Living and working conditions

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Germany


Living conditions

Income and taxation

 

The average gross monthly earnings of full-time workers was EUR 3 771 in 2017. Men earned on average EUR 3 964 and women EUR 3 330. In the new Länder of the former East Germany, the average wage is EUR 3 049 less than in the former west German Länder

The average gross salary for full-time employment varies from sector to sector. 

Here is a brief overview:

Average monthly earnings of full-time workers in the financial and insurance industry: EUR 5 179

Average monthly earnings of full-time workers in the manufacturing industry: EUR 3 959

Average monthly earnings of full-time workers in the service sector: EUR 3 726

Average monthly earnings of full-time workers in the hospitality sector: 

EUR 2 332.

Anyone residing in Germany or staying in Germany for more than 6 months in a calendar year must pay tax on their entire income from home and abroad. As an employee, tax is automatically deducted from wages. The amount of income tax is based on income level and marital status.

The filing of a tax return is voluntary in Germany. In some cases, there is an obligation to make a tax return by 31 July of the following year: for additional income apart from wages, unemployment benefit, sickness benefit or short-time allowance. In the case of several forms of employment or certain tax class combinations, the filing of a tax return is obligatory.

 Employees who receive an income in Germany must pay tax. Individual living conditions are taken into account in calculating taxable income. Single people have to dig deepest into their pockets. Anyone who is married, is also the sole earner and has children gets off much more lightly. 

The employer withholds income tax from each wage payment and pays the tax directly to the tax office. Everyone in employment is required to make a contribution towards social security. Half of contributions are paid by the employer and half by the employee. The total social security contribution is approximately 39.8% of gross wages/salary. At present the solidarity surcharge introduced in 1995 to build up the east German economy amounts to 5.5% of wage/income tax. Church members who are liable to taxation must also pay a church tax of between 8 and 9% of their tax liability, depending on the Land they live in. State collection of tax for religious communities is a peculiarity of the German system.

At the end of the year a tax return can be submitted to the tax office. 

The filing of a tax return is voluntary, if one is not obligated by law to submit one. 

Those who are not obliged to submit a tax return do not have to submit one, but can do so voluntarily.

The submission of a voluntary tax return is particularly worthwhile if, for example, the employee had to pay high advertising costs, special expenses or exceptional costs, or got married during the year. In these cases, a tax refund may be possible.

An obligation to submit a tax return exists, inter alia, in these cases:

  • The taxable supplementary income is above EUR 410.
  • An allowance was granted.
  • Unemployment benefit, sickness benefit or short-time allowance, etc. above EUR 410 was received.
  • There were parallel employment contracts with several employers.
  • There are capital gains for which no final withholding tax could be levied.
  • Unmarried or divorced parents want to transfer certain allowances for a child.
  • A spouse had tax code 5 or 6 all year or for some part of the year.

Value-added tax (VAT) on the acquisition of goods and the use of services varies between 7% and 19%.

VAT of 19% is calculated for the majority of goods and services in Germany.

A rate of 7% applies to basic daily necessities such as bread, butter and milk. Sports and cultural events are also included in basic goods and services, so the reduced VAT rate applies to stadium, cinema and theatre tickets. Even newspapers, magazines and books are only taxed at 7%, as well as public transport within a 50kilometre radius, which includes buses, trains, trams and even taxis. VAT of 19% is calculated for the majority of goods and services in Germany. 

Text last edited on: 10/2018

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