German payroll tax. Average salary in Germany after taxes

2024 Author: Howard Calhoun | [email protected]. Last modified: 2024-01-17 18:37

Payroll tax is levied in Germany as a form of income tax on income from self-employment. If a person is registered at the workplace as an employee, then he pays the appropriate amount of profit to the state. More precisely, the employer calculates payments from the employee's income and transfers the appropriate amount directly to the tax office.

In the framework of this article, we will consider the answer to the question: “What is the tax in Germany on wages?”

General information

Income tax in Germany can be called the most popular source of budget revenues. It provides almost 40% of all budget revenues. The order in which these quantities are calculated has nothing to do with our system. The following factors are used in their determination:

• having children;
• marital status;
• wages of both spouses.

All individuals who live in Germany for more than 180 days are tax residents. If they receive income, they mustmake appropriate deductions from their salaries.

In Germany, this tax is distributed among budgets as follows:

• 42, 5% - to the state;
• 42, 5% to the state treasury;
• 15% - to the local budget.

The German payroll tax law states that every worker who receives payments at the place of employment and lives in Germany must transfer the established amounts from their income. There are six types of payroll levies in which workers can be classified according to allowances and deductions.

Let's consider what taxes are paid in Germany on wages:

• personal income tax;
• church tax;
• solidarity tax;
• he alth insurance;
• pension insurance;
• care insurance;
• Unemployment insurance payments.

The tax base for accruals are the following categories:

• salary;
• doing business;
• self-employed income;
• fishing and agriculture;
• capital transactions;
• rental property;
• property sale.

Bets may be determined based on the following points:

1. To calculate how much taxes working people should pay, special classes (gradations) were introduced in Germany.
2. There are six bets in total.
3. Electronic payout procedure in progress.

Net payroll calculation: gross and net

Let's look at how salaries are determined in Germany after taxes.

Net salary is defined as the amount that is left in the hands of an employee after deducting social expenses and taxes. These social security contributions are paid by the employer to the responsible authorities. The amount of contributions to the state is the difference between the gross and net wages.

The average income in Germany for full-time employees is about 40,000 euros per year. However, social contributions and taxes in the amount of about 15,000 euros are deducted from this amount in the calculation of net wages. The level of social security and taxation is often criticized and is especially hard on the middle class. Particular attention is paid to the payroll tax as a form of income collection. Thus, the average payments to the working population in Germany, taking into account deductions, are about 25,000 euros.

The country has a progressive scale of taxation from wages, that is, the more payments to employees, the higher the amount of deductions in favor of the state.

Bets can be varied. The tax percentage in Germany starts at 14% and ends at 45%.

Employer settlement

The tax system in Germany means that the calculation of the net pay is done by the employer himself. It is he who transfers contributions tosocial security and he alth insurance to the responsible authority. Tax deductions are also paid to the local inspectorate by the enterprise where the employee works. Gross and net wages are indicated in the statement with paid social and tax contributions. The employer uses specialized computer programs to calculate the net amount and transfers these values to the payroll.

Payroll - note

Important components of employment benefits are not only accruals and benefits, but also formal information relating to the employer and employment relationship. The name and address of the organization must also appear on the statement, as well as the date of birth and employee identification number. Important data that should never be missed include the policy number and start of employment. The reporting billing period must contain data on social insurance, tax days, as well as an indication of the class and amount of child benefits.

Standard payroll provides information about the recipient of general social security contributions. After deducting all amounts, the difference shows the net income of the employee.

Average salary in Germany after taxes

In the table below you can find information about the current average wage in Germany. It is taken from a source of the German Federal Office for Statistics. The table shows the gross amount before taxes and fees with full employment. Calculations based on dataon the amount of income of citizens of the country for one month of work, which is 3771.00 euros. The average salary is calculated for the secondary sector of the German economy, which includes manufacturing, construction and services. In the calculations, the amounts do not include lump-sum payments and benefits.

Average salary in Germany after taxes 2018 in euros

Period	Amount, Euro
Gross salary per year	45252
Gross monthly salary	3771
Gross salary per week	942, 75
Gross hourly wages	23, 57

The average wage in Germany after tax with a full-time worker in the manufacturing sector is 3,771.00 euros.

Let's imagine the net salary, the amount of net payments to employees after social and tax deductions. According to the Federal Office for Statistics of Germany, net payments in Germany for 2018 with full employment range from 59% to 67% of the gross value, depending on whether the employee has children. The average figure can be taken as 64%. The table below shows the average net wages in the country.

Net payments in Germany to working citizens for 2018 in euros

Period	Amount, Euro
Net salary per year	28961, 28
Net salary per month	2413, 44
Net salary per week	603, 36
Net hourly salary	15, 08

Explanation of tables:

• annual amount - value multiplied by 12;
• weekly - salary divided by 4;
• hourly - pay divided by 160.

Class Information

As of January 1, 2013, the corresponding payroll tax class in Germany has been registered in the functions of the electronic income tax calculation. This procedure replaced the paper-based calculations of amounts.

With the help of automatic calculation procedures and a table of tax deductions, it is possible to determine the appropriate class of worker in Germany, as well as the amount of payments to the state. This table shows which payroll tax in Germany should be levied on an employee, which tax class corresponds to which income.

Class Overview

Tax in Germany on salary as a percentage depends on the established class.

Each of the six classes is focused on a different group of people. The exact breakdown is presented in the table below.

Classes	Groups
1	Single Married Limited Tax Liability Divorced
2	Single parents
3	Registered partners, married people who are not separated from each other and receive different wages (partner who earns more receives tax class 3)
4	Registered partners or married people who do not live together get the same salary
5	Registered life partners as well as married people who are not permanently separated and earn very different wages (partner who earns less gets tax class 5)
6	For other types of work

To get a new class, you must submit an application to the tax authority in writing.

Moving from one rank to another is usually possible only once a year by visiting an inspection.

All classes from the table have different characteristics. Consider them in more detail.

Pay class 1

Let's look at how much German payroll tax is paid in class 1.

The same deductions apply for tax classes 1 and 4. Thiscategory is for single or divorced workers. Even married people who permanently live apart from their spouse or have a spouse who lives abroad fall into this income tax group.

Employees whose husband/wife died before January 1, 2014 are also tax class 1 from 2015. The same applies to employees who live in a registered partnership or are subject to limited income tax. Again, tax class 1 deductions are identical to those from income tax class 4.

Pay class 2

Let's look at how much taxes are paid on second-class salaries in Germany.

The second class from the list is for workers who are one parent. They are eligible for the exemption, so they are in tax class 2.

In order for such an allowance to be granted to one worker, he must have at least one child. In such a situation, the employee is en titled to the amounts of payments for a child who must live with a parent. In addition, this child must be registered at the worker's primary residence.

Pay class 3

The salary in Germany, after taxes in the third class, has its own criteria. The third group of taxes relates to married workers who are both permanent residents of the country and do not permanently live separately from each other. If one of them does not receive a salary or salary, then he must be assigned to the tax class5, the other spouse is automatically class 3.

Married couples since 2010 can choose a combination of tax codes 4/4, 3/5. However, this method is only possible for class 4. If the combination 3/5 is chosen, then this possibility will be excluded. In the selection process, each spouse is en titled to a basic benefit based on their gross income.

The factor, which is individually determined by the tax office for spouses, is decisive for this separation procedure.

From 2013, widowed workers also enter this class 3 group if the spouse died after December 31, 2011.

Salary class 4

In the fourth grade, both spouses must receive a salary, they cannot live permanently apart from each other and must live in Germany.

Class 4 has comparable deductions to first class tax. However, there is an added child allowance of around 3,624 euros. The income tax limit without children in 2018 is 11822.99 euros.

Pay class 5

Payroll tax class 5 is analogous to group 3. The fifth tax class from the overview is also for spouses. If one of the two partners is subject to tax class 3 at the request of both spouses, the other is transferred from category 4 to tax group 5. It is already clear from the review of tax classes that categories 3 and 5 are for spouses whose salaries vary significantly.

The class table indicates that tax code 5 applies to the partner who earns less. Respectively,deductions by tax category vary significantly: the 5th grade payroll tax limit in 2018 is €1,272.99.

Salary class 6

The sixth and last salary class in the table is for workers who receive income from several employers at the same time. The employee must be tax deducted by the employer paying the lower amount.

Even retirees who want to continue to work and receive a pension at the same time are in the sixth tax class. Tax within this category is particularly high as there are no exemptions.

Deductions

Germany also provides special tax deductions that reduce the burden on employees' salaries.

These include the following expenses:

• alimony;
• costs of a single parent to raise a child under 16;
• paying for self-tuition and professional development;
• insurance and charitable contributions to German institutions;
• working expenses;
• emergency expenses.

Payroll and insurance tax rates

The income tax of the different classes is partly related to whether the worker is legally or individually insured. For workers covered by compulsory insurance, the he alth insurance contribution in the first tax class is 14.6 percent. Individually insured workers usually have to pay morehigh payroll tax percentages in Germany.

It should be noted that in this country there is also a non-taxable minimum, which is 10,000 euros per person per year. For example, if the total family income does not exceed 18,000 euros per year, they are exempt from all types of payments. That is, the principle is as follows: the more a person earns, the more he pays.

How does the IRS calculate income tax?

The tax office has a task to collect the amounts of payments in favor of the state. It must be careful not to make mistakes that would result in the State forfeiting the revenues to which it is en titled. Thus, the payroll tax is designed to withhold amounts from the wages of the working population. The state receives part of the deductions that are due to it directly from the source - the employer. He is also liable to the treasury for too little income tax withheld and paid. The reverse situation is also possible, when the employee has a claim to the inspection for overpayment, which also requires confirmation.

How to get the excessive payroll tax back?

An employer calculates taxes in Germany with two components: official employment tax tables (for allowances, lump sums, etc.) and personal individual tax benefits (eg class, child allowances). At the end of the year, according to the declaration, you can return the overcharged amounts. Can be usedspecial software or hire an accountant to resolve this issue on the preparation of the declaration.

If an employee does not want to file a return, they should at least ensure that their deductions are accurate and there are no overpayment situations.

Tax payroll calculator for employees and self-employed

Wage and payroll tax, solidarity surcharge and he alth care costs, long-term care, pension and unemployment insurance reduce an employee's net wage. If an employee wants to understand what the gross salary deductions are and how these values change with increasing income, he can get the answer using the payroll tax calculator.

The tax return is submitted by the employee himself, filled out manually, or on special forms or using computer software. Difficulties arise when the employee has additional earnings. In such a situation, when filling out reports, it is better to resort to the help of a specialist. If the employee himself submits a report to the inspection, then the deadlines for submission are set earlier (a difference of six months) than in a situation where an expert is involved in the documentation.

In the declaration, two groups of information can be distinguished: the amounts of taxes themselves and social contributions. Solidarity contribution and church fee have been added to other taxes.

Thus, in the framework of this article, we considered the answer to the question: “What is the tax in Germany on wages?”