Social security contributions
The following social security contributions (as of January 2021) are levied on employment income. Employer contributions are generally tax-free.
- Pension insurance: 18.6%, up to an income ceiling of EUR 85,200 annually (EUR 80,400 in the new federal states). A contribution of 9.3% each is borne by both the employer and the employee.
- Unemployment insurance: 2.4%, up to an income ceiling of EUR 85,200 annually (EUR 80,400 in the new federal states). A contribution of 1.2% each is borne by both the employer and the employee.
- Health insurance: 14.6%, up to an income ceiling of EUR 58,050 annually. A contribution of 7.3% each is borne by both the employer and the employee.
- Long-term care insurance: 3.05% (3.3% for childless individuals, beginning with age 23), up to an income ceiling of EUR 58,050 annually. The contribution is borne 1.525% by the employer and 1.525% (1.775% for childless individuals, beginning with age 23) 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 0.12%, up to the income ceiling of EUR 85,200 annually (EUR 80,400 in the new federal states).
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). For an interim period between 1 July 2020 and 31 December 2020 the rates were reduced to 16% and 5%. An entrepreneurial 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 (testators/heirs and donors/donees). An individual who is not resident in Germany under national tax rules 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. For surviving children, an additional tax free allowance of up to EUR 52,000 depending on age at the time of inheritance may apply.
There is a local tax on real estate 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 (directly or indirectly) in property owning companies.
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 and the rates depend on various criteria. 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.