German Tax Glossary for Expats (English Guide)
Understanding German tax terminology is essential for expats, freelancers, and international professionals living in Germany.
A
Assessment Notice (Steuerbescheid)
The official document issued by the German tax office (Finanzamt) after reviewing your tax return. It shows your final tax calculation, including whether you owe additional taxes or will receive a refund.
B
Basic Tax Allowance (Grundfreibetrag)
The amount of income you can earn each year without paying income tax in Germany. Only income above this threshold is taxable.
C
Church Tax (Kirchensteuer)
A tax paid by individuals registered as members of a recognized religious community in Germany. It is typically 8–9% of your income tax.
D
Double Taxation Agreement (DTA) (Doppelbesteuerungsabkommen)
An agreement between Germany and another country that prevents the same income from being taxed twice. This is especially important for expats with foreign income.
E
ELSTER (Electronic Tax Filing System)
Germany’s official online platform for submitting tax returns electronically. While primarily in German, it is widely used by both residents and expats.
Employment Income (Einkünfte aus nichtselbstständiger Arbeit)
Income earned as an employee, including salary, bonuses, and benefits provided by your employer.
F
Finanzamt (Tax Office)
The local German tax authority responsible for processing tax returns, issuing tax assessments, and collecting taxes.
Freelancer (Freiberufler)
A self-employed professional providing services (e.g., consultant, designer, IT specialist). Freelancers have different tax obligations compared to employees.
G
German Tax ID (Steuer-ID)
A unique, lifelong identification number assigned to every resident in Germany. It is required for employment, payroll, and filing your tax return.
H
Home Office Allowance (Homeoffice-Pauschale)
A tax deduction available for individuals working from home, allowing a fixed daily amount or actual expenses to be claimed.
I
Income Tax (Einkommensteuer)
The main tax on personal income in Germany. It is progressive, meaning higher income levels are taxed at higher rates.
K
Kleinunternehmerregelung (Small Business Regulation)
A rule allowing small businesses and freelancers to avoid charging VAT if their annual turnover remains below a certain threshold.
L
Lohnsteuer (Wage Tax)
Income tax automatically deducted from an employee’s salary by the employer and paid directly to the tax office.
Lohnsteuerbescheinigung (Annual Wage Tax Statement)
A document provided by your employer summarizing your yearly income and the taxes withheld. It is required for filing your tax return.
M
Mehrwertsteuer (VAT – Value Added Tax)
A consumption tax applied to goods and services in Germany. The standard rate is 19%, with a reduced rate of 7% for certain items.
Marital Splitting (Ehegattensplitting)
A tax benefit available to married couples that can reduce overall tax liability by splitting income between spouses.
P
Progressive Tax Rate
A tax system where the tax rate increases as income rises. Germany’s income tax ranges from 0% to 45%.
S
Self-Employment (Selbstständigkeit)
Working independently rather than being employed. Self-employed individuals must manage their own tax filings and payments.
Social Security Contributions (Sozialabgaben)
Mandatory contributions covering health insurance, pension, unemployment insurance, and long-term care insurance.
Solidarity Surcharge (Solidaritätszuschlag)
An additional tax on top of income tax. Most taxpayers are exempt, but higher earners may still be required to pay it.
T
Tax Class (Steuerklasse)
A classification that determines how much wage tax is withheld from your salary. It depends on marital status and employment situation.
Tax Return (Steuererklärung)
The annual declaration of your income and expenses submitted to the German tax office to determine your final tax liability.
Tax Residency (Steuerliche Ansässigkeit)
Your tax status based on where you live. German tax residents are taxed on their worldwide income.
V
VAT (Value Added Tax / Mehrwertsteuer)
A tax applied to most goods and services in Germany, typically at 19%. Businesses are responsible for collecting and reporting VAT.
W
Work-Related Expenses (Werbungskosten)
Costs directly related to your job (e.g., commuting, equipment, training) that can be deducted to reduce taxable income.
Worldwide Income
All income earned globally. If you are a tax resident in Germany, you must declare your worldwide income in your tax return.
Why This German Tax Glossary Is Important for Expats
This glossary helps expats in Germany:
- Understand key German tax terms in English
- File accurate German tax returns
- Maximize deductions and tax refunds
- Avoid costly tax mistakes
- Communicate effectively with a tax advisor
Need Help with Your Taxes in Germany?
German tax rules can be complex—especially for expats, freelancers, and international professionals. Working with an English-speaking tax advisor in Germany ensures compliance, clarity, and optimal tax results.
