Living and working conditions

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Living conditions

Income and taxation


The average gross monthly earnings of full-time workers was EUR 3 994 in 2019. The difference between the average gross hourly rate of pay for men (EUR 22.16) and women (EUR 17.72) is 20 per cent.

According to the findings of the Federal Statistical Office for 2019, the average gross annual earnings for full-time employees vary from sector to sector. Here is a brief overview:

Manufacturing industry: EUR 54 718

Service sector: EUR 51 676

Public and personal services: EUR 51 279

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 file 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 employment relationships 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 [Finanzamt]. 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.
  • You have received a severance payment or a long-service bonus from a (former) employer, for which the special one-fifth rule had already been applied when deducting wage tax
  • Divorced or permanently separated parents (or both parents in the case of parents of illegitimate children) have requested that the ‘tax allowance for parents of children in education’ [Ausbildungsfreibetrag] or the lump-sum allowance for disabled persons [Behindertenpauschbetrag] be distributed in a proportion other than 50/50
  • You received special bonus payments and changed employer in the same year, and your new employer failed to account for the values of the previous employer when calculating wage tax
  • You became divorced over the course of the year or your partner died, and one of the spouses remarries in the same year
  • Your spouse is a taxpayer with restricted tax liability who lives in a foreign EU/EEA country and is registered on your wage tax card
  • Your place of residence or habitual residence is located abroad and you have applied for unlimited tax liability in Germany

Value-added tax (VAT) [Mehrwertsteuer (MwSt.)] on the purchase of goods and the use of services varies between 7% and 19%. The majority of goods and services in Germany are subject to 19% VAT. 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. VAT of 19% is charged on the majority of goods and services in Germany.


Text last edited on: 06/2020

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