Taxes and social security contributions

You have found a job in the Stuttgart Region and negotiated a gross salary. You may be surprised to find that the first salary paid to your back account will differ from what was agreed. The explanation is simple:

In Germany there is a gross wage which is the amount written in the employment agreement. Social security contributions are taxes are automatically deducted from this wage. What you actually receive is the net wage. The amount paid to your bank account is your wage net of taxes and deductions. The payroll department can help you to understand how much you and your employer have paid from your gross wage for which tax or social security contribution.

Taxes

Tax identification number

In order to pay taxes from your gross wage in Germany, you need a tax identification number. This number is applied for automatically for you from the German Federal Central Tax Office (BZSt) when you register with the 'Einwohnermeldeamt' or the immigration authorities. The tax identification number is allocated entirely using an automated process. For this reason, employees cannot themselves apply for a tax identification number. It can take up to three months to be allocated.

Income tax

The most important tax for employees in Germany is income tax, which you pay on all your earnings in a calendar year above a certain basic tax-free allowance (in 2014: EUR 8,354, or EUR 16,708 for married couples and civil partnerships). This of course also includes your salary (income from dependent employment). If you work for a company as an employee, you don't have to do anything about the income tax. Your employer will automatically deduct the income tax from your gross wage every month in the form of wage tax and will transfer it to the tax office for you.

The tax rate depends on your taxable income. As a rule: the higher your taxable income, the higher the tax rate. The rates are between 14 and 45 percent. However, the top marginal tax rate of 45% is paid only for taxable income above EUR 250,730 per year, or above EUR 501,460 per year for married couples and civil partnerships.

You can get further information on income tax from the Make it in Germany welcome portal or the tax office responsible for you, which you can find in the municipality search.

Solidarity surcharge

The solidarity surcharge was introduced after the reunification of Germany in order to achieve comparable living conditions in East and West. It amounts to 5.5% of wage or income tax. This tax applies to all companies and citizens.

Church tax

If you are a member of a tax-collecting religious community, for example the Protestant or Catholic church, you will be liable to pay church tax. This is also paid to the tax office by your employer. It amounts to approximately 8% of the gross salary.

Social security contributions

Employees in Germany who are in employment subject to social security are insured against risks such as illness, industrial accidents, unemployment and old age.

You and your employer pay a fixed percentage of your income for membership in the social security system. Your employer registers you with social security and deducts the amounts for pension insurance, health insurance, nursing care insurance and unemployment insurance from your salary and transfers them to social security along with the employer contribution.

Statutory health insurance

Statutory health insurance pays for the costs of visits to a doctor and treatment of illnesses as well as health-promotion measures and other services. For example, it pays you sick pay if you are sick and unable to work for longer than six weeks.

You can choose your health insurer at will. This is not the case for the other social security contributions.

The general contribution rate is the same for all health insurers. The contribution is 15.5% in 2014, of which you pay 8.2% and your employer pays 7.3%.

Another special feature of health insurance is that you do not have to join statutory health insurance above a compulsory insurance threshold. If you earn more than EUR 53,550 per year, you can also join a private health insurer. Because it is not easy to switch from private back to statutory health insurance, however, you should consider this step carefully.

Helpful hint: Everyone resident in Germany must have health insurance. This means that in order to be able to work in Germany, you have to register with a health insurer.

You can find further information on health insurance and benefits under Health.

Statutory accident insurance

Statutory accident insurance covers accidents at work or on the way to or from work. It covers the cost of medical treatment and reintegration into the workplace after an industrial accident or occupational illness. The contributions are paid for solely by the employer.

Statutory pension insurance

Statutory pension insurance pays for your pension after you have retired. The amount of your pension depends on your income and the number of years of contributions in Germany. It also pays for other measures to make you ready to return to the employment market after a longer illness. The contribution is 18.9% in 2014, of which you and your employer each pay half.

Statutory nursing care insurance

Although it is mainly older people who require long-term nursing care, anyone may require nursing care at any time. Statutory nursing care insurance provides basic protection for this eventuality. The contribution is 2.05% in 2014, of which you and your employer each pay half. People without children pay a 0.25% mark-up.

Statutory unemployment insurance

Unemployed people who have paid contributions to statutory unemployment insurance in Germany for at least a year within the past two years and who are looking for a job receive an income to replace their wage for a certain time (unemployment benefit I). As part of its statutory remit, the Federal Employment Agency also supports everyone who is looking for a job by means of advice and mediation services. Since 2011 the contribution has been 3%, of which you and your employer each pay half.

Sozialversicherungsausweis

As an employee, you will be sent a social security card with a social security number by the DSRV. You do not have to apply for the card to be issued; it is issued automatically when you or your employer registers with the health insurer. Keep the social security card in a safe place, as you will need the number now and then.

You can get further information on the statutory pension and social security card from Deutsche Rentenversicherung Baden-Württemberg under the free service telephone number (+49) 0800/1000 480-24 or on the internet.

 

The Stuttgart Region Welcome Service is an offering by Stuttgart Region Economic Development Corporation (Wirtschaftsförderung Region Stuttgart GmbH) for Stuttgart Region Skilled Specialists Alliance (Fachkräfteallianz Region Stuttgart), funded by Baden-Württemberg’s Ministry of Finance.