Living in Germany
Your Complete Financial Guide
Essential guidance for UK expats navigating taxes, pensions, and financial planning in Germany.
At SJB Global, we specialise in helping expats organise their financial lives and navigate the complexities of cross-border rules between Germany and the UK.
Defining a German Resident
In Germany, you are considered a tax resident if you are physically present in the country for more than six months in a calendar year, or for a consecutive six-month period that overlaps two calendar years. You may also be considered tax resident if you acquire a permanent abode, such as renting a property with a contract longer than six months. For short-term stays, renting for less than three months is generally advisable to avoid being seen as a tax resident.
Germany Tax Position for Residents
Tax residents in Germany are liable to pay income tax on their worldwide income, including employment earnings, rental income, investment income, and business profits. Interest, dividends, and capital gains are also taxable, though they may be subject to separate rates or allowances.
Employees are taxed under a PAYE-style system, with income tax withheld at source by the employer. A tax return is not always required if you are taxed exclusively through payroll, but filing becomes necessary if you have multiple income sources or other taxable income outside of employment.
Germany’s tax system is progressive, meaning that the rate of tax increases as income rises. Tax rules also vary depending on marital status, with married couples benefiting from income splitting for tax calculation purposes.
In addition to income tax, individuals may be subject to a solidarity surcharge and, if applicable, church tax (usually between 8–9%, depending on the state).
Tax Relief for German Residents
German residents are allocated to different tax brackets depending on their personal circumstances. These brackets help determine the rate of income tax payable and provide relief where applicable. Factors that influence your bracket include marital status, whether both spouses earn income, single-parent status, and whether you hold multiple jobs. The system ensures that tax obligations are aligned with individual circumstances.
German Tax Position for Non-Residents
Non-residents are individuals who spend less than six consecutive months in Germany. Unlike residents, non-residents are only liable to pay tax on income sourced within Germany, rather than worldwide income. This distinction ensures that taxation is fair and proportional to the level of engagement with the German economy.
Quick Overview of Living and Paying Taxes in Germany
Tax Residency
Considered a resident if in Germany for more than six months or with a permanent abode. Residency affects worldwide income taxation. Short-term rentals under 3 months usually avoid residency rules.
Income & Social Contributions
Residents are taxed on worldwide income, including employment, rental, investment, and business earnings. Employees contribute to health, pensions, long-term care, and unemployment, split roughly 50/50 with their employer. Self-employed individuals are generally exempt.
Capital, Inheritance & VAT
Capital gains and dividends are taxed at a flat rate with an additional solidarity surcharge. Inheritance and gift tax applies to residents and non-residents with assets in Germany. VAT standard rate is 19%, reduced to 7% for essentials like food and books.
Business & Resources
Corporation tax is 15%, plus solidarity and municipal trade taxes, bringing effective rates to 30–33%. Official guidance: Bundeszentralamt für Steuern and UK Government – Living in Germany for UK nationals.
Taxes and Social Contributions in Germany
Understanding Germany’s taxation and social contribution system is essential for residents and businesses alike. This section highlights the key obligations, from social contributions and income taxes to VAT, inheritance, and corporate taxes.
Social Contributions
Employees in Germany make contributions covering health care, pensions, long-term care, and unemployment insurance, shared roughly equally with employers.
Capital Gains and Dividends
Capital gains and dividends are taxed at a flat rate, with an additional solidarity surcharge.
Value Added Tax (VAT)
VAT is levied on goods and services, with a standard rate and reduced rate for essentials like food and books.
Inheritance and Gift Tax
Inheritance and gift tax applies to residents and non-residents with assets in Germany, with rates and allowances depending on the heir’s relationship to the giver.
Corporation Tax
Corporation tax applies to company profits, with additional surcharges and local trade taxes affecting the total rate.
Transfers Affected by the Overseas Transfer Charge
Not all QROPS pension transfers are subject to the overseas transfer charge. However, a 25% charge may apply if you request a transfer on or after 9th March 2017 and certain conditions are met. This includes situations where you are not a tax resident in the EEA and the QROPS is located outside your country of residence, or if you are an EEA resident transferring to a QROPS outside the EEA. The charge may also apply if you have not provided all required information before the transfer is completed, if a previously requested transfer was redirected to a different QROPS, or if your circumstances change within five years of the transfer—such as moving outside the EEA or transferring your QROPS funds away from your country of residence.
Transfers Not Affected by the Overseas Transfer Charge
Certain QROPS transfers are exempt from the overseas transfer charge. You will not be subject to the 25% charge if your pension transfer meets any of the following criteria:
- Your transfer is to a QROPS within the EEA, and you are a tax resident in the EEA (including all EU countries, plus Liechtenstein, Norway, Iceland, and Gibraltar).
- Your transfer is to a pension scheme in your country of residence (e.g., an Australian resident transferring to an Australian QROPS).
- Transfers that are classified as unauthorised payments because they are not recognised transfers.
- You are a former employee of an international organisation that has set up a QROPS specifically for former employees.
- You are transferring to a QROPS which is an overseas public service pension scheme sponsored by your employer.
Taxation on UK Pensions
A Double Taxation Agreement (DTA) between the UK and Germany ensures that pensions, annuities, or similar payments arising in the UK and paid to a German resident are generally only taxable in Germany, the country of residency. This means that if your pension remains in the UK, no UK tax should be deducted at source, provided the DTA provisions are met. In Germany, pension income is subject to tax at the resident’s applicable rates. At SJB Global, we can assist you in obtaining an NT tax code, which allows your UK pension to be paid gross, with taxation applied solely in Germany.
Should I transfer to a SIPP or QROPS?
Should you wish to understand whether a transfer to a SIPP or QROPS would be in your interest and potentially which option would be better suited, please complete the form below, and one of our specialist independent financial advisers will contact you to discuss further. Please note that there is no cost or obligation to take the call.
Stay Up to Date on German Taxes
Navigating Germany’s tax system can be complex, and legislation changes regularly. Staying informed about residency rules, reporting obligations, and tax rates is essential to remaining compliant and making the most of planning opportunities. Regularly reviewing your financial situation with a professional adviser can help prevent surprises and enable timely, informed decisions.
Key Steps for Expats:
- Confirm German tax residency status
- Declare foreign assets (including crypto, if applicable)
- Review income, capital gains, and wealth taxes
- Evaluate pension options (UK and local)
- Check double tax treaty implications
- Consider inheritance and estate planning
- Stay compliant with social security contributions
Resources for Expats in Germany:
Bundeszentralamt für Steuern (Federal Central Tax Office) – official guidance on income, capital gains, and inheritance tax obligations.
UK Government – Living in Germany – practical guidance for UK nationals on taxes, pensions, and residency.
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Dan
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Paul Simms
After having a bad experience worrying about an underperforming portfolio after moving my pension out of the UK (a QUROPS) I decided to make the changeover to it being... read more
Mike Hatrick
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Navigating taxation, pensions, and investment options in Germany can be complex. Speak to an expert advisor to ensure your financial planning is compliant, tax-efficient, and aligned with your long-term goals.
What does the obligation free call include?
An initial 15-minute introduction call explaining our services and how we can help.
We go through a fact-finding exercise so we can then provide a full financial planning report including a personalised retirement forecast with future projections and work out how on track you are.
Lastly, we will provide a recommendation on any areas where we feel you could improve.
Who is SJB Global and meet your adviser
Our regulations, Independence and Fees
Our process from start to finish
Area we help with including:
UK Pension Advice
Retirement Planning
Investment Planning
Tax Planning
US Expat Services
International Estate Planning
Note: Minimum managed assets for SJB Global is £100,000 or currency equivalent.
Licensing & Regulations
Nexus Global specialises in providing a regulatory platform and compliance support to international financial advisers and intermediaries to enable them to meet regulatory requirements to provide their clients with a professional service. The financial advisers trading under SJB Global are members of Nexus Global. Nexus Global is a division of Blacktower Financial Management (International) Limited (BFMI). All approved members of Nexus Global are appointed representatives of BFMI. BFMI is licensed and regulated by the Gibraltar Financial Services Commission (FSC) and bound by the rules under licence number 3647: http://www.fsc.gi/regulated-entity/blacktower-financial-management-international-limited-3647.