Germany

money.qxd 05/01/2006 14:13 Page 40
MONEY
40
Taxation
Taxes are inevitable, sadly. And expats should know what kinds they might
face. Here is an overview of the main ones and how to handle them.
One of the first tasks involved for anyone
moving to Germany is to assemble a small
group of advisers to help you plot your
way through life in the new nation.
Along with a doctor, a dentist and a
lawyer, a ‘Steuerberater/in’ (tax accountant)
is one of the first people it is good to
make contact with after arriving in
Germany to establish your tax responsibilities
in the nation.
In seeking the advice of tax accountants,
you should be aware that the German
system of the state recognising
Steuerberater/in means that they can be a
little bit more strict in their dealings with
you than their counterparts in other
nations. It should also be noted that the
German tax system is a state matter, with
the tax year essentially a calendar year
that runs to the end of December.
INCOME TAX
Taxable income in Germany is derived
from the following seven basic sources:
•Agriculture and forestry
•Trade or business
•Independent professions
•Employment
•Capital investment
•Rents and royalties
•Other income (as defined by tax law)
Anyone who takes up residence in
Germany or has his or her customary
place of abode here is subject to an unlimited
tax liability on his or her worldwide
income. You can be resident in more than
one country; for German tax purposes
‘customary place of abode’ means an
address you live at for more than six
months of the year.
The source of employment income is considered
to be the place where employment
is carried out (not the place where the
salary is paid).
The Steuerberater/in may insist on seeing
a document (such as a work contract) setting
out the terms and conditions of your
employment or basis of your income,
whatever these may be. The tax office will
issue those working for German employers
with a ‘Lohnsteuerkarte’ (wage tax
card), which you hand over to the pay
office to be used as a basis for tax withholding.
HUSBANDS AND WIVES
Spouses may file jointly (splitting tariff)
or separately. In general, splitting tariff is
more advantageous, but it’s granted only
if both spouses are resident in Germany.
(Exceptions are made for EU nationals
under some conditions.) Income earned
by dependent children is not included in
the joint return; they must file their own
if the income exceeds a certain amount.
A unique feature of the German tax system
is the Kirchensteuer (church tax). It
dates to the early 1800s, when Prussia
gave churches the right to levy tax to compensate
for property taken to help pay for
the Napoleonic wars. The churches’ right
to tax is now in the German constitution.
When filling in your tax form or first visiting
an accountant, you'll be asked to
declare a religion. Up to nine percent tax is
levied as a payroll deduction on the
income of Protestants, Catholics, and Jews.
If you're not religious, say so, but know that
the tax office can ask you to prove it. This is
relatively easy for Germans. It can be trickier
for foreigners, and you may have to formally
'leave' the church at the local town hall
(Rathaus) if you do not want to pay church
tax.
continued on page 42
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