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Income Tax in Germany

Contributed by Welcome Center Malta
13 October, 2020

Income tax is the most vital tax for jobholders in Germany. The amount of income tax you pay usually depends on your annual income, and this refers to all of your income in a calendar year.

If you're an employee, you do not have to lift a finger, since your employer will deduct it from each salary/gross wage and submit it to the Federal Central Tax Office for you. Your employer will also submit:

  • The "solidarity surcharge" (Solidaritaetszuschlag)
  • The "church tax" (Kirchensteuer): In Germany, members of certain religious organisations and churches have to pay church tax.
  • Your unemployment, pension, nursing, and health insurance are deducted from your income as well.

The amount deducted from your income every month is usually stated in your paycheck.

How much income tax do you've to pay in 2020?

Everyone's income is subject to a basic tax allowance in Germany. Up to this amount, your income is non-taxable. In 2020, taxable income amounts have gone up a bit compared to 2019. Taxable income of less than 9,408 euros is tax-free for individuals not in a civil partnership or unmarried. For couples who are in a civil partnership or married, the threshold is EUR 18,816.

Incomes higher than the above amounts are taxed at a rate of 14% - 42%. The general rule is - as your taxable income goes up, the rate of taxation goes up.

You should note that incomes from 250, 731 euros for unmarried people are the ones taxed at 42%. For couples in a civil partnership or married, the maximum tax rate is normally applicable in earnings of over EUR 501, 462.

You can also declare 100% of your health insurance in Germany.

Income tax declaration (Einkommensteuererklaerung)

After the end of one calendar year, consider filing an income tax return so that the Federal Central Tax Office can check whether you've paid too little or too much in taxes. It may well be financially beneficial for people to submit a tax return, as you may receive a tax refund.

The Federal Statistical Office confirms that nine out of ten individuals who submit an annual income tax return get a refund of approximately EUR 900 or claim deductible amounts. This is because most allowable expenses that can decrease your taxable income haven't been considered. For instance, a weekend commuter that uses an additional property near his/her workplace may be able to claim back mortgage or rent costs. So, regardless of whether it's compulsory for you to file a tax return, it's often worthwhile to do so.

How to submit your income tax declaration

The best way to submit your tax declaration is online at www.elster.de, Elster Site ((Elektronische Steuererklaerung). Once you've registered, just follow the instructions carefully and enter the deductions you're entitled to, your expenses, and income. You can also submit your tax declaration by completing a form.

You have to download these forms from the tax office website and then print them out or collect them from the tax office.

It is important to note that if you're obliged to submit a tax declaration (like those who choose the combination brackets of 3 and 5, and those that got indemnities) of more than EUR 410, you've to hand it by the end of May of the following year to the tax office.

Details required for tax declaration forms

To correctly and easily fill out your tax returns forms, you'll need to prepare some details in advance. Most persons will need to supply the below information in their forms:

  • Employment tax statement - usually issued by employers at the end of a financial calendar year.
  • Proof of payments or receipts for tax deductions, if applicable.
  • Your tax number/tax ID, if you've one.
  • The details of the local tax office.
  • The IBAN of your bank account.

If you've general questions about the income tax returns, the tax office provides regular opening hours for any enquiries - whether by telephone or in-person. You can also visit the Elster official website and go through the FAQ page.

If you require additional help filing your tax return, consider consulting a lawyer or a tax advisor. You'll have to pay for the service. You can also seek additional assistance from self-help organisations for workers, usually run by workers, which help matters concerning income tax. They will help you with any tax-related question and are cheaper than consulting a lawyer or a tax adviser.


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