Currency: Euro
Wage Payment: Monthly
Tax Year: Calendar Year (Jan-Dec)
Language: German
Website: http://www.bzst.de/EN/Home/home_node.html (Tax Department)
Capital: Berlin
Social
Security
All employees working in Germany
are generally subject to the German social security system, which consists of
the following statutory insurances:
·
Pension Insurance
·
Unemployment Insurance
·
Health Care Insurance
·
Nursing Care Insurance
·
Occupational Accident Insurance
The Calculation Base is Gross
Salary. The Contributions by employee are tax deductible. Limits and rates
differs as per region.
CALCULATION LOGIC EXPLAINED BELOW:
Pension Insurance: 18.9% of gross salary up to
threshold of € 71,400 p.a. (€ 60,000 p.a. for new eastern states of Germany).
Contributions are shared equally by employer and employee.
Unemployment insurance: 3.0 % of gross salary up to a
threshold of € 71,400 p.a. (€ 60,000 p.a. for new eastern states of Germany);
Employer and employee share the contributions equally.
Health care insurance: 15.5 % of gross salary up to a
threshold of € 48,600 p.a.; (Allocation: Employer 7.3 % / employee 8.2 %)
Nursing care insurance: 2.05 % of gross salary up to a
threshold of € 48,600 p.a.; Employer and employee share the contributions
equally. However, employees without children pay 1.275 % instead of 1.025 %.
For Saxony, different rates apply.
The occupational accident
insurance depends on the industrial sector and the accident risk; these
contributions are borne by the employer only
Personal
Income Tax
The Tax Year followed in Germany
is Jan-Dec. Regular income is taxes on accrual basis on other hand one time
payments are taxed on receipt basis. The Payment Frequency is Monthly.
Salaries paid or borne by a German
employer or German permanent establishment of a foreign employer are subject to
wage tax, which is withheld by the employer and credited against the final
annual income tax charge. Salaries which are paid by a foreign employer and
recharged to a German company are as well subject to withholding tax.
Progressive Tax Rates are followed
in Germany. Tax Rates differ as per Marital Status of Individual. A Solidarity
surcharge of 5.5% is levied on the annual income tax amount.
There are tax class for tax rates
i.e.
I : Single or divorced/separated
|
II: Single or divorced/separated with at least one
single child living together in the same household
|
III: Married Spouse with higher income (only one spouse
working)
|
IV: Married (both spouse working)
|
V: Married Spouse with lower income (only one spouse
working)
|
VI: Second or more employments or requirements to
present a wage tax certificate to the employer are not met
|
Church Tax
Employees are responsible for
paying a church tax. The Church tax is withheld from each employees’ total
monthly taxable income. The Church tax varies by federal state between 8% and
9%.
Deductions
and Relief
·
Personal allowance of EUR 8652 (EUR 17,304 for married couples
filing joint return)
·
Standard Deduction of employment related expenses is EUR 1,000.
·
Church Tax
·
Special Tax Relief For Children
A Standard Deduction of EUR 292 and EUR 584 per month per child
for each child up to 18 years old, or even up to 25 years old if the child is
still in education (no age limit if child is handicapped).
Otherwise a monthly tax free payment of
€ 184 for the first and second
€ 190 for the third and
€ 215 for the fourth child and further children is granted under
certain conditions.
Benefit-in-kind
Company Cars, Stock Options
Benefit-in-kind are not taken into account if their value does not
exceed EUR 44 in a calendar month.
Next: Part 2 (Statutory Leaves, Overtime and Statutory Reporting)
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