Income tax ("Einkommensteuer") is the most significant tax collected in Germany. It makes up most of the state revenue and is paid by both employees and self-employed individuals, so it applies to almost everyone. There are seven types of income for which you have to pay an income tax in Germany. These are incomes generated through:
- self-employed work
- business entities' ventures
- agriculture and forestry
- capital assets
- rent and lease
- and other types of income mentioned in the income tax law, for instance, pensions.
There are also earnings on which you do not have to pay any income tax. These include parental allowance ("Elterngeld"), unemployment benefits', BAföG and scholarships. The same applies if you have a mini-job or your income is below the so-called basic exemption level ("Grundfreibetrag"). The basic exemption level is adjusted annually and amounts to 9,108 euro for single individuals and 18,336 euro for married couples in 2019. If your income is below this amount, you do not have to pay income tax. Otherwise, however, anyone who resides in Germany and earns money must pay income tax.
Please note: If you have registered your place of residence in Germany, you must pay taxes. Taxation applies to all of your income, including what you may earn abroad. However, there are so-called double taxation agreements ("Doppelbesteuerungsabkommen") between Germany and some other countries to protect taxpayers from double-taxation. You can find these double taxation agreements on the website of the Federal Ministry of Finance.