Germany attracts many foreigners with its stability, high standard of living, and clear working conditions. But when you move here, the question immediately arises: how are taxes paid in Germany and how much does the state take? The tax system here is quite sophisticated and complex, but once you understand the basics, it’s not so scary. Especially if you are a foreigner who has just arrived to work or is considering working in Germany for women or men.
The system is structured so that most taxes are withheld directly by the employer. The employee receives a “net” salary. Below we will look at what exactly tax deductions consist of.
Personal income tax is the main payment deducted from your salary. In Germany, it is called Einkommensteuer. If you are an employee, you pay it in the form of Lohnsteuer, i.e., it is automatically deducted from your salary by your employer.
The amount of tax in Germany depends on your income. The rate is progressive: from 14% to 45%. There is a tax-free minimum – if your annual income is less than approximately €11,600 (this figure may change each year), no tax is payable.
This is a separate mandatory payment that is not considered a tax but is also deducted from your salary. These include:
The total amount of contributions is approximately 20% of your salary. Half is paid by the employer and half by the employee.
Yes, there is such a tax in Germany, but it only applies to those who officially belong to recognized churches. It amounts to 8–9% of income tax. If you have not specified your religious affiliation, this payment is not collected.
This tax was introduced after the reunification of East and West Germany. Its purpose is to finance the development of eastern regions. Today, most employees no longer pay it, but for high incomes (over €60,000), solidarity is still relevant — the payment is 5.5% of the Lohnsteuer amount.
In general, the tax system in Germany is structured in such a way that employees pay not only income tax but also a number of mandatory contributions. All this has a significant impact on the final salary amount, so it is worth having an idea of each type of deduction in order to realistically assess your income and not be surprised by the difference between “gross” and “net.”
Every employee in Germany is automatically assigned to one of six tax classes. This determines how much tax will be deducted from your salary. For example:
For foreigners, taxes in Germany are often determined by which class you are in. In most cases, newly arrived employees are placed in Class I unless they declare otherwise.
Immediately after registering your place of residence (Anmeldung) in Germany, you will automatically receive a tax identification number – Steuer-ID.
This number will be sent to you by mail within a few weeks after registration and is required for official employment. Without it, your employer will not be able to correctly report your income to the tax office, and you risk being placed in the highest tax class (VI), which means maximum deductions from your salary.
The Steuer-ID consists of 11 digits and is assigned to a person once in their lifetime. It does not change even if you move to another city, change employers, or temporarily leave the country. The number is not public and should be kept in a safe place – although if lost, it can be restored through the tax office (Finanzamt).
This number may also be required when opening a bank account, filing a tax return, contacting an insurance company, or government agencies. So, if you plan to work in Germany, the Steuer-ID is one of the first things you need to obtain after moving.
In Germany, the tax system for employees is designed to make life as easy as possible. All major taxes are deducted and paid automatically before your salary is paid into your account. You receive your so-called “net” salary, i.e. the amount remaining after all mandatory deductions.
All tax administration is handled by your employer. They send your income details to the tax office (Finanzamt) every month and pay the relevant amounts: income tax (Lohnsteuer), pension contributions, health insurance, unemployment insurance, and other social security contributions. This applies to both German employees and foreigners who are officially employed in the country. Thus, taxes in Germany are actually paid by the employer, not the employee.
For most people, this is convenient: there is no need to calculate anything manually, fill out monthly reports, or visit the tax office. But that doesn’t mean you can completely forget about the system. There are situations when it is advantageous or even mandatory to file an annual tax return (Steuererklärung) – for example, if you had significant expenses for moving, education, double residence, or a change in tax class during the year.
Even if filing a return is not mandatory, it often allows you to get back some of the overpaid amounts. So it’s important to review your tax situation at least once a year – it may be a pleasant surprise for your wallet.
In Germany, not all employees are required to file a tax return. If you only receive income from one employer, have not changed your tax class during the year, and do not have any special additional income, you do not need to file a Steuererklärung. However, voluntary submission is often beneficial – many people receive a refund of some of the taxes they have paid. Sometimes this amounts to several hundred, sometimes even thousands of euros.
If you have had expenses that the tax office can take into account, for example:
These expenses can be included in your tax return and will reduce your taxable income.
Foreigners can and are entitled to file a Steuererklärung even if they only work in the country for part of the year. This is especially relevant if:
In such cases, the tax office may take your status and expenses into account and refund part of your taxes to your bank account. If you don’t want to deal with the paperwork yourself, you can use online services such as SteuerGo, Taxfix, or WISO Steuer – they have an English interface and are easy to use for beginners.
Even if your job in Germany seems “clean” from a paperwork perspective, don’t ignore the Steuererklärung – it’s a real opportunity to get some of your earnings back, especially if you find German taxes too high.
The German tax system allows you to reduce your tax liability through expenses. For example:
These benefits can reduce your taxes in Germany and get some of your money back. Taxes on salaries in Germany depend not only on your tax bracket, but also on your knowledge of the system.
If you have just arrived, here are a few practical things to keep in mind:
Working in Germany has clear tax rules. Knowing the basics will help you avoid surprises and plan your budget better. Taxes in Germany for non-residents may seem complicated at first, but with time, anyone can figure out the system.
