Important information

Important information you should know before you begin work in Germany. This section will tell you about some of the practical issues which you will need to consider after you have started working.

German residents are liable for taxation on their world-wide income where as non- residents are only liable for taxation on income derived from German sources. Residency is defined as having a domicile or having been present in Germany for an uninterrupted six- month period, which may fall in two calendar years. Expatriates living in Germany as residents may be subject to pay German income tax, especially if they are employed by a German company.

Taxable income includes income from employment, self-employment, business and real estate. Employment income includes salaries, wage bonuses, profit participation and other remuneration and benefits granted for services rendered in public participation and other employment, as well as pensions and other benefits received by a former employee. Money paid to foreign employees in Germany, such as foreign service, income tax, car and housing allowances, are considered additional employment income, with no preferential tax treatment.

The German tax system is very similar to the tax system in most other western countries. Taxation of an individual’s Income is progressive. The more you earn, the more tax you are required to pay. The German government differentiates between two forms of income tax, Lohnsteuer and
Einkommenssteuer. Lohnsteuer is paid on salaries and wages, and is deducted from your paycheck. Einkommenssteuer is paid on self employed income, and is an estimated amount based on your earnings from the previous year. As a rule you are obliged to submit an income tax return by the 31st of May of the year following the one which the income was received. There may be penalties if the return is filed late.

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