Taxation and insurance

Taxation

The income tax in Germany is subject to a progressive tariff, which means that higher incomes lead to a higher percentage of deduction. However, German income tax law provides opportunities to reduce the taxable income.

Personal taxes in Germany are the income tax (“Einkommensteuer”) and the church tax (“Kirchensteuer”, which is imposed from registered members of German religious communities and is insofar voluntary). For employees these taxes have to be retained as wage tax (“Lohnsteuer”) directly from the salary and—if the person has no further income from outside the employment—in principle, nothing else has to be performed. Singles and families with double income are taxed higher than families with only one earner (or with a partner with only low income).

The solidarity charge (“Solidaritätszuschlag” or Soli for short), which has been introduced as additional tax after Germany’s reunification to finance the restructuring of the “New Federal States”, the former German Democratic Republic), has been removed for most employees as of January 2021. Only employees with a yearly income of more than 73.000€ gross for singles or 147.000 for partners with equal income have to partly pay the Soli. Employees with a considerable higher income have to pay the full amount.

But German income tax law provides a lot of opportunities to reduce the taxable income. These facts can be retroactively claimed in the frame of an income tax declaration (“Einkommensteuererklärung”), which often leads to a sometimes significant refunding. European XFEL can recommend to you English-speaking tax advisors who offer their support to all of our colleagues.

The tax class III for families leads to a higher disposable income. Further effects result from the “family” component of the International Allowance and a slightly reduced contribution to the long-term care insurance.

Social insurance

Germany provides one of the most comprehensive social insurance systems in the world.

It consists of health, pension, unemployment, long-term care, and industrial accident and disease insurance. With the exception of the industrial accident and disease insurance, which is completely financed by the employer, the contributions for the social insurances are shared roughly equally between employer and employee. Similar to the wage tax, the contributions are directly deducted from the salary.

In 2023 every employee pays 9.30% of his/her income for the pension and 1.3% for the unemployment insurance up to a contribution ceiling of 7.300,00 € monthly. For the health insurance, the employee pays 7.30% plus the additional individual amount which depends on the respective health insurance (usually ranging from 0.7% to 1.2%, with the average being 0.9% ) and for the long-term care insurance between 0,7% and 1,7% (for employees with children depending on the number of children) or 2,3% (for employees without children) up to a contribution ceiling of 4.987,50 €. The health insurance also covers spouses and children without additional cost as soon as they arrive in Germany and as long as they have no own income.

The HR group will assist you in the application procedure. Insurances with documentations and hotlines in English are available. Your health insurance is valid from your first working day. The costs for medical treatment will be paid directly by the insurance. Medical professionals must clarify any exceptions to insurance coverage in advance. An additional private health insurance is usually unnecessary, unless for dental prostheses, which are covered only partially by the common insurance. In cases of long-term illnesses, all employees are entitled to six weeks of continued remuneration and afterwards up to a duration of 18 months to sick pay by the health insurance.

Medical treatment

You and the members of your family will immediately receive a personal insurance card issued by your health insurance provider.

You will be treated upon presentation of your insurance card when visiting the doctor or the hospital. You don’t normally have to pay a bill from the doctor or the hospital first and then have this reimbursed. However, in some cases, there are co-payments that you must pay directly to the care provider. For visits to the doctor, you should, if possible, call to arrange an appointment beforehand (this does not apply to emergencies, of course). The doctor prescribes medicines required for treatment. The insured person receives the medicine by presenting the doctor’s prescription to the pharmacy. In most cases the insured person has to make a co-payment of 5 € to 10 €. The local Association of Statutory Health Insurance Physicians (“Kassenärztliche Vereinigung”) provides information for finding appropriate insurance (German language only).