Germany Tax Rates 2016
Last partial update, July 2016.
- Taxation of an individual's income is progressive. In other words, the higher the income, the higher the rate of tax payable.
In 2016 the Germany tax rates for an individual are 14% - 45%.
- Singles pay on income above EUR 254,447 (couples, on income above EUR 508,894) income tax of 45% before 5.5% solidarity tax and 8%-9% church tax which are imposed on the income tax.
In addition to regular tax, there is a trade tax that is imposed on business income.
- The standard rate of Germany corporate tax in 2016 is 15%.
There is a reduced rate for part of a corporation's income.
- An additional tax has been imposed to help the merger of the two Germanys.
This is "solidarity tax" which is 5.5% of the normal rate payable.
The tax is levied on corporations and individuals, subject to the conditions specified in the law.
- There is also a municipal "trade tax" of 14%-17%.
- In 2016 the effective corporate tax rate, including trade tax and solidarity tax is about 30%-33%.
Germany Income Tax for an Individual
- An individual is liable for tax on his income as an employee and on income as a self-employed person.
An individual who meets the test of a "permanent resident" of Germany will have the tax calculated on his income in Germany and from overseas.
A foreign resident who is employed in Germany pays tax only on income earned in Germany.
- To be considered a German citizen, a test must be met of either a life centered in Germany or a continuous stay of 6 months in Germany.
- A partnership is not a separate body for tax purposes.
The income from the partnership is divided between the partners who will then each pay their tax as an individual on their share according to their share in the partnership.
- An employer is obligated to deduct the tax payable, income tax and social security immediately on a monthly basis from income earned as a wage.
- A self-employed person must prepay income tax that will be offset on filing an annual return.
The advance payment is determined on the basis of the return made for the previous year. In the event of a new business, the advance will be calculated on the basis of estimates made by the owner of the business. The advance payment is made once every three months.
- Certain payments, as specified below, are deducted from taxable income.
Germany individual income tax rates, 2016
||Tax Base (EUR)
||Up to 8,652
||254,447 and over
Note: The rates are before solidarity tax,all individuals,and business tax-for business income.
Members of the church pay 8%-9% church tax.
Germany Corporate Tax
- The basic 2016 corporate federal rate of tax in Germany is 15%.
- A "business tax", 14%-17% in average, payable to the municipality, is added to the tax.
- A company that operates in a number of cities pays business tax according to the location of its employees in the various cities.
- Taxable income for the purposes of "business tax" may be adjusted for purposes of calculating the basis on which "business tax" is payable.
- "Business tax" is an allowable expense for purposes of calculating the income on which corporation tax is payable.
Germany Capital Gains
Capital Gains (Individual)
Germany Dates of Reporting and Payment:
- Profits from the sale of private real estate that has been held for more than 10 years, or from the sale of other assets that have been held for more than 12 months is exempt from tax. For shorter holding periods the general tax rates apply.
- Sale of a shares when the percentage of the investment is less than 1% is subject to a flat 25% tax. On the other hand, when the percentage of the holding is in excess of 1%, tax is payable on 60% of the profit at normal rates.
Capital Gains (A Company)
- The standard rate of tax for a company is 15%.
- 95% of a capital gain from the sale of shares in a foreign subsidiary or German company is exempt from tax when received by a company taxable in Germany.
The tax year in Germany ends on December 31.
Advance payments for income tax are paid according to the following:
Germany Deduction of Tax at Source
Taxation of Employees:
- An individual
- An individual whose income is from a salary only does not have to file an annual return. The employer, who deducts tax from the employee, transfers the tax immediately to the tax authorities every month.
- An individual who is self employed is obligated to make 4 quarterly advance payments.
- An individual who is self employed is obligated to file a return by the end of the month of May.
A limited company
- It is compulsory to submit the financial statements by the 31st May following the tax year.
- During the year, the company must make 4 quarterly advance payments on the 10th of the months of March, June, September and December. The balance of the tax payable must be paid within 30 days of receipt of an income tax assessment.
- A fine of 1% per month is payable on arrears in payment of the tax balance.
The employer is obligated to deduct tax at source from an employee and to make additional contributions to social security.
Germany Other deductions:
- An employed person - The employer and employee each make an equal payment.
- The social insurance covers pensions, unemployment and nursing insurance.
- There is an upper limit of the salary on which national insurance is payable.
- Income in excess of the limit is exempt from national insurance.
- The rates for employers are pension-9.35%,unemployment insurance-1.5%, health insurance-7.3%-8.8% and care insurance-1.175%.
Deductions must be made from the following payments to nonresidents as follows:
Comments: Deduction at source for overseas residents is subject to the Double Taxation Prevention Treaty.
- Dividend - 26.375% (including solidarity tax).
- Royalties - 15.825% (including solidarity tax).
- Interest - 0%/25%.