In Germany, every citizen of society pays taxes. Since residents are aware that this is the most important source of income for the state, thanks to which it performs its functions for citizens. The budget needs and much more are paid from the state treasury. Without tax revenues, the state would not be able to cope with all this and, accordingly, work efficiently. Therefore, the German tax is so important for everyone.
There are two other reasons why taxes are levied. By taxing harmful products such as cigarettes, the state regulates consumer behavior. Because of the excise tax on tobacco, cigarettes in Germany are far from being a cheap product, and this, in turn, may encourage someone to quit smoking. Social justice is also promoted through taxes. The more a person earns, the higher his taxes.
Tax classes in Germany
The tax system in Germany divides taxpayers into 6 different classes depending on their personal circumstances and income, as they follow a progressive taxation system. This or that tax class in Germany determines the amount of taxes that must be paid.
The main factor for determining tax class in Germany is marital status. You can choose a class only after the wedding. In Germany, citizens are required to inform the tax office of all matters that may affect the change of tax class (for example, divorce or the appearance of children).
Each class in Germany determines different tax-free amounts and allows you to receive tax refund benefits.
The progressive German taxation system divides all taxpayers into the following 6 classes:
- Class I: Single/divorced/widower/married to a non-German tax resident or non-EU spouse/one-person household.
- Class II: Parents raising a child alone and eligible for benefits.
- Class III: Taxpayers who are married to a spouse who is unemployed or in the fifth tax class/widower (up to one year after the death of the spouse).
- Class IV: married couples with equal income (both receiving it in Germany).
- Class V: married taxpayers whose spouse is in tax class 3.
- Class VI: Persons earning income from more than one employer or working in two or more occupations.
Main taxes in Germany
This country has many different types of taxes that each citizen must pay depending on their class and occupation. Here are the main types of taxes:
- personal income tax;
- tax on corporations;
- value added tax;
- trade tax;
- property tax;
- land tax;
- tax paid when buying a land plot;
- insurance premiums;
- inheritance and gift tax;
- car tax;
- tax on the maintenance of the fire department;
- excises on coffee, sugar, mineral oils, wine and tobacco products;
- customs duties;
- fees going to the development of oil production in Germany.
Income tax in Germany
Personal income tax typically ranges from 14 to 45% depending on income level and other factors like tax class. Income tax in Germany for individuals is levied on a progressive scale depending on the amount of income. In addition, income is considered: profit from the sale of financial instruments such as shares, dividends and interest. In these cases, a rate of 25% plus a solidarity tax applies.
VAT in Germany
The most significant from a fiscal point of view in Germany among taxes on legal entities is the value added tax, which replaced the previously levied turnover tax. The object of this tax is turnover, that is, the supply of goods, the provision of services, the importation of goods and their acquisition. In practice, this is a general excise tax on private and public consumption. The standard VAT rate in Germany is 19%, for a number of goods and services 7%.
Property tax in Germany
The size of the property tax rate in Germany will depend on the age and depreciation of housing. The base rate is 0.35% of the appraised value of the property per year. But there are also municipal coefficients, which can be from 0.98% to 2.84% of the estimated cost of housing per year, which is more likely.
Trade tax in Germany
The trade German tax is one of the main local taxes. As for the income component of the trade tax, taxation, except for profit, is subject to an amount equal to 0.5% of the interest for the use of borrowed funds of a capital nature taken for a long period. Losses received from the activities of other enterprises are also taken into account (with the taxpayer’s equity participation in it). A number of deductions are provided: for an amount equal to 1.2% of the cost of land plots, the amount of profit received from the activities of other enterprises, as well as from the activities of foreign branches. In the presence of past years, the taxable base is reduced by their amount.
Inheritance and gift German tax
Inheritance and gift tax is levied at rates differentiated depending on the degree of kinship and the value of the acquired property. Excises are mainly directed to the federal budget (except for beer). Excisable goods and services include: liquid and mineral fuels, sparkling wines, coffee, beer, tobacco and tobacco products, alcoholic beverages.
Land tax
Land German tax is imposed in Germany on land owned by legal entities and individuals. The collection of taxes is carried out by communities. The tax rate consists of two parts, one of which is set centrally, the other is a community surcharge.
Read more: https://taxtaxation.com/french-tax-system/
FAQ
The deadline for filing taxes in Germany is generally May 31st of the year following the tax year. However, this deadline may be extended to September 30th if you file your taxes through a tax advisor.
Some tax deductions and credits available in Germany include deductions for work-related expenses, charitable donations, and health insurance premiums. There is also a basic tax-free allowance of €9,744 for individuals and €19,488 for married couples.
If you don’t pay your taxes in Germany, you may be subject to penalties and fines. In some cases, you may also face legal action or even imprisonment.
The income tax rate in Germany is progressive, meaning that the more you earn, the higher the tax rate. The tax rate ranges from 0% for individuals earning up to €9,744 per year to 42% for those earning over €57,051 per year.
VAT, or value-added tax, is a tax that is added to the price of goods and services in Germany. The current standard VAT rate in Germany is 19%, although there are also reduced rates of 7% and 0% for certain types of goods and services.
