Germany is the Europe’s biggest economy and one of the richest countries in Europe. It is wealthy not only in GDP per capita terms but also in terms of average personal income. The country is famous for its affluent middle class, generous welfare system, free healthcare and education, clean environment, public safety and generally fair and even distribution of wealth. Therefore, Germany is also highly regarded for its great quality of life.
- Average Gross Salary in Germany:
An average gross salary in Germany in 2017 was 3,770 euros a month for full time employees (self-employed, part-time jobbers and people with very low income below the taxable level were not included in these statistics). That is around 45,000 euros a year gross (before income tax and social contributions). The minimum wage in Germany is currently just under 1,500 euros a month which is 18,000 euros a year.
Major differences in income levels still exist between the East and the West. The average salary in the old federal states is about 25% (or 800 euros a month) above the average in the new states. That is, employees in the former East Germany earn on average around 3,000 euros a month (excluding the city state Berlin because Berlin is not considered one of the new federal states). Employees in the southern federal states – Hessen (capital Wiesbaden), Baden-Württemberg (Stuttgart) and Bayern (Munich) – have the highest average wages whereas those in the new states – Mecklenburg-Vorpommern (capital Schwerin), Sachsen-Anhalt (Magdeburg) and Brandenburg (Potsdam) – have the lowest salaries. In fact, employees in the federal state Hessen earn on average 55% more than their counterparts in Mecklenburg-Vorpommern.
Furthermore, German men earn on average nearly 21% more than women. There are also differences in income levels between the regional capitals (and large cities in general) and rural areas but these are less significant than differences between men and women or between the old and new federal states. By far the biggest difference is in Bayern (the federal state of Bavaria) where the average salary drops by 7% when excluding the capital Munich from the state’s average.
- Personal Income tax:
Germany has a rather complicated taxation system and personal income taxation is no exception. There is a progressive personal income tax rate starting from zero and ending at 45% for high-income individuals earning more than 260 thousand euros a year.
- Church tax:
Moreover, a church tax, which is either 8% or 9% (depending on the federal state) of taxable income, is payable by all registered church members in Germany. To confuse you even more, the amount paid as church tax is fully tax deductible. A foreigner who does not wish to pay a church tax in Germany should never mention their church affiliation in any official document (e.g., in residence registration). Otherwise, Roman Catholics and Protestants will most likely need a written proof (a certificate) that they quit the church in order to avoid paying the German church tax.
- Tax deductions:
The German personal income tax law allows for a number of tax deductions, both related and non-related to taxable income, such as training and commuting expenses, dual household costs, work-related insurance costs, contributions to voluntary health insurance and pension schemes, church tax and a variety of expenses related to bringing up children (e.g., childcare, school fees).
