The forms of taxation that are important in practice include:
The current regular VAT rate in Germany is 19%. Certain products, such as food, books, flowers and plants are subject to a reduced tax rate of 7%. VAT is generally collected by the performing company and submitted to the tax office.
Land Transfer Tax
Land transfer tax is a one-off tax that incurs when selling/purchasing a building/property. The condition for the land transfer tax is that a domestic property is subject to a purchase and a change of legal entity. However, there are also some particularities to be observed that are subject to tax exemption. The regular tax rate in Germany is in between 3.5% and 6,5% of the corresponding purchase price. Due to federalism in Germany, however, every federal state may specify another tax rate.
Land tax is a tax on the ownership of properties. It is charged by the communities.
Inheritance Tax / Gift Tax
Inheritance tax is a tax incurring for an asset transfer in case of death from the deceased to the heir. The asset transfer/estate is subject to taxation. This is a so-called estate tax.
Gift tax means a taxation of an asset transfer in return for payment from the donor to the donee.
Taxation of Salaries
Persons who receive a monthly income from employed work are subject to monthly payroll tax, which is withheld by the employer (plus solidarity surcharge and church tax, if applicable).
Payroll tax is a type of income tax. The amount of the tax depends on individual features, such as marital status, income and children. At the end of the tax year, the payroll tax compensation or the income tax return is used to determine the precise annual tax and specifies it as income tax (payroll tax return of the employee).
In addition to payroll tax, the employer usually has to withhold the employee’s social security contributions for health insurance, nursing care insurance, unemployment insurance and pension insurance in payroll accounting. It should be noted that the following percentages apply to income subject to tax and social security contributions. The following contributions are applicable for 2017:
Contribution group 2017
|Health insurance||Total: 14,6 % + additional contribution employee
(employee’s contribution, + additional contribution )
|Nursing care insurance||2,55 %
(additional contribution for childless people of 0.25%)
|Pension insurance||18,7 %|
|Unemployment insurance||3,0 %|
|Contribution assessment ceiling 2017||Health/ Nursing care insurance||Pension / unemployment insurance (old West-German states)||Pension / unemployment insurance (newly-formed German states)|
|Year||52.200,00 €||76.200,00 €||68.400,00 €|
|Month||4.350,00 €||6.350,00 €||5.700,00 €|