURANCE | CONTRIBUTION | WEST | EAST |
| Pension | 9.30% | €7,550 | €7,550 |
| Health* | 7.30% | €59,850 (annual) | €59,850 (annual) |
| Long-Term Care | 1.70% | €4,987.50 | €4,987.50 |
| Unemployment | 1.30% | €7,300 | €7,100 |
*Employees who earn up to €66,600 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
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.
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 19.6% of their gross salary to social security.
There are four elements to the Social Security System:
| Contribution ceiling | Contribution ceiling | ||
| TYPE OF INSURANCE | CONTRIBUTION | WEST | EAST |
| Pension | 9.30% | €7,300 | €7,100 |
| Health* | 7.30% | €59,850 (annual) | €59,850 (annual) |
| Long-Term Care | 1.70% | €4,987.50 | €4,987.50 |
| Unemployment | 1.30% | €7,300 | €7,100 |
**Employees who earn up to €66,600 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 0.6%
| PROGRESSIVE TAX RATE | TAX BAND FOR SINGLE TAXPAYER | TAX BAND FOR MARRIED TAXPAYER |
| 0% | Up to €10,908 | Up to €21,816 |
| 14% for the minimum amount, rising to 42% as income increases | €10,909 - €62,809 | €21,816 to €125,618 |
| 42% | €62,810 - €277,825 | €125,620 - €555,650 |
| 45% | Over €277,826 | Over €555,650 |
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%.
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.
Child benefits are extended to all parents in Germany, regardless of their income, by the Family Benefits Office (Familienkasse) at the Federal Employment Agency. €250 monthly per 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:
Besides child benefits, some parents can claim a supplementary child allowance (Kinderzuschlag). Since 1st January 2023 amounts to €250 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:
Parents can also claim extra assistance for school trips, school supplies and school meals.
Under certain conditions, a tax-free child allowance (Kinderfreibetrag) may also be granted to parents. In 2023 this is €6,024 per child. 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.
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.
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:
€187 per month for children up to 5 years old
€252 per month for children aged 6 to 11 (inclusive)
€338 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.
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.
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:
Deduction amounts to €1,200 per year. For children studying abroad, the amount may be reduced.
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