Tax Rates in Germany

Home to Europe’s largest economy, and the fourth largest in the world, Germany has a population of over 80 million. It also provides an impressive range of job opportunities.

Research shows that in Germany, 1.27% of people work in agriculture, 27.13% work in industry, and the remaining 71.6% work in the service industries.

We’ve taken a closer look at how German working practices and tax rates differ to those in the UK.

German Working Practices

Working hours:  Working hours and breaks are governed by the Arbeitszeitgesetz (law on working hours), collective wage agreements and company agreements, or are arranged on an individual basis.

Standard hours:  The working week varies between 36 to 40 hours, with most full-time jobs either seven or eight hours per day, five days a week. Work on Sundays is largely prohibited, except for workers in the service industry.

Flexi-time’. Many companies in Germany will allow you to work flexibly, this can include working from home, and compressed hours.

Overtime:  This must conform to the maximum working hours of no more than 60 hours per week, averaging out to 48 hours over six months. Overtime is usually compensated with time off in lieu of additional pay.

Holidays and leave:  The minimum statutory holiday entitlement is 20 days, based on a five-day working week. On a six-day working week, this rises to 24 days. It is not uncommon for an employer to grant additional holidays. Employees are entitled to holiday pay; this is calculated based on their average salary of the 13 weeks before the holiday is taken.

Sick leave: In the event of illness, an employee must inform the employer as soon as possible. In the case of illness lasting longer than three days, an employee must submit a doctor’s certificate no later than the following working day.

Parental leave: Parents are free to decide themselves how much parental leave they wish to take. It can be taken at any point between your child’s birth and their third birthday. With the permission of your employer, you can also save up to 24 months of parental leave to be used between your child’s second and seventh birthdays.

Public holidays: 1 January, 6 January, 21 March, 24 March, 1 May, 12 May, 22 May, 15 August, 3 October, 31 October, 1 November, 19 November and 25-26 December.

The 183-day rule in Germany

Your treatment will depend on your residency and the duration of your work assignment.

If you are in the country for 183 days or more in any calendar year, or for an average of 90 days in any four-year period, you are deemed to be a tax resident.

Tax rates in Germany (2019-20)

As you leave the UK, you should complete the P85 form and send this to HMRC.

Euros

Personal Tax Rates in Germany

Less than €9,169

0% (married couples €18,338)

€9,169 – €55,960

 14% – 42%

€55,961 – €265,236

 42%

€265,327 + 

 45%

Additional taxes include:

  • Solidarity surcharge (Solidaritaetszuschlag), capped at 5.5% of your income tax
  • Church tax (8% – 9%), if you are a member of a registered church in Germany

In Germany, for tax purposes, you are either a resident or a non-resident. If you have been present in Germany for over 183 days, you are generally considered to be a resident for tax purposes. The 183-day rule is not the only consideration for a tax residence. If you are a non-resident for tax purposes, you will generally still be liable to pay tax on German-sourced income. The rate may vary; tax and double taxation agreements may alter it. There are 6 tax classes that you may fall into, each one with varying rates:

  1. Those single or separated, but not falling into either categories 2 or 3
  2. Single and separated, with a child, entitling them to a child’s allowance
  3. Married, or widowed employees who are within the first year of a spouse’s death
  4. Married employees both receiving income
  5. Married persons who would normally fall into category 4, but whose spouse is in tax class 3
  6. Employees who receive income from other employment on one or more different tax cards

As well as this, you may either be a salaried employee or a Freiberufler (independent professional: e.g. doctors, architects or contractors). For salaried employees, tax and social insurance are deducted by the employer. Contractors must pay the tax department their tax obligations throughout the year.

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Social Security and Employee Benefits in Germany

Expatriates can take advantage of the generous German social security benefits, while living here and even, in some cases, when they return home.

Germany has an elaborate social security system that sees to it that its citizens live comfortably even if they’re sick, disabled, unemployed or retired. Expatriates can also participate in the system to a large degree.

By law, employees contribute towards the scheme, and the percentage they pay is matched by their employer. The Social Security Rate for Employees currently stands at 19.63%, and covers the following:

  • Pension insurance
  • Unemployment insurance
  • Health insurance
  • Nursing insurance for disability and old age

Other pillars of the social security system include company accident insurance, which is paid for by the employer, and social indemnity which is handled by the state.

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