Social security contributions
The following social security contributions (as of January 2017) are levied on employment income. Employer contributions are generally tax-free.
- Pension insurance: 18.7%, up to an income ceiling of EUR 76,200 annually (EUR 68,400 in the new federal states). A contribution of 9.35% each is borne by both the employer and the employee.
- Unemployment insurance: 3%, up to an income ceiling of EUR 76,200 annually (EUR 68,400 in the new federal states). A contribution of 1.5% each is borne by both the employer and the employee.
- Health insurance: 14.6% to 15.7%, up to an income ceiling of EUR 52,200 annually. A contribution of 7.3% is borne by the employer and the remaining amount (between 7.3% and 8.4%, depending on the health insurance provider) by the employee.
- Long-term care insurance: 2.55% (2.8% for childless individuals, beginning with age 23), up to an income ceiling of EUR 52,200 annually. The contribution is borne 1.275% by the employer and 1.275% by the employee.
- Work accident scheme depends on the industrial sector and the accident risk; these contributions are borne by the employer.
- Insolvency contribution only payable by the employer amounts to 0.09%, up to the income ceiling of EUR 76,200.
An individual can apply for private health and long-term care insurance if certain conditions are met.
Self-employed individuals generally do not have to pay mandatory social security contributions.
Value-added tax (VAT)
Proceeds of sales and services provided in Germany are subject to VAT under the common system of the European Union (EU) at the standard rate of 19% (7% on certain items, such as food and books). The taxpayer generally is entitled to deduct the VAT charged on input from that payable on output.
Net wealth/worth taxes
At this point of time, no wealth taxes are levied in Germany.
Inheritance, estate, and gift taxes
Inheritance tax is a tax on lifetime gifts and on transfers of value passing on death. This tax is imposed on German residents. An individual who is not resident in Germany is liable to this tax only in relation to their assets situated in Germany.
Progressive tax rates of 7% up to 50% and tax-free amounts between EUR 20,000 and EUR 500,000 apply, depending on the value and the degree of the relationship between donor and beneficiary. For a surviving spouse, an additional tax-free allowance of EUR 256,000 is granted. This allowance is reduced by the discounted value of any pension entitlements, which are not subject to inheritance tax.
There is a minor local tax on property. The respective municipality is responsible for the final tax assessment.
There are no additional taxes on luxury goods in Germany.
Real estate transfer tax
Real estate transfer tax is levied at 3.5 to 6.5% of the consideration on all conveyances of German property. It is also levied on indirect transfers on acquisition of at least 95% of the shares in property owning companies. If the transfer is indirect, and without its own specific consideration, the basis for the tax is 12.5 times the annual rentable value. This value is derived from rents actually paid over the previous three years, or estimated from statistics maintained by the local authority.
The tax is not levied on direct or indirect transfers without consideration in the course of a corporate reorganisation, under the laws of a member state of the European Economic Area (EEA), provided that at least 95% of the ultimate interest in the property remains unchanged for five years before and after the transaction.
Customs duties are levied under a common system on imports into the EU. The rate is set at zero on most imports from EU candidate countries and on many imports from countries with which the EU has an association agreement. For manufactured produce from other countries, the rates generally lie within the range of zero to 10%. The basis is the import value of the goods. The European Commission also sets 'countervailing' duties from time to time on specific imports from specific countries in order to counter dumping attempts. The countervailing duty rate is set to fully absorb the dumping margin and is therefore usually much higher than 10%.