Working & Living in Germany 2019 - Moving together. Making tomorrow. A brief introduction to tax, social security, immigration and employment law ...
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Working & Living in Germany 2019 Moving together. Making tomorrow. A brief introduction to tax, social security, immigration and employment law
Individual taxation 4 Social Security 8 Immigration 11 Employment law 14 About Deloitte Global Employer Services 17
Moving together. Making tomorrow.
Working & Living in Germany 2019 |
Introduction
This booklet contains brief information about the main
aspects of individual taxation, social security, immigration
and employment law as of January 1, 2019.
It is written as a quick guide for employers considering
sending an employee to Germany and for employees
who are contemplating a working assignment to Germany.
The booklet only presents a broad overview and
simplifications have been made for readability. It does
not provide in-depth answers to specific questions.
Because of the complexity of the various laws and
ongoing legislative changes, none of the information
contained in this booklet may be relied upon for
specific planning. Rather, we encourage the reader to
contact our Global Employer Services specialists to
obtain detailed and up-to-date answers to questions.
03
Moving together. Making tomorrow.
Working & Living in Germany 2019 |
Individual
taxation
Tax Liability in Germany Germany has a progressive tax rate
In case of a residence or your habitual currently ranging from 14 % to 42 %. If
abode in Germany, the individual is consi- a taxpayer receives income above the
dered to be a tax resident in Germany. ceiling of € 265,327 (€ 530,654 for married
The citizenship is irrelevant for German couples), a special tax rate of 45 %, the
tax purposes. so called “rich tax” applies. In addition,
Germany levies a solidarity surcharge
A German tax resident is taxed on the amounting to 5.5 % of the income tax
worldwide income (unrestricted tax liability). liability and church tax of 8 % or 9 % if the
Some foreign source income will be exempt taxpayer registers with a German church.
from German tax but considered as pro-
gression income according to a Double Tax In some cases (especially for assignees
Treaty (increases applicable tax rate). from predominantly catholic countries),
we recommend to review the church tax
Married taxpayers may choose a joint or position and possibly actively resign from
separate filing. If they choose to file jointly, German church. This can be handled when
a special tax rate will apply (splitting tariff). registering the German residence with the
However, the splitting tariff will only local registration office.
be granted if both spouses are German
residents (exceptions for EU nationals).
04
Moving together. Making tomorrow.
Working & Living in Germany 2019 |
05 Moving together. Making tomorrow.
Working & Living in Germany 2019 |
Employment income Rental income Income from foreign bank accounts will be
All types of remuneration and most of the Rental income from real estate in Germany declared in the tax return further on and
benefits received for services performed is taxable in Germany at the taxpayer’s will in general be taxed with the flat tax rate
in Germany, regardless of who pays it and tax rate. Deductions, such as mortgage of 25 %. Only if the taxpayer’s personal tax
where or when it is paid, constitute taxable interests, depreciation or other expenses rate is lower than 25 %, he or she can opt
employment income. As mentioned before, (e. g. maintenance) are allowable. Losses to taxation at personal rates.
employment income may be exempt from may be offset against other taxable income.
German taxation according to a Double Tax In case a taxpayer moving to Germany
Treaty, if applicable. Employment income Rental income from countries that are owns investment funds it is highly
is subject to German wage tax which is members of the European Union/EEA is in recommended to have these investments
withheld and paid by the employer through most cases exempt from German taxation. reviewed before arrival in Germany. There
a monthly payroll. Rental income from countries that are not may be different reporting and taxation
members of the European Union/EEA is requirements of investment funds in
Business expenses mostly exempt from German taxation but Germany compared to the home country
Employment related expenses are will be taken into account when calculating regulations.
deductible from gross income if they the personal tax rate (progression income).
are directly related to the employment Rental losses from foreign sources cannot Interest and dividend income is excluded
in Germany, not reimbursed tax-free by be offset against positive income taxable from German taxation up to an annual
the employer and if they incur during in Germany but could be offset against lump sum amount of € 801 (€ 1,602 for
the period of German residency. Please positive income from the same source in married couples filing jointly).
note that expenses must be proven by future years.
documentation, e. g. invoices.
Capital gains and losses
Examples (if not reimbursed by the Interest and Dividend income For shares or stocks bought after
employer): According to German domestic law and the December 31, 2008, capital gains realised
respective Double Tax Treaty, interest and upon disposal will be fully taxable regard
•• Moving expenses
dividend income from German and non- less of the holding period and will be
•• Double household expenses German sources received by a German tax subject to the above mentioned 25 % flat
resident are usually taxable in Germany. tax (“Abgeltungsteuer”). Profits from the
•• Lump sum deduction for literature of
Under certain conditions taxes withheld sale of real estate may be tax-exempt if
€ 110 (if actual expenses incurred are
at source in a foreign state may be credited certain conditions are met.
higher, then actual expenses are applied)
against the German tax liability for this
and for banking fees of € 16
income. Capital losses resulting from the sale of
•• A standard deduction of € 1,000 is shares can only be offset against capital
granted if the actual expenses are not Beginning 2009, the so called “Abgeltungs gains of the same year or with future
higher. steuer” was established in Germany. This is capital gains.
a withholding tax amounting to 25 % (plus
solidarity surcharge and – if applicable – Special rules apply to the sale of a substan
church tax) which will be withheld by the tial interest (minimum 1% ownership) in a
bank (usually) and compensates the tax company.
liability for income from capital investment.
The withholding obligation however, only
applies to German bank accounts.
06 Moving together. Making tomorrow.
Working & Living in Germany 2019 |
Deductions Tax returns and compliance
Special expenses The tax year is the same as the calendar Important notice
Special expenses are personal or family year. In general, a German tax resident
expenses which are not related to any must file an annual tax return with the local Documents that should be kept
income and which can be deducted tax office by July 31 of the year following the
according to the German Income Tax Code. tax year. In case the tax return is prepared •• Proof of business and private trips
These special expenses are e.g. tuition fees by a professional tax advisor, the deadline outside Germany
for private schools or charitable donations is usually extended until the end of February •• Documents supporting business
to German/EU institutions. of the second year following the respective expenses (e.g. travel expenses,
tax year (upon application). moving expenses, double
Please note that any expenses can only be household expenses, job related
considered with supporting documents, If the return is not filed on time the tax literature, business telephone
e.g. certifications, receipts. authorities automatically assess penalties costs, computer, printer etc.)
amounting to 0.25 % of the assessed tax
Extraordinary burden / Support of for each started month of delay. •• Documents supporting special
needy dependents expenses or extraordinary
Taxpayers are entitled to receive a tax relief The income tax is not payable at the time burden (e.g. donation certificates,
with regard to an extraordinary burden the tax return is filed. The tax authorities non-reimbursed medical
which is unavoidable. A tax relief will will review the tax return and issue a expenses)
however only be granted, if a reasonable separate assessment notice (this may •• Original tax certificates
threshold of the taxpayer’s income is take 2 – 6 months depending on the tax concerning interest and dividend
exceeded. authorities). Usually any payment will be income (e.g. 1099s)
come due within one month after receipt
Besides, the support of needy dependents of the assessment notice, unless separate
is also deductible if certain conditions are instructions for payment have been re
met. ceived from the tax authorities. Penalties
for late payment are 1 % per month of
Child payment and benefit the amount due.
Taxpayers may be entitled to receive a
monthly tax-free cash payment of € 194 Interest is charged or credited on final tax
for the first and second dependent payments if the assessment notice is
child, € 200 for the third dependent child not issued within 15 months after the end
and € 225 for the fourth and following of the tax years. For each month after
dependent children (As of July 1, 2019: 15 months after the end of the tax year
€ 204, € 210, € 235). The tax-free cash 0.5 % interest has to be paid.
payment will be paid up to the age of 18
(up to the age of 25 for children in full-time
education) if certain conditions are met.
The taxpayer can also claim a child
allowance in the amount of € 3,810 per
year and child (€ 7,620 for married tax
payers) within the tax return if the resulting
tax reduction is higher than the cash child
payment received.
For further information please refer to
“Parental benefit” on page 10.
07Moving together. Making tomorrow. Working & Living in Germany 2019 | 08
Moving together. Making tomorrow.
Working & Living in Germany 2019 |
Social
Security
Branches of social security Long-term nursing care/disability
Compulsory health insurance insurance
The insurance covers employees and their This scheme is compulsory. Contributions
families. The general contribution per are 3.05 % of the monthly gross salary
centage is 14.6 % plus an additional contri- up to € 4,537.50, payable half by employer
bution if implemented by the respective and employee each. Additionally, since
insurance institution – on average 0.9 % January 1, 2005, employees without
of the monthly gross pay up to € 4,537.50 children have to pay a supplemental
(payable half by employer and employee 0.25 % of their contribution base. This
each). All workers with regular annual does not apply to persons under the
salaries lower than € 60,750 must be en- age of 23, born before January 1, 1940, or
rolled in the compulsory scheme. currently drafted in military or civil service.
If the employee has opted for private
Private health insurance health insurance, he/she must still enrol
Salaried workers whose wages exceed in the compulsory long term insurance,
the ceiling may opt out of the compulsory but the account will be administered by
scheme and choose private health in the private carrier.
surance. Privately insured persons may
claim a contribution toward their premium Accident insurance
from their employer equal to that required The insurance covers work-related
for the compulsory health insurance. accidents and occupational diseases
and is financed entirely by employer
contributions. These are calculated
at year-end based on the actual wage
base and occupational risk categories.
09 Moving together. Making tomorrow.
Working & Living in Germany 2019 |
Unemployment insurance Parental benefit The parental benefit can also be claimed
The compulsory unemployment insurance Employed parents are entitled to apply for during a job-related stay abroad.
scheme is financed by contributions parental benefit (Elterngeld) if they reside in A precondition is that the parents maintain
of 2.5 % of the gross monthly salary up to Germany and one parent interrupts his/her their place of residence in Germany or
€ 6,700 (€ 6,150 in the former Eastern employment (or reduces his/her working that they are assigned by their German
states), payable half by employer and time to a maximum of 30 hours per week) employer to another country within the
employee each. for the child’s care and education. Parents context of that employment for a limited
with an annual income of more than period. In case of assignments within the
Pension insurance € 500,000 (€ 250,000 for single parents) EU/EEA or Switzerland, an entitlement to
The statutory pension scheme calls for are not entitled to parental benefit. parental benefit will exist if the employee
contributions of 18.6 % of gross monthly continues to be subject to the German
salary up to € 6,700 (€ 6,150 in the former The parental benefit amounts to 65 % – 67 % legislation on social security (i.e. an A 1
Eastern states), payable half by employer of the parent’s last net income but not certificate can be applied for).
and employee each. more than € 1,800 per month. However,
entitled parents receive at least a basic Even non-EU-citizens, who do not have
Social coverage for international allowance of € 300 per month. Parental the right to move and reside freely within
assignees benefit is paid basically for a period of 12 Member State's territory, can acquire an
Employees coming from outside Germany months. If the other parent also interrupts entitlement to parental benefit if they
would normally be subject to social taxes. or reduces his/her employment for child establish a residence in Germany and are
Very often, however, a social security care and education, the parental benefit is in possession of a specific residence title
agreement exists between Germany and paid for an additional 2 months. (e.g. an unlimited settlement permit).
the employee’s home country that will
allow the employee to remain in his/her
home scheme for a limited number of Social security rates and ceilings of contributions for 2019
years under certain conditions. Germany
has concluded such agreements with % €/month
50 countries. The home country employer Pension insurance* 18.6 6,150 – 6,700
must file an application for a certificate of Unemployment insurance* 2.5 6,150 – 6,700
coverage (form A1 in Europe) to request the Long-term care/disability** 3.05 – 3.3 4,537.50
exemption from German social taxes. One
Health insurance*** 14.6 4,537.50
must note that not all agreements cover all
branches of social coverage so it may not * Lower ceilings apply to former East Germany.
** 3.05 % + 0.25 % extra charge for individuals without children, with some exceptions.
be possible to obtain complete exemption.
*** The contribution rate may be increased individually by the relevant chosen health insurance carrier
(on average 0.9 %).
Social security administration
Mandatory social insurance contributions
for employers and employees combined
reach on average 40 % of gross wages
below annually defined ceilings. Employers
and employees split most of these charges
in a variety of ways. The employee’s portion
to the social security is withheld directly by
the employer from the employee’s gross
salary. The employer is obliged to remit the
total contributions to the health insurance
carrier on a monthly basis.
10 Moving together. Making tomorrow.
Working & Living in Germany 2019 |
Immigration
General Immigration regulations Please note that a non-compliance
In general, the immigration authority regarding the salary requirements might
examines, where appropriate with lead to the withdrawal of the current
the involvement of the labor authority residence/work permit or to the rejection
(One-Stop Government), whether of a new application.
•• the activity of the foreign employee has
Entry visa requirements
disadvantageous impacts on the local
EU-/EEA-nationals and citizens of privileged
labour market,
countries, as the US, Canada, Japan,
•• there are German or EU-nationals Australia, New Zealand, Israel, Republic
available on the local labour market who of Korea, may enter Germany without a
can fill the same position (so called visa. Nationals of other countries must
“priority check of the labour market”), and apply for an entry visa at the German
embassy or consulate in their country of
•• the same conditions of employment
residence before traveling to Germany to
regarding compensation, working time
take up gainful employment. The process
and vacation granted to comparable
takes approximately 4 – 8 weeks before
German employees are also offered to
the employee will be in a position to
the foreign employees.
travel to Germany and commence his/her
Since January 1, 2019 the general statutory assignment. Entry visas allowing to work
minimum wage for all work performed are generally valid for 90 days. After arrival
in Germany has been increased to € 9.19/ this visa will have to be converted into a
per hour worked. In addition the total short or long term residence permit.
remuneration, minimum salary plus
additional allowances paid directly to the
employee, must achieve an amount, which
is comparable to local colleagues working
in the same position with a comparable
professional background.
11 Moving together. Making tomorrow.
Working & Living in Germany 2019 |
International staff exchange program •• The employee is defined as manager,
Blue Card EU Under certain circumstances, skilled specialist or trainee (definition given by
employees with a university degree law)
The Blue Card EU is a simplified working for a multinational company can
•• Employer is a multinational company with
temporary work permit for highly obtain a residence and work permit if
headquarter outside the EU
educated skilled employees. The they are seconded to an affiliated German
requirements to be met in order to company, provided the assignment occurs •• Host company belongs to the same
have a Blue Card issued are a within the scope of an intra-company staff undertaking or group of undertakings
recognized university degree and a exchange program. However, the intra-
•• Employee receives locally comparable
proof of a specific offer of a local company staff exchange program is only
salary.
German employment contract with applicable, if
an annual gross salary threshold
of at least € 53,600 (in 2019). •• the company has established a global EU- and EEA-citizens
For shortage occupations (doctors, staff exchange program and is registered EU nationals do not require a residence or
IT professionals, mathematics, with the central labour authority, work permit for Germany.
engineers, etc.) according to the
•• the German branch or subsidiary has
Federal Ministry of Labor the Dependents
seconded employees abroad in the past,
annual salary threshold amounts The application for residence permits for
to € 41,808 (in 2019). •• the applicant holds a university degree. accompanying family members can be
made at the same time as the main one,
In those cases the employees are This procedure generally simplifies the and a work permit is granted automatically
dispensed with the time-consuming application proceedings and is less time- for the accompanying spouse. Applications
priority review. consuming. for accompanying dependents could last
longer, as the local immigration office
Blue Card holders can receive a Intra-Corporate Transfer (ICT) of the intended city of residence could be
permanent residence permit Under certain conditions, employees who involved in the process as well.
(“Niederlassungserlaubnis”) after 33 hold the position of a specialist, a manager
months. If German language skills or a trainee working for a multinational Registration with municipal
according to level B1 can be proven, company can obtain a residence and work authorities
this period is shortened to 21 months. permit based on the ICT-Directive. One All individuals regardless of their nationality
condition is that the employee to be send are required to register with the town hall
abroad is transferred from an undertaking of their place of residence within 14 days
Residence and work permits established outside the territory of a after arrival.
for non EU-citizens Member State to an entity established in
Non-EU-citizens, who wish to take up an EU Member State belonging to the same The confirmation of registration is a pre-
a gainful employment in Germany, are undertaking or group of undertakings. requirement for the residence permit
required to be in possession of a residence application. The registration will also trigger
permit allowing to work in Germany. Such The application process of an ICT-permit the issuance of a Tax Identification Number
permit will be issued in the form of an can be characterized as accelerated and (TIN). This TIN is imperative to be indicated
electronic residence card. The issuing simplified. An ICT-permit allows new options when filing the personal income tax return
authority is the local immigration office of regarding Intra-EU-Mobility. Third country with the German tax authorities. The tax
the district/city where the applicant will nationals, holding a valid ICT-permit in one office will assign a tax number upon the
reside and not the one of the district where of the Member States of the EU, can during filing of the tax return, thus, no special
the employer is located. the period of validity of the ICT-permit registration is necessary with the tax
enter, stay or work in one or several second authorities.
Residence permits allowing to work are Member States of the EU. Depending on
generally issued for a particular job with a the duration of stay, a simplified single Since November 2015 not only a valid
specific employer at a determined location application procedure or a notification lease agreement but also a landlord’s
and a particular place of work, not for procedure is necessary. Generally speaking, confirmation is required for the registration.
employment in general. If the job as such an ICT-Permit is only applicable if:
or the location changes, it will be necessary The de-registration at the town hall is also
to ask for an amendment of the existing necessary upon leaving.
German residence permit.
12 Moving together. Making tomorrow.
Working & Living in Germany 2019 |
13 Moving together. Making tomorrow.
Working & Living in Germany 2019 |
Employment law
Employees’ rights in policy decisions within supervisory
There is no single law governing the boards of enterprises with more than 500
individual and collective aspects of em employees are well established.
ployment in Germany. The relationships
between employer and employees German labour law is heavily weighted
are governed by collective bargaining in favour of the employee and it may
agreements between trade unions and be difficult to terminate employment
employers but also by works agreements relationships. For dismissals involving a
between employers and works councils, certain number of employees, companies
the individual employment contracts may need to work out a social plan with the
entered into between the parties and works council and notify the local labour
different specific employment laws. The office in advance. Statutory minimum
German Civil Code mainly regulates notice periods vary depending on the
the general requirements concerning employee’s seniority. Notice periods may
(employment) contracts but also specific be modified, within limits, in collective
aspects like notice periods. bargaining agreements. Executives are
often employed under limited contracts,
Co-determination in certain operational with no guarantee of renewal. The pre-
matters through works councils on requisites regarding terminations for
company level as well as the joint firms employing ten or less persons are
participation of labour and management considerably less stringent.
14 Moving together. Making tomorrow.
Working & Living in Germany 2019 |
15 Moving together. Making tomorrow.
Working & Living in Germany 2019 |
Working hours and holidays Furthermore, many industries are subject
Working hours in Germany are governed by to minimum wages regulated under
law. The normal working day is eight hours. collective bargaining agreements. Wages in
There are specific regulations for certain foreign owned firms are basically similar to
business sectors as set out especially in those in domestic companies.
collective bargaining agreements. Union
agreements are very specific on shift Notwithstanding the minimum wage, wages
work. Overtime pay often starts at a 25 % and salaries vary by location, seniority and
premium but can even be higher. In skills of the employee. They are often lower
particular cases, employers may choose to in rural districts than in major cities.
pay higher overtime pay or to give workers
additional time off instead. Germany’s comprehensive state pension
scheme requires compulsory payroll
Full-time employees with a five-day working deductions.
week will by law be granted a minimum
of 20 days of vacation. On average, the Fringe benefits, such as extra-pay at
workforce is entitled to an annual vacation Christmas or vacation pay, are customary
of 30 days. in most German firms.
Wages and benefits In the event of illness, an employer must
Since January 1, 2015, the German continue to pay 100 % of the salary or
Minimum Wage Act is in effect. Accordingly, wages for up to six weeks. If the illness
employees in Germany are entitled to lasts longer, the employee’s health insurer
a minimum wage of € 9.19 gross per grants sick pay amounting to 70 % of gross
hour. This applies to all employees who pay (but not exceeding 90 % of normal net
render their services on German territory pay).
no matter how long these services are
rendered. Therefore, the minimum Mothers are entitled to 14 weeks’ maternity
wage also applies for example to foreign leave (six weeks before and eight weeks
employees who are assigned to Germany. after the birth), during which they receive
There are only very few exceptions compensation. Subsequently, both parents
made from the minimum wage, e.g. as may take unpaid leave of up to three years
regards certain kinds of internships. In (parental leave) and must be guaranteed
addition to defining a minimum wage, the employment of equal status (though not
Minimum Wage Act also contains certain necessarily in the same position) when
documentation and reporting obligations they return. During parental leave, parents
that might need to be considered by are entitled to work part-time if they wish.
employers. Parents who interrupt their employment
can apply for a parental benefit (please
refer to page 10).
16About Deloitte
Global Employer Services
Worldwide GES locations in Germany
Our internationally operating Global Berlin
Employer Services (GES) practice is Kurfuerstendamm 23
comprised of over 6,000 dedicated global 10719 Berlin
mobility, talent and rewards professionals Phone +49 30 25468 01
in over 150 countries, all committed to
bringing excellent services to our clients. Duesseldorf
Schwannstrasse 6
This makes us the world´s largest provider 40476 Duesseldorf
of international assignment consulting Phone +49 211 8772 01
services for assigned employees.
Frankfurt
Germany Franklinstrasse 50
Deloitte Germany has one of the most 60486 Frankfurt
developed GES departments in Europe Phone +49 69 75695 01
with six locations throughout Germany:
Berlin, Dusseldorf, Frankfurt, Hamburg, Hamburg
Munich and Stuttgart. Dammtorstrasse 12
20354 Hamburg
Our portfolio consists of the following Phone +49 40 32080 0
services:
Munich
•• Global Mobility Advisory Services
Rosenheimer Platz 4
•• International Assignment Tax Services 81669 Munich
Phone +49 89 29036 0
•• Employment Tax
•• Social Security Stuttgart
Loeffelstrasse 42
•• Immigration
70597 Stuttgart
•• Employee Benefit Taxation Phone +49 711 16554 01
•• Global Mobility Compensation
•• Mobility Technology Solutions
•• Employment Law*
* Employment Law Services in connection with
cross-border assignments will be rendered by
our specialists of Deloitte Legal.This communication contains general information only not suitable for addressing the particular circumstances of any individual case and is not intended to be used as a basis for commercial decisions or decisions of any other kind. None of Deloitte GmbH Wirtschaftsprüfungsgesellschaft or Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the “Deloitte network”) is, by means of this communication, rendering professional advice or services. No entity in the Deloitte network shall be responsible for any loss whatsoever sustained by any person who relies on this communication. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/de/UeberUns for a more detailed description of DTTL and its member firms. Deloitte provides audit, risk advisory, tax, financial advisory and consulting services to public and private clients spanning multiple industries; legal advisory services in Germany are provided by Deloitte Legal. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte’s approximately 286,000 professionals are committed to making an impact that matters.
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