Germany Taxation/ Tax Classes
People staying in Germany and having German source of Income are normally subjected to German rule of Taxation.
The German taxation is similar to many other countries (including India) where the earner pays income tax throughout the year (Einkommensteuer) based on the paychecks and then adjustments are made at the end of the year (Jahrliche Steuererklaerung) for under/overpayments.
To know more about Taxation in Germany, refer to link:
https://en.wikipedia.org/wiki/Taxation_in_Germany
Gross - Net Salary Calculation:
In Germany, there are different taxes that are applicable to the Income that many a times result in a big difference between Gross and Net Salary.
If you want to calcualte your Net Salary then we recommend to use the following link to calculate the same:
http://www.parmentier.de/steuer/steuer.htm?wagetax.htm
Rate of Taxation:
As in India, Rate of taxation is dependent on the earnings. The following tables show the rate of taxation applicable in Germany for years 2016 and 2017.
2016 - Rate of Taxation
| Income Upto | Rate of Taxation |
|
Upto Euro 8,652 for Single Person Upto Euro 17,304 for Married Couple |
Tax Free (0%) |
|
Upto Euro 53,665 for Single Person Upto Euro 107,330 for Married Couple |
From 14% till 42% |
|
Income from Euro 53,666 upto Euro 254,466 for Single Person Income from Euro 107,330 upto Euro 508,892 for Married Couple |
Taxed at 42% |
|
Income above Euro 254,466 for Single Person Income above Euro 508,892 for Married Couple |
Taxed at 45% |
For more details, refer to:
2017 - Rate of Taxation
| Income Upto | Rate of Taxation |
|
Upto Euro 8,820 for Single Person Upto Euro 17,640 for Married Couple |
Tax Free (0%) |
|
Upto Euro 54,058 for Single Person Upto Euro 108,116 for Married Couple |
From 14% till 42% |
|
Income from Euro 54,058 upto Euro 256,304 for Single Person Income from Euro 108,116 upto Euro 512,608 for Married Couple |
Taxed at 42% |
|
Income above Euro 256,304 for Single Person Income above Euro 512,608 for Married Couple |
Taxed at 45% |
For more details, refer to:
Tax Classes:
Employees of German companies are normally assigned a tax class by the tax authorities according to various categories.
The "Tax Class" (Lohnsteuerklasse or Steuerklassen) is important in determining the amount of withholding (income) tax deducted from a salary as well as in determining the value of a number of social benefits for which the taxpayer may be eligible.
A tax class may be assigned to an employee by the authorities based on marital status and other criteria.
- Class I - applies to single (unmarried) people; those living in a registered civil partnership; those who are divorced, widowed or married unless they fall under tax class II, III or IV
- Class II - applies to those who are a single parent and living alone with a child or children and are entitled to the child allowance (Kindergeld) and/or other government assistance
- Class III - applies, upon request, to married employees if both spouses live together in Germany and one spouse is the sole wage earner; or the other spouse earns a salary but chooses to be categorized under Class V. Also applies to widowed employees for the calendar year following the death of the spouse if both were employees and living together in Germany on the day the spouse died
- Class IV - applies to married workers who live together and have not selected Tax Class III or V for one of them
- Class V - applies to a taxpayer whose spouse is classified under Tax Class III
- Class VI - an optional class available to individuals who may have more than one job and earn money from other employment. The taxpayer may have more than one Lohnsteuerkarte resulting from the multiple jobs.
There may be various family models and permutations of the tax classes. To be sure to have the best classification, feel free to consult the tax office or a tax advisor.