Page 23 - CEE Tax Guide 2025

Personal income tax /
VAT options in Germany Applicable / limits
Social security system
Distance selling
Call-off stock Individuals are subject to unlimited income tax
liability if either their domicile or habitual abode
VAT group registration
is located in Germany (tax residents). In this case,
Cash accounting – yearly EUR 800,000/year they are taxed on the basis of their worldwide
amount in EUR (approx.)
income (universal principle). Non-resident tax
Import VAT deferment – on 26th of the second payers are taxed on the basis of their domestic
month after import
income (territorial principle). Resident tax payers
Local reverse charge – in some specific can deduct also specific living expenses and
cases (in particular, extraordinary expenses.
construction work, gold)
The taxable income of each individual is subject
Option for taxation to the tax schedule. Spouses may apply for the

letting of real estate – for commercial real estate spouses schedule.
Capital income is taxed with a final tax of 26.375%
supply of used real estate
on a gross basis. Dividends in the business assets
VAT registration Registration as entrepreneur are taxed with the partial income method, i. e. 60%
threshold is mandatory; Thresholds for
small business regulation: less of the profit is taxable. The sale of real estate is tax
than EUR 25k in preceding exempt i. a. after a 10 years private if held in the
calendar year and less than EUR private assets.
100k in ongoing calendar year.
The German social security system has five
The VAT rate in Germany is 19%. A reduced rate of 7% pillars (health insurance, pension insurance,
applies to certain alimentary and other selected unemployment insurance, nursing care insurance
items. In addition to VAT, there are various excise and accident insurance). The contributions are
duties on imported goods, as well as real estate evenly split between the employee and the employer
transfer tax (see below). with the exception of the accident insurance, which
The transfer of real estate is taxed. In order is only paid by the employers. The contributions
to mitigate this tax often complex share- or interest amount in 2025 as follows:
deal structures are set up, and less than 90% of the a) health insurance 14.6% (to be split evenly),
respective shares or interest in the real-estate in some cases an additional contribution
holding entity are transferred. Additionally, specific (on average 2.5%) is due and also split evenly;
exemptions may be applicable. b) pension insurance 18.6% (to be split evenly);
The rate differs depending on the state, in which c) unemployment insurance 2.6%
the real estate is located. The rates range between (to be split evenly);
3.5% and 6.5%. d) nursing care insurance 4.2% (in case of children
Germany also levies excise taxes (some harmonized less, contribution to be split evenly);
by EU law, others not). e) the accident insurance paid only be the employer.

Wage related taxes in Germany Minimum wage Average wage in private sector
in EUR in EUR
2,222 266,800 4,634 621,200

Total wage cost 2,688 121.00% 5,605 121.00%
Employer´s social security contributions 466 20.95% 971 20.95%
Gross salary 2,222 100.00% 4,634 100.00%
Employee´s income tax 168 6.22% 698 15.06%
Employee´s social security contributions 479 21.55% 999 21.55%
Net salary 1,605 72.00 2,937 63.00%

Prof. Dr. Adrian Cloer
Attorney/Tax Advisor, Partner
Phone: +49 151 56 02 16 96
E-mail: adrian.cloer@mazars.de

Central and Eastern European tax guide 2025 Forvis Mazars 23