The German Tax System

What types of tax should I pay?

Each time we go to a supermarket or café, drop by at a gas station or receive a payroll, we are paying taxes. Taxation is the primary source of revenue for the state and enables the government to perform its duties. The German state is responsible for funding Kindergartens and schools, universities and hospitals, construction of roads, the salaries of teachers, police officers, firefighters, politicians and much more. Without tax revenues, the state could not fulfil such responsibilities.

Collecting revenue, however, is not the only reasons for taxation. There are, in fact, two other grounds for taxation. Through the taxation of harmful things, such as cigarettes, the state tries to improve behaviours. The cigarettes are expensive as a result of the tobacco tax; so that some give up smoking due to its high cost. Furthermore, social justice should be promoted through taxation: those who earn more must pay more taxes than people with less income.

What do I need to know?

Who has to pay taxes?

What is a Tax Identification Number ("Steueridentifikationsnummer")?

What is an Income Tax ("Einkommenssteuer")?

What is the payroll tax ("Lohnsteuer")?

What are the tax brackets ("Steuerklasse")?

What is "Umsatzsteuer" (colloquially also known as "Mehrwertsteuer")?

What is the Corporation Tax ("Körperschaftssteuer")?

What is the Trade Tax ("Gewerbesteuer")?

What is the Church Tax ("Kirchensteuer")?

Do Muslims also pay Church Tax?

How are imported/exported goods taxed?

Important

You have to make sure that you pay your taxes and accurately inform the Tax Office about your income. You can learn how to do so by reading our chapters The Tax Return, Starting up as Self-Employed ("Freiberufler"), and Starting up a Registered Business ("Gewerbe"). Tax evasion is not a trivial offence, but a criminal act- tax evaders face fines and, in severe cases, imprisonment of up to 10 years in Germany.