Expatriate tax ebook - Germany
What taxes?
Capital gains tax
Inheritance, estate and gift taxes
Investment income
Local taxes
Real estate taxes
Social security taxes
Stock options
Wealth taxes
Other specific taxes
Capital gains tax
Investment income and sales become taxable within one year of acquisition. Please note that only half of the investment incomes and capital gains are taxable. Costs, which are related to these incomes, can only be deducted by 50 percent.
For capital gains there is a tax free amount of 512. Higher capital gains will be taxed completely at the individual personal income tax rate.
Inheritance, estate & gift taxes
A liability to German inheritance and gift tax depends on whether the individual or the deceased or donor maintains a domicile or habitual place of abode in Germany. Furthermore, certain assets located in Germany could be taxable. If the individual and the deceased or donors are close relatives, there are tax free amounts depending on the relationship.
Investment income
Interest income and savings income are taxed with 30% interest discount tax plus a 5.5% solidarity surcharge.
Dividends are taxed with 20% capital gains tax plus a 5.5% percent solidarity surcharge. There is a saver's tax free amount of 750 for a single person and 1,500 for a married couple, as well as a blanket deduction for income related expenses of 51 per person for investment income.
Please note that there is a new German tax rule which comes into effect from 2009. There will be a withholding tax amounting to 25% plus a 5.5% solidarity surcharge on investment income. The new tax is a type of flat tax.
Local taxes
No local taxes apply to individuals in Germany. If an individual owns a house or a flat, he has to pay real property tax.
Real estate tax
Real estate tax is applicable in Germany. The amount of real estate tax depends on the value of the real estate.
Social security taxes
Social security contributions include pension insurance, unemployment insurance, nursing insurance and compulsory health insurance. The contribution rate for compulsory health insurance depends on the health insurance fund, which can be chosen by the employee.
Social security contributions depend are salary dependent. There is an income limit up to which contributions are payable.
Income thresholds for 2008
| Annual | Monthly | Rate of contribution | |
|---|---|---|---|
| West Germany Pension insurance Unemployment insurance |
63,600 63,600 |
5,300 5,300 |
19.9 % 3.3 % |
| East Germany Pension insurance Unemployment insurance |
54,000 54,000 |
4,500 4,500 |
19.9 % 3.3% |
| Whole Germany Compulsory health insurance Nursing insurance |
43,200 43,200 |
3,600 3,600 |
approximately 15,0 % 1,7% (from 1 July 2008 1.95%) |
Stock options
Stock options are treated as income from employment and subject to the individual progressive tax rates. If the stock options are not traded options, then the tax due is levied at the time of exercise. But according to the model treaty the vesting date is applicable. If the stock options are traded options, than the tax due is levied when the options are granted.
Wealth tax
There is no wealth tax in Germany.
Other specific taxes
There are no other specific taxes in Germany.
Information about Germany:
Last updated 27 June 2008
This information has been provided by Grant Thornton Germany, a member firm of Grant Thornton International Ltd and is for informational purposes only. Neither Grant Thornton Germany nor Grant Thornton International Ltd can guarantee the accuracy, timeliness or completeness of the data contained herein. As such, you should not act on the information without first seeking professional tax advice.
Disclaimer
Contact us
For further information on expatriate tax services in Germany, please contact Gabriele Becker.