Income tax in Germany for foreigners
posted by Qentin Briggs in Germany forum
Expatriates living in Germany can be subject to German taxes, especially if they have German source income. This depends on the tax agreements between your country and Germany (i.e. if there is a double taxation agreement).
In Germany, you pay income taxes throughout the year, usually with an employer deducting tax from each paycheck. Adjustments are then made at the end of the year for possible under or overpayments.
In 2007/2008 an income of less than €7,664 is tax-free for a single person (€15,329 for a married couple). Incomes up to €52,152 for a single person (€104,304 for a couple) are then taxed with a rate progressively increasing from 15% to 42%. Incomes over €52,152(€104,304) are taxed at 45%. In addition to this there is the "solidarity surcharge" of 5.5% of the tax, to cover the costs of integrating the states of the former East Germany. If you're member of one of the main churches, you will also have to pay a "church" tax which depends on your income.
In addition to income tax, you will also have to pay a part of your salary for four social programs; retirement, unemployment, health insurance and long-term nursing care. Payments for these programs are borne equally by the employer and the employee.
If you're subject to German tax, generally most sources of income are then taxable. The Lohnsteuer (wage tax), which alone accounts for a third of the German government's revenue, is withheld at source from compensation. Income from other sources (e. g. self-employment, fees for services, rent collections, investments and the like) are covered by the Einkommensteuer (income tax).
The Lohnsteuer differs from the Einkommensteuer only by the method of collection. The Lohnsteuer is collected at source and paid directly to the Finanzamt (tax office) by the employer while the individual must pay the Einkommensteuer himself.
Hope this helps. For more info on the German tax system, you might also want to have a look at http://en.wikipedia.org/wiki/Taxation_in_Germany