Living and working conditions

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Germany


Living conditions

Income and taxation

 

The average gross monthly earnings of full-time workers were EUR 3 975 in 2020. The difference between the average gross hourly rate of pay for men (EUR 22.78) and women (EUR 18.62) is 18 per cent.

 

According to the findings of the Federal Statistical Office for 2020, the average gross annual earnings for full-time employees vary from sector to sector. Here is a brief overview:

  • Manufacturing industry: EUR 53 351
  • Service sector: EUR 51 953
  • Public and personal services: EUR 52 479

 

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.

 

Individual living conditions are taken into account in calculating taxable income. Single people have to pay the most taxes. Anyone who is married, is also the sole earner and has children gets off much more lightly. 

 

The filing of a tax return is voluntary in Germany. In some cases, there is an obligation to submit a tax return by 31 July of the following year, e.g. for those who earn additional income on top of their wages or receive unemployment benefit, cash sickness benefit or short-time allowance. In the case of several employment relationships or certain tax class combinations, the filing of a tax return is obligatory.

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.

 

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

  • A rate of 19% is charged on 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 50-kilometre radius, which includes buses, trains, trams and even taxis.

 

Text last edited on: 07/2021