Germany

Individual - Significant developments

Last reviewed - 09 July 2020

Social security contributions

As of 1 January 2020, the income ceiling for mandatory pension insurance has increased from 80,400 euros (EUR) to EUR 82,800 (EUR 77,400 in the new federal states). The increase of the contribution ceiling is also applicable to unemployment insurance.

Additionally, the income ceiling for mandatory health and long-term care insurance increased from EUR 54,450 to EUR 56,250.

As of 1 January 2020, the contribution rate to German state unemployment insurance was reduced from 2.5% to 2.4%. The rate for pension insurance was kept at 18.6%. The contribution rate to the health insurance system was fixed at 14.6% and the rate for nursery care insurance at 3.05%. All mentioned rates are shared equally between employer and employee.

Extended filing obligation for non-resident taxpayers

Where income is subject to withholding tax (WHT), for non-resident taxpayers the income tax liability is normally settled through the withholding system and no returns or assessments are required. However, as of 1 January 2020, there is a tax filing obligation with progression effect for non-resident taxpayers who benefited from the so-called 'one-fifth rule' in payroll on multi-year income (e.g. long-term incentive payments) or on severance payments.

Planned partial abolition of solidarity surcharge tax

On 20 August 2019, the German government proposed a bill for the partial abolition of the solidarity surcharge tax. Based on the draft law, as of 2021, no solidarity surcharge should be levied for individuals filing separately and having an income tax burden of not more than EUR 16,956 (approximately equivalent to a gross income of EUR 73,874) as well as for married filing jointly taxpayers with an income tax burden of not more than EUR 33,912 (approximately equivalent to a gross income of EUR 151,990). Where the aforementioned thresholds are exceeded, a sliding scale applies so that the current 5.5% solidarity surcharge would eventually only apply in full for individuals filing separately and having a gross income of approximately EUR 109,451 or approximately EUR 221,375, respectively, for a married filing jointly couple with two children where only one spouse is the earner.