Germany payroll tax: taxes and social charges in 2023, 2022 deductions from salaries

§ Payroll taxes in Germany: gross/net calculator

The salary, which are paid to an employee in Germany and the amount of which is stipulated by the employment contract between the company and the employee is the gross salary (Brutto-Arbeitslohn), i.e. the amount, from which taxes and social charges have not yet been deducted. The amount of salary that an employee receives into their bank account is called net salary (Ger.: Netto-Arbeitslohn). What taxes and charges are withheld from wages in Germany (year 2022):

• Personal income tax (Ger.: Einkommensteuer(ESt) / Lohnsteuer) - [14-45%], see the tax rates below on the page.
• Church tax (Ger.: Kirchensteuer) - [8-9% from ESt] - if a person belongs to one of the churches that collect taxes from believers, for example, the Catholic church. (By officially leaving the Church, you can avoid paying this tax.)
• Solidarity tax (Ger.: Solidaritätszuschlag) - [5.5% from ESt] - only high earners pay
• Compulsory health insurance
  [14.6%: 7.3% by the employee, 7.3% - by the employer]
• Compulsory pension insurance
  [18.6%: 9.3% by the employee, 9.3% - by the employer]
• Compulsory nursing insurance/ Compulsory insurance in case of need for care
  [3.05%: 1.525% by the employee, 1.525% - by the employer]
• Unemployment insurance
  [2.4%: 1.2% by the employee, 1.2% - by the employer]

You can find out more about the current rates of social deductions from salaries in Germany on the page Pensions in Germany: contributions to pension insurance and other social charges.

§ Examples of salary calculation in Germany: gross/net calculator

Table 1 below gives an example of calculating a net salary for an employee who receives 4'000.00, 3'000.00 or 1'500.00 euro gross, has 1 child and has tax bracket III, lives in Western Germany. In this case, his payroll deductions will look like this:

Table 1. Examples of gross/net monthly salary calculation

Absolute calculation accuracy is not guaranteed!

§ Additional payments; fringe benefits in Germany

Additional payments to an employee

In addition to salary in Germany, firms can transfer one-off payments to an employee, for example, a cash allowance for Christmas (in German: Weihnachtsgeld) or a holiday/vacation bonus (in German: Urlaubsgeld) and others. However, whether such payments will be made or not and in what amount, depends on the enterprise itself and the contract with each specific employee.

Fringe benefits

Social contributions (in German: Sozialabgaben), which are calculated on the basis of the total salaries due, are made in equal parts by the employee from their salary and the employer. In 2022, these employer payments averaged 22.0 % of the employee's gross salary.

However, not all payments of the enterprise to the employee are subject to taxes and social charges. The company does not pay social charges from the payments below:

• Payment of child care expenses (Kindergarten or Tagesmutter);
• Payment for commuting between a residence and a place of work;
• Payment for a fitness studio or wellness courses;
• Sale of products of own production at a reduced price to the employees of the enterprise.

§ Personal income tax rates in Germany

In Germany, unlike some other countries, there is a progressive scale of tax on personal income, i.e. the more a person earns, the higher the tax rate that s/he pays. The initial tax rate in Germany is 14%, and the maximum is 45%. Thus, if a person begins to earn above a tax-free minimum (in German: Steuerfreibetrag) during the year (for example, in 2022 for single people it is 9984 euros, see "tax brackets" below on the page), s/he starts paying the 14% tax and the more s/he earns, the higher the tax rate s/he pays. However, the increased rate does not apply to the total amount received for the year; it shall apply to the difference between the amount of the lower rate and the amount of the higher rate. In the above example, if a person earned 12000 euros per year, then s/he would pay 14% of 2016 euros (12000-9984=2016).

§ Personal income tax brackets (tax classes) in Germany

In Germany, there are tax classes that are assigned to payers of the personal income tax. There are 6 such brackets in total, and depending on the tax bracket, people pay monthly more or less tax from their wages every month (the difference is not in tax rates, but in the amount of non-taxable amounts). Which bracket one or another person is referred to, depends on their marital status. Tax brackets set non-taxable wages. The following are the tax brackets/tax classes characteristics:

• I. Individuals not married and with no children.
• II. A parent raising children alone.
• III. and V. Married couples who have a significant difference in income.
• IV. Married couples who do not have a significant difference in income.
• VI. If you hold multiple jobs.

For married couples, it is most beneficial to apply classes of taxation 3 and 5 if the husband and wife have a significant difference in income.

The non-taxable minimum wages in Germany as of 2022 are provided in table 2 below. The table also shows which tax classes(brackets) they refer to.

Table 2. Non-taxable income (Steuerfreibetrage) as of 2022 год

§ Links to useful websites

• Solidaritätszuschlag, Bundesregierung
• Einkommensteuergesetz (EStG), § 32a Einkommensteuertarif
• Kirchensteuer, Bundeszentralamt für Steuern
• Deutsche Rentenversicherung

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