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Germany - Other taxes and levies

Germany - Other taxes and levies

Taxation of international executives

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Social security tax

Are there social security/social insurance taxes in Germany? If so, what are the rates for employers and employees?

Employer and employee

The following rates (2020) have to be applied against the gross salary, with the ceilings indicated.

Type of Insurance Paid by employer Paid by employee Total
Pension 9.3% 9.3% 18.6%
Unemployment 1.2% 1.2% 2.4%
Health* 7.3% 7.3% 14.6%
Nursing** 1.525% 1.525% 3.05%
Total Percent 19.325% 19.325% 38.65%

 

  Annual*** EUR (Ceiling) Monthly*** EUR (Ceiling)
Pension 82,800 6,900
Unemployment 82,800 6,900
Health 56,250 4,687.50
Nursing 56,250 4,687.50

* An additional average amount of 1.1 percent – shared equally between employer and employee – is levied. However, this percentage might slightly vary – depending on the individual insurance agency`s discretion.

** Plus 0.25 percent surcharge on nursing insurance to be borne by employees without children.

Furthermore, special rates apply for Saxony (1.025 percent employer and 2.025 percent employee rate).

***The ceiling for pension and unemployment insurance applicable in the Eastern Bundeslaender (former German Democratic Republic – East Germany) is EUR77,400 per year and EUR6,450 per month.

The employer is liable for the total payment, which must be made on a monthly basis.

Exemption may be granted under the EU rules or a bilateral social security agreement.

Gift, wealth, estate, and/or inheritance tax

Are there any gift, wealth, estate, and/or inheritance taxes in Germany?

Inheritance and gift tax is assessed on the transfer of property by reason of death, gifts during lifetime, and transfers for certain specified purposes, as well as on the net worth of certain family foundations or trusts.

Worldwide assets are potentially liable to this tax if the transferor or the transferee is resident in Germany at the relevant time. Otherwise, it applies only to assets situated in Germany.

Taxable transfers of property are subject to inheritance and gift tax at graduated rates, depending on the value of the property and the family relationship of the respective individuals. The rates vary from 7 percent up to 50 percent.

Since 1997, there has been no net worth tax in Germany.

Real estate tax

Are there real estate taxes in Germany?

Yes. However, the existing regulation has been declared as “unconstitutional” by Court. Currently, a real estate tax reform is underway.

Sales/VAT tax

Are there sales and/or value-added taxes in Germany?

The standard VAT rate for supplies and goods of services is 19 percent. For certain goods and services, the VAT tax rate is 7 percent.

Unemployment tax

Are there unemployment taxes in Germany?

Yes. The rate for unemployment tax is 2.4 percent (see above – social security taxes).

Other taxes

Are there additional taxes in Germany that may be relevant to the general assignee? For example, customs tax, excise tax, stamp tax, and so on.

Real estate transfer tax

This tax is generally imposed on any transaction that causes a change in the ownership of real estate property situated in Germany. The tax rate is generally 6 percent (ranging from

3.5 - to 6.5 percent, depending on the location).

Local taxes

Local taxes are levied only on income from trade or business.

Foreign Financial Assets

Is there a requirement to declare/report offshore assets (e.g. foreign financial accounts, securities) to the country’s fiscal or banking authorities?

German resident taxpayers are taxable with their worldwide income. Tax residents have generally to declare their worldwide investment income, including income generated by investments in foreign (i.e. non-German) entities or investment vehicles such as trusts, partnerships, funds and the like. Treaty provisions might provide tax relief, if the taxpayer remains resident in another country/jurisdiction based on Article 4 of the OECD Model Convention.

The following should be noticed:

1. German tax law includes CFC rules according to which income received in a separate foreign legal entity might – if certain conditions are met – become directly taxable at the level of the shareholder itself (“looking through approach”).

2. The taxation of foreign Trusts follows special regulations. In short, such vehicles are very often regarded as “transparent” for German tax purposes thus triggering an income tax liability for the German tax resident beneficiary even if no distributions are paid by the trust itself.

3. The taxation of investment income derived from investment funds is complex and not straight forward. New regulations apply from 2018 onwards, including taxation of “deemed income”.

Furthermore, German residents are obliged to separately report their participation and the acquisition of foreign companies/partnerships/vehicles if

  • They hold at least 10 percent or more of the shares in a legal entity (directly and indirectly) or
  • The acquisition costs of all shares (direct and indirect holdings have to be summed-up) exceed EUR150,000 in total.
  • Taxpayers and “related persons” (for example parents, children and other relatives) together do have “control” over foreign entities/vehicles (even in case they themselves hold a participation of less than 10 percent in the entity).

Last but not least there is an obligation to inform the German tax authorities whether the taxpayer maintains “business and/or financial relations with foreign jurisdictions” in the German income tax return itself (“yes” or “no” question). This information shall enable the authorities to follow up.

Disclaimer

All information contained in this publication is summarized by KPMG AG Wirtschaftsprüfungsgesellschaft, the German member firm affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity, based on the German Income Tax Law 2019 (§§ 1, 2, 3, 8, 9, 9a, 10, 10b, 10c, 17, 19, 20, 23, 32, 32a, 32b, 32d, 33a, 37, 38, 39b, 49, 50 EStG); Abgabenordenung (§§ 8, 9, 149, 152, 233a, 238, 240 AO); Bundesumzugskostengesetz (BUKG), Auslandsumzugskostenverordnung (AUV), Bundesversicherungsanstalt für Angestellte (BfA); Inheritance and Gift Tax Act (§ 19 ErbStG); Debatin/Wassermeyer, Doppelbesteuerung, Kommentar, Stand October 2019; 147 EL) Guidance issued by the Federal Ministry of Finance on Taxation of Employment Income According to the Double Tax Treaties on 03 May 2018).

Copyright

© 2020 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

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