Germany

Individual - Significant developments

Last reviewed - 13 February 2021

Social security contributions

As of 1 January 2021, the income ceiling for mandatory pension insurance has increased from EUR 82,800 to EUR 85,200 (EUR 80,400 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 56,250 to EUR 58,050.

The 2021 contribution rate to German state unemployment insurance is 2.4%. The rate for pension insurance is 18.6%. The contribution rate to the health insurance system is fixed at 14.6% and the rate for nursery care insurance at 3.05%. All mentioned rates are shared equally between employer and employee.

Reduction of solidarity surcharge tax

As of 1 January 2021 the application of the solidarity surcharge tax has been substantially reduced. In general, no solidarity surcharge is levied any longer for individuals filing separately and having an income tax burden of not more than EUR 16,956 (approximately equivalent to a taxable income of EUR 62,000) as well as for married filing jointly taxpayers with an income tax burden of not more than EUR 33,912 (approximately equivalent to a taxable income of EUR 124,000). Where the aforementioned thresholds are exceeded, a sliding scale is used so that the top 5.5% solidarity surcharge would eventually only apply in full for individuals filing separately and having a taxable income of approximately EUR 96,850 or approximately EUR 193,700, respectively, for married filing jointly. The full rate of solidarity surcharge is applied on capital investment income subject to lump sum taxation and on employment income taxed at lump sum rates.

COVID-19 reliefs

A number of COVID-19 relief measures have been enacted in 2020 and are still in force in 2021. These encompass the possibility for an employer to grant on top a tax free employment payment or benefit up to a total of EUR 1,500 until 30 June 2021 and to pay a tax free uplift within a limited range to the short time work allowance until 31 December 2021. The maximum amount of loss carry back for income tax purposes was increased to EUR 10,000,000 (single filing) / EUR 20,000,000 (married filing) for tax years 2020 and 2021. For dependent children a one time cash bonus of EUR 300 per child in 2020 and of EUR 150 per child in 2021 is paid. A home office lump sum expense of EUR 5 per day for a maximum of 120 days per calendar year may be claimed for tax purposes in 2020 and 2021. The filing deadline for 2019 income tax returns were extended until 31 August 2021 for those taxpayers assisted by a professional tax adviser.