Expatriate tax ebook - Germany

What taxes?

Capital gains tax/Investment income 
Inheritance, estate and gift taxes
Local taxes
Real estate taxes
Social security taxes
Stock options
Wealth taxes
Other specific taxes

Capital gains tax/Investment income
Starting with 2009 there is a withholding tax of 25% plus a 5,5% solidarity surcharge plus church tax (if applicable) on investment income an capital gains ("flat tax"). From 2009 onwards the one year holding period for capital gains is no longer applicable. But for shares bought before December 31, 2008 the old rule of the holding period is still valid. So, if the sale of "old shares" is done after the one year period the gain is tax free.

Inheritance, estate & gift taxes
A liability to German inheritance and gift tax depends on whether the individual or the deceased or donor maintains a domicile or habitual place of abode in Germany. Furthermore, certain assets located in Germany could be taxable. If the individual and the deceased or donors are close relatives, there are tax free amounts depending on the relationship.

Local taxes
No local taxes apply to individuals in Germany. If an individual owns a house or a flat, he has to pay real property tax.

Real estate tax
Real estate tax is applicable in Germany. The amount of real estate tax depends on the value of the real estate.

Social security taxes
Social security contributions include pension insurance, unemployment insurance, nursing insurance and compulsory health insurance. The contribution rate for compulsory health insurance depends on the health insurance fund, which can be chosen by the employee.

Social security contributions depend are salary dependent. There is an income limit up to which contributions are payable.

Income thresholds for 2010

	Annual €	Monthly €	Rate of contribution
West Germany Pension insurance Unemployment insurance	66,000 66,000	5,500 5,500	19.9 % 2.8%
East Germany Pension insurance Unemployment insurance	55,800 55,800	4,650 4,650	19.9 % 2.8%
Whole Germany Compulsory health insurance Nursing insurance	49,950 49,950	4,162.50 4,162.50	approximately 14,0 %

Stock options
Stock options are treated as income from employment and subject to the individual progressive tax rates. If the stock options are not traded options, then the tax due is levied at the time of exercise. But according to the model treaty the vesting date is applicable. If the stock options are traded options, than the tax due is levied when the options are granted.

Wealth tax
There is no wealth tax in Germany.

Other specific taxes
There are no other specific taxes in Germany.

Information about Germany:

• introduction
• facts and figures
• basis of taxation
• what taxes?
• tax planning opportunities