In general, all income attributable to self-employment or business, including gains from the sale of property used in a business or profession, is subject to income tax.
Income derived by general or limited partnerships is not taxed at the level of the partnership, but each partner is taxed on his or her attributable profits separately. The compensation that a partner receives from a partnership for services rendered, for loans given or for assets loaned to the partnership is included in the partner’s income from self-employment or business activities.
If a nonresident carries on a business through a permanent establishment in Germany, taxable income is computed in the same manner as for a resident individual and is taxed at the same income tax rates. However, the basic tax-free allowance in the amount of EUR11,604 (2024) is not considered.
Directors’ fees. Remuneration received as a supervisory board member of a corporation is treated as income from self-employment. A member of a supervisory board has been regarded as an entrepreneur and was generally subject to value-added tax at a rate of 19%. According to case law, this can no longer be claimed as a general rule. A case-by-case examination is therefore necessary.
Investment income. Investment income, such as dividends and interest, is taxed at a flat tax rate of 25%, which must be withheld at source by the payer. A solidarity surcharge (5.5% of the flat withholding tax) and church tax, if applicable, (8% or 9% of the final withholding tax, depending on the location) is added. The flat withholding tax is, in most cases, the final tax. In general, investment income taxed at source does not have to be declared in the German income tax return. However, if the investment income was not subject to the flat tax withholding at source (in particular, capital investment income from foreign sources), the total annual gross investment income must be declared in the tax return. In general, if the investment is held in a German account, the financial institution determines the amounts to be considered in the income tax return. However, if the taxpayer owns, for example, investment funds’ units or shares that are held in a foreign account, the taxable income (pre-determined tax base [Vorabpauschale]), which consists of all distributions made by the fund and any gain from the sale of funds) needs to be calculated individually for each fund. Taxpayers with an average personal income tax rate below 25% can apply for the lower personal tax rate to investment income by declaring such income in the German income tax return.
Negative investment income cannot be deducted from income of other sources (for example, employment income and selfemployment income). However, a net investment loss can be carried forward to be credited against future positive investment income. A special loss consideration rule applies to capital gains derived from the sale of shares.
Investment income is tax-free in an amount of EUR1,000 (2024) per year for a single taxpayer and in an amount of EUR2,000 (2024) per year for a married couple filing jointly. In general, actual expenses cannot be deducted. The investor can provide the
Income-related deductible expenses include the following:
• Cost of travel between home and the “primary place of work” (see below)
• Expenses for working from home (lump-sum deduction for home office)
• Expenses connected with maintaining two households for business reasons (rent, home trips, per diems and moving costs, to a certain extent)
• Specialist books and periodicals for business purposes
• Membership dues paid to professional organizations, labor unions and similar bodies
• Childcare expenses (subject to certain limitations; see Employment income)
The following are the tax rules regarding the deduction of workrelated travel expenses:
• The legal definition of “primary place of work” describes a fixed central location of the employer, an affiliated company or a third party determined by the employer to which the employee is permanently assigned.
• Per diems are determined by a two-tiered scale of flat fees, which are set at EUR14 and EUR28 (generally for up to three months). For one-day business trips (absence of at least eight to 24 hours), the per diem is EUR14. The per diem for the arrival and departure day of a multiday business trip equals EUR14, while the per diem for an absence of 24 hours equals EUR28. For meals granted by employers, the standard per diems are reduced by a certain percentage referring to the meal granted to the employee by the employer (or by a third party at the request of the employer) during a business trip. The percentages are 20% for breakfast and 40% each for lunch and dinner.
• For job-related maintenance of two households in Germany (that is, the maintenance of a personal household at the place of residence and lodging at the workplace and job-related inducement), the expenses can be deducted as income-related expenses up to a general limit of EUR1,000 per month. If the household at the workplace is located abroad, the upper limit of EUR1,000 does not apply.
• Lodging expenses during assignments outside the primary workplace can be deducted as income-related expenses without restriction for up to 48 months.
A standard deduction of EUR1,230 per year for employmentrelated expenses is granted without any further proof. However, an employee can claim a larger deduction if he or she proves that the expenses actually paid exceed the standard deduction.
For retirees, the standard deduction is EUR102 per year.
Premiums under contracts for life, health, accident or liability insurance, and compulsory payments to various forms of social security are deductible as special expenses within certain limits. Payments to foreign insurance companies are deductible only if the respective company has a registered office or an executive board in the European Union (EU) or a contracting Member State of the European Economic Area (EEA) and is authorized to perform its insurance services in Germany. Other foreign insurance companies are required to hold a permit to operate in Germany.
The employees’ portion of the following payments, limited to an annual total of EUR27,625 less the tax-free employer’s contribution, is deductible:
• Compulsory state old age insurance
• Certain professional group pension plans
• Qualifying life annuity pensions
Premiums for basic health care services under German social security law are deductible only as special expenses. Fees for additional services relating to private health care plans are generally not deductible.
Contributions under contracts for nursing care insurance entirely qualify as deductible special expenses.
In addition, taxpayers may claim deductions for contributions to health and nursing care insurance paid for spouses subject to unlimited taxation, common-law spouses and children for whom the taxpayer is entitled to receive childcare allowances under German regulations. The deduction is subject to the abovementioned restrictions.
Other insurance contributions under contracts for unemployment, disability, accident, liability and life insurance are deductible only up to EUR1,900 for employees (EUR2,800 for all others), provided that this limit has not already been reached by contributions to health and nursing care insurance.
Other items that may be claimed as special deductions include church tax and donations. Instead of itemizing these deductions, a standard deduction of EUR36 (EUR72 for married couples filing jointly) per year is granted.
Personal deductions and allowances. The following tax benefits are granted to individuals:
• A basic tax-free allowance of EUR11,604 is available for single individuals (EUR23,208 for married couples filing a joint return). The government has announced a draft law that increases the basic tax-free allowance to EUR11,784 for 2024 (retroactively).
• The income tax on compensation received in one year for services performed over a period of several years (for example, a long-term bonus is calculated by reference to a special formula one-fifth rule). Under this formula, tax is calculated both for income less the one-time payment and for income less the onetime payment plus one-fifth of the one-time payment. The difference between the two results is multiplied by five. This tax relief is also granted to individuals who are nonresidents for tax purposes.
• Termination payments are also subject to taxation, considering the abovementioned one-fifth rule, if certain conditions are fulfilled. Termination payments that are paid in connection with cross-border employees subject to tax in more than one country with a double tax treaty in place must be considered as additional income for the former employment. In any case, the tax treatment of termination payments needs to be investigated in detail based on the underlying situation. However, any regulation in an underlying double tax treaty regarding the taxation of termination payments must be considered preferential. If one country
interprets the underlying double tax treaty in a manner so that it will not tax the termination payment, Germany taxes this payment instead if the individual is tax resident in Germany at the time of payment.
• Private use of a company car is generally subject to income tax. However, it benefits from preferential tax treatment.
• Income derived on business days spent in foreign countries may be exempt from tax in Germany under the progression clause generally contained in tax treaties entered into by Germany. However, proof of actual foreign tax paid or a waiver of the taxation of such income by the foreign tax authorities is required.
Taxpayers with children receive children-related deductions, such as for the following:
• Each child under 18 years of age
• Each child under 21 years of age if the child is jobless and registered as seeking work
• Each child under 25 years of age who is attending school, college or university, is receiving vocational training or is doing voluntary work in the social or ecological sector
The children allowance equals EUR266 for each child for each month of eligibility. Parents filing a joint return receive an allowance of EUR532 per child per month. The allowance in the amount of EUR532 also applies to a single parent if the spouse dies before the beginning of the calendar year or if one parent lives outside Germany during the entire calendar year. A monthly childcare allowance of EUR122 (EUR244 under the circumstances mentioned above) is also granted for each eligible child. German tax residents and foreign individuals with certain residence permits are entitled to a monthly child subsidy payment of EUR250 (2024) per child. The government plans to increase the children allowance and the child subsidy payment for 2024 retroactively.
The subsidy described above relates to children who are resident in the EU/EEA and qualify for the deductions mentioned above. Taxpayers who are entitled to claim child subsidy payments cannot benefit from both the child-related deductions and the child subsidy payments. When the income tax return is filed, the tax authorities determine automatically whether the child-related deductions or the child subsidy payments are more favorable to the taxpayer. The child-related deductions are not considered for wage tax withholding purposes, but they are considered in calculating the solidarity surcharge and church tax (if applicable), which is withheld via the payroll.
Business deductions. In general, all business expenses are deductible from gross income. Living or personal expenses are not deductible unless they are incurred for business reasons and the amount is considered reasonable.
Rates. Individual tax rates for 2024 increase progressively to a marginal rate of 42%. The top rate of 45% applies only if taxable income is EUR277,826 (EUR555,652 for married taxpayers filing jointly) or more. For taxable income from EUR66,761 (EUR133,522 for married couples filing jointly) up to EUR277,825 (EUR 555,650 for married couples filing jointly), the top rate is 42%.
The following tables present the tax on selected amounts of taxable income in 2024.
Single taxpayers and married taxpayers filing separately
Married taxpayers filing jointly
* Excluding church tax, if applicable.
Certain income that is not taxable is taken into account when determining the tax rate on German taxable income. This inclusion rule is known as the “tax exemption under progression clause.” For example, individuals who transfer to or leave Germany within the calendar year must take into account foreign income earned either before becoming a German resident or after leaving Germany when determining the tax rate on their German taxable income.
To help finance the costs related to German unification, a 5.5% solidarity surcharge used to be imposed on the income tax liability of all taxpayers. This surcharge is phased out from 2021 onward.
If a German tax resident is a member of a registered church in Germany entitled to impose church tax, church tax is assessed at a rate of 8% or 9% on income tax liability, depending on the location.
Business income is subject to both income tax and trade tax. Trade tax rates vary, generally ranging from 7% up to 18.5%, depending on the location. Income tax is partially reduced insofar as the income tax is allotted to business income (business income is subject to income tax and trade tax; however, for trade tax already paid on business income, a certain tax credit on income tax is granted). Trade tax is not levied on income from self-employment.
Salaries of nonresidents employed by domestic employers are subject to withholding tax (that is, wage taxes and solidarity
levied at a rate of 3.4% and are shared equally by employer and employee. Contributions of childless employees are increased at a rate of 0.6%. The increase is borne solely by the employee. As of 1 July 2023, contributions to state nursing care insurance are reduced for employees with children up to an age of 25 years, depending on the number of children.
Totalization agreements. To provide relief from double social security taxes and to assure benefit coverage, Germany has entered into totalization agreements that usually apply for a maximum period of two to five years with the following jurisdictions.
EU countries
Albania
Australia
Brazil
India Philippines
Israel Switzerland
Japan Tunisia
Korea (South) Türkiye
Canada and Quebec Moldova Uruguay
Chile Morocco United States
China Mainland
North Macedonia Yugoslavia*
* Germany honors the totalization agreement with Yugoslavia with respect to the successor countries, except for Croatia, North Macedonia and Slovenia.
EC Regulation No. 883/2004 took effect on 1 May 2010. This regulation determines, among other items, which social security legislation applies to employees posted to other EU Member States. The regulation applies to the EU Member States. Effective from 1 January 2011, the coverage of the social security regulation was extended to non-EU nationals (third-country nationals) moving within the EU, with the exception of Denmark and the United Kingdom. As of 1 April 2012, Switzerland has adopted EC Regulation No. 883/2004.
Effective from 1 June 2012, EC Regulation No. 883/2004 applies also to assignments to European Free Trade Association (EFTA) states (Iceland, Liechtenstein and Norway). For non-EU citizens under certain conditions, the former totalization agreements entered into with each of the EU/EFTA countries or Switzerland continue to apply.
Effective from 1 January 2021, the United Kingdom left the EU and the determination of the applicable social security law between the EU Member States and the United Kingdom is governed by the new Trade and Cooperation Agreement for all scenarios that started as of 1 January 2021. In transitional cases, EC Regulation No. 883/2004 still applies based on the Withdrawal Agreement between the EU Member States and the United Kingdom.
D. Tax filing and payment procedures
The tax year in Germany is the calendar year.
The following are the deadlines for the annual tax returns:
• Individuals filing on their own: 31 July of the following year
• Individuals filing with the assistance of a tax advisor: 28 or 29 February of the year thereafter
If a tax return is not filed on time, late filing penalties are automatically assessed and, in general, cannot be eliminated.
(c) Armenia, Moldova and Turkmenistan have agreed to honor the USSR treaty. The Russian Federation suspended its double tax treaty with “unfriendly countries,” including Germany, in 2023. Germany treats the Russian Federation as a non-cooperative jurisdiction as of 1 January 2024. Income that needs to be tax-exempt according to the double tax treaty can be taxed in Germany. However, the taxes that have been paid in the Russian Federation will reduce the tax to be paid in Germany.
(d) Germany honors the Yugoslavia treaty with respect to Bosnia and Herzegovina, Kosovo, Montenegro and Serbia.
(e) Because Germany has never recognized Taiwan as a sovereign state, this agreement is not a treaty under international law. Instead, it was completed in accordance with the practice that other Western states have followed with respect to Taiwan. It is an agreement between the head of the German Institute in Taipei and the director of the Taipei Representative Office in Germany.
The treaties mentioned above are applicable for 2024. For the application of the treaty in previous years, it needs to be determined which version of a treaty is effective. Germany is negotiating double tax treaties with Angola, Benin, Botswana, Burkina Faso, Chile, Colombia, Ethiopia, Hong Kong, Jordan, Kosovo, Lebanon, Nigeria, Oman, Qatar, Rwanda, San Marino, Senegal and Serbia.
F. Entry into Germany
General. In general, any individual needs a visa to enter Germany. However, nationals of certain jurisdictions are exempt from the requirement to obtain a visa if they want to enter Germany for tourist, visitor or business trip purposes (not for general work purposes). The visa-free jurisdictions are Albania, Andorra, Antigua and Barbuda, Argentina, Australia, Austria, Bahamas, Barbados, Belgium, Bosnia-Herzegovina, Brazil, Brunei Darussalam, Bulgaria, Canada, Chile, Colombia, Costa Rica, Croatia, Cyprus, the Czech Republic, Denmark, Dominica, El Salvador, Estonia, Finland, France, Georgia, Greece, Grenada, Guatemala, Honduras, Hong Kong, Hungary, Iceland, Ireland, Israel, Italy, Japan, Kiribati, Korea (South), Latvia, Liechtenstein, Lithuania, Luxembourg, Macau, Malaysia, Malta, the Marshall Islands, Mauritius, Mexico, Micronesia, Moldova, Monaco, Montenegro, the Netherlands, New Zealand, Nicaragua, North Macedonia, Norway, Palau, Panama, Paraguay, Peru, Poland, Portugal, Romania, Samoa, San Marino, Serbia, Seychelles, Singapore, the Slovak Republic, Slovenia, the Solomon Islands, Spain, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Sweden, Switzerland, Taiwan, Timor-Leste, Tonga, Trinidad and Tobago, Tuvalu, Ukraine, the United Arab Emirates, the United Kingdom, the United States, Uruguay, Vatican City and Venezuela. This exemption only applies for a maximum (cumulative stay) of 90 days within a period of 180 days.
EU/EEA nationals. From an immigration point of view, EU nationals are not restricted from entering, staying permanently or temporarily, or working in Germany. The EU countries (aside from Germany) are Austria, Belgium, Bulgaria, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, the Slovak Republic, Slovenia, Spain and Sweden.
A passport or national identity card valid throughout the entire length of stay is mandatory for entering and staying in Germany. The same treatment also applies to nationals of Iceland,
in the applicant’s home jurisdiction (that is, the current jurisdiction of residence/living). Only citizens from the most preferred jurisdictions (“best friends”) are exempt from the requirement of a national visa, even for working activities. The “best friend” jurisdictions are Australia, Canada, Israel, Japan, Korea (South), New Zealand, the United Kingdom and the United States. Citizens from these jurisdictions are permitted to apply directly for a residence permit for work purposes after arrival in Germany at the local German foreigners’ office without first obtaining a national visa. However, they also have the option to obtain such a visa for working reasons outside of Germany at the German embassy in their jurisdiction of living before entering Germany. If the application is filed directly in Germany without first obtaining a national visa, work is only allowed after the application is approved by the local German foreigners’ office. Considering that the process after arriving in Germany may include long waiting times, obtaining a national visa can speed up the start of work in Germany. A national visa is issued with a validity of three to 12 months and has multiple entries.
Residence permits. After the entry into Germany and the completion of address registration at the town hall registration office, the final, long-term residence permit must be applied for at the local foreigners’ office. If a national visa for work purposes has been granted, the application for the final residence permit is only necessary if the stay exceeds the validity of the national visa. Employees from the “best friends” jurisdictions who enter Germany without a national visa must visit the foreigners’ office to apply for the final residence permit and to obtain a preliminary residence permit that includes work authorization before starting to work in Germany. The final permit combines the work and residence permits.
Usually, the residence permit is granted as an electronic residence permit (elektronischer Aufenthaltstitel, or eAT) as a plastic card in a credit card format equipped with a contact-free chip inside the card on which biometric features (photograph and two fingerprints), ancillary conditions (special requirements) and personal data are stored.
Under the German immigration law, various types of residence permits are available. They are not applicable for EU/EEA/Swiss citizens.
Temporary residence permit. A temporary residence permit (Aufenthaltserlaubnis) is granted primarily in connection with stays for working and education purposes, for family reasons and for humanitarian and political reasons. The temporary residence permit for working purposes usually requires the approval of the labor office (see Section H).
For residence permits for work purposes, various schemes/local application types are available. The following are the most common schemes:
• Skilled worker with university degree
• Local hire specialist
• Certain nationals/“best friends”
• International staff exchange
• Leading executives
• Skilled worker with vocational education or distinct professional experience
Non-EU/non-EEA/non-Swiss citizens who intend to enter Germany for more than 90 days and who have been granted the EU long-term residence permit in another EU Member State usually are entitled to get a residence permit issued by the local German foreigners’ office. Work authorization for the first year requires additional approval from the labor authorities. In any event, a consular visa process in the jurisdiction of residence is usually recommended.
EU Blue Card. The name, EU Blue Card, is somewhat misleading because, if issued by the German authorities, it generally allows working only in Germany but not in other EU Member States.
Since 18 November 2023, the rules for the issuance of the EU Blue Card were changed and new categories were added. The following are the general requirements for all of the categories:
• Local German employment contract must be at least six months.
• Qualification must be adequate for the intended position.
• Social security contributions generally must be paid in Germany (domestic employment relationship). Only a few exemptions apply.
All applicable options with their specific requirements are discussed below.
Traditional EU Blue Card (§18g Abs. 1 S. 1 AufenthG [German Residence Law]). The following are the specific requirements for the Traditional EU Blue Card:
• German or acknowledged university degree.
• Minimum level of annual guaranteed gross salary (EUR48,300 per year for 2025). This amount usually changes every 1 January.
Labor authority approval is not required.
EU Blue Card Shortage Occupation (§18g Abs. 1 S. 2 Nr. 1 AufenthG). The following are the requirements for an EU Blue Card Shortage Occupation:
• German or acknowledged university degree.
• Minimum annual gross salary level of EUR43,759.80 (2025 calendar year). This amount usually changes every 1 January. Comparable salary must be reached.
• Labor authority approval.
The list of the professions applicable for the shortage occupations can be found in the list at 2024_Mangelberufe_DE (makeit-in-germany.com).
EU Blue Card IT Professional (§18g Abs.2 AufenthG). The following are the requirements for the EU Blue Card IT Professional:
• Minimum annual gross salary level of EUR43,759.80 (2025 calendar year). This amount usually changes every 1 January. Comparable salary must be reached.
• Skills, capabilities and/or knowledge based on professional IT experience of at least three years within the last seven years at
weeks after moving into the apartment; this includes subsequent changes of the living address.
Fast-track procedure. The Skilled Worker Immigration Act (Fachkräfteeinwanderungsgesetz, or FEG) adopted in 2020 provides the possibility for some immigration schemes for accelerated procedures at the foreigners’ authorities of the federal states. With the approval of the fast-track application filed locally in Germany, the foreigners’ authorities forward the application to the competent embassy or consulate, which must provide an appointment within three weeks. However, both the employee and the employer are required to provide the authorities with more documents than before. Also recently, due to capacity issues, the local authorities often needed several months until issuing an approval under this fast-track option. Subsequently, in practice, this is usually only relevant for applications if consular visa appointments in the jurisdictions of residence are not available for a very long time.
H. Approval of the labor office and self-employment
General. The work permission in the residence permit usually mentions the name of the employer as well as the profession of the employee; that is, it is restricted to one specific position for a specific employer. Consequently, a change of employer, including a change within a group of companies, and/or a change of position generally requires a change of the work annotation of the residence permit. As an exemption, Blue Card holders (including a national visa tied to a Blue Card as local application type) can change their employer or position anytime as long as the new position also qualifies for a Blue Card. However, within the first 12 months of holding a Blue Card (or an according national visa), a notification of the change of employer/position must be filed by the employee with the local foreigners’ office to enable them to verify that all conditions for a Blue Card still apply. In case of uncertainties, officers have the right to suspend working rights for up to 30 calendar days. One year after holding an EU Blue Card (including time with an according entry visa), the work authorization becomes automatically by law unrestricted for any employment; that is, it is not tied to an employer or position anymore, including positions that do not qualify for a Blue Card. For other employment schemes, there is no such automatic change. However, for some employment schemes after two or three years (depending on the circumstances), individuals can apply for the work authorization to be changed to unrestricted employment. This becomes effective only on approval.
Application process for obtaining a residence permit for work purposes for non-EU/non-EEA/non-Swiss citizens. Except for the EU Blue Card, most immigration schemes for employment purposes require approval of the labor authorities. Depending on the case constellation, the employer may request advance approval of the labor authorities. As of September 2024, this advanced approval process with the labor authorities generally takes two to six weeks until the approval is obtained. Most schemes do not include a labor market test. However, certain schemes (for example, the “best friend” scheme) require a labor market test. Currently, in practice, such a labor market test currently rarely
Spouses of non-EU/non-EEA/non-Swiss citizens generally cannot stay in Germany on a dependent residence permit if they are under 18 years old.
Under certain limited circumstances, parents and other dependents of a third-country national obtaining a Blue Card or a residence permit as employee in Germany can apply for a residence permit as a dependent. In general, spouses of non-EU citizens must prove that they have basic German language skills (A1 level) or a higher education before they enter Germany. Children over 16 may also be required to present German language skills under specific limited circumstances. Post arrival, an integration course may be required. Depending on the facts, exemptions may apply with respect to the language skills and/or integration course.
Driver’s licenses/permits. Citizens of EU and EEA Member States may use their home-jurisdiction driver’s licenses until the expiration date of the licenses for the entire length of their stays in Germany without applying for German licenses. However, the citizen must be at least 18 years old.
Other foreign nationals in Germany generally may drive for a maximum of six months if they have valid foreign driver’s licenses. A foreign national must apply for a German license with the Public Affairs Office (Ordnungsamt) within six months after the date of entry into Germany. Citizens of the following jurisdictions can apply for a German driver’s license with a limited examination or without a new examination.
Albania Japan North Macedonia
Andorra Jersey San Marino
Bosnia and Korea (South) Serbia
Herzegovina Kosovo Singapore
French Polynesia Moldova South Africa
Gibraltar Monaco Switzerland
Guernsey Namibia Taiwan
Isle of Man
New Caledonia United Kingdom
Israel New Zealand
Australian, Canadian and US citizens may apply without examination if they hold specified state driver’s licenses (for example, Alabama, Arizona, Ohio and Utah in the United States). However, even if an individual described in this paragraph applies for a German driver’s license, he or she may not drive in Germany with his or her home-country driver’s license after a six-month period beginning with the date of entry into Germany.
The following documents are generally necessary to obtain a driver’s license:
• Valid passport and residence permit.
• One photograph.
• Translation of the foreign driver’s license by a qualified sworn translator or by one of the major German automobile clubs. This rule does not apply to citizens of EU or EEA Member States, Hong Kong, New Zealand, Senegal and Switzerland.
• Original and photocopy of the foreign driver’s license.
• Name of the German driving school that the foreign national wishes to attend to prepare for the practical and theoretical exam (only if exam is required).
After a three-year period, proof of eye examination and a certificate for training in first aid procedures are required.