German Taxation?

Question

I have been offered a job in Germany, but I have been told that the taxation system there is much higher than the UK, as they use a direct taxation system as opposed to VAT as here in the UK!
Can anyone elaborate on this?

Answer 1

As always it depends but yes, taxes or even more what you have to pay for your social insurance (which always makes up 19.8% of your salary) are higher than in the UK.
Besides that, it all depends on how much you earn, the German tax system has a far stronger progression element, so if you re working in a high paid job, you will pay more tax than you do in the UK, so your net income is likely to be lower. The highest income tax rate is at 42% (plus the 19.8% social insurance you have to pay anyway). But still, there are many ways to deduce your taxable income (if you have children, you re married etc) which logically also deduces the effective tax rate. The composite tax rate in Germany (Western Germany) is at about 34%.
After all, it is still very likely that you ll pay more taxes/social insurance than you do in the UK. Btw, the VAT is currently at 19% but many goods of the daily use (food!) are only taxed at 7%.
Anyway, don t forget that rents generally are a bit lower (apartments are also very likely to be in a better shape, higher average standing than in the UK... but the real estate market varies a lot- the south is far more expensive than the north), food is much cheaper (very competitive market structure) and I d say that with the same amout of money you get in the UK, you can have a higher living standard in Germany. Besides that, Germany also offers other advantages such as a better infrastructe or significantly lower crime rates.
Btw- depending on various factors- you should be able to request to be taxed in Britain if you don t plan to work in Germany for more than 3 years (you ll pay even less taxes than you do now) but that all depends on your contract with the company and many other factors, personally I wouldn t recommend it (especially for health care reasons).

@bostonianinmo: it s not true that doing a tax declaration is compulsory in Germany and when you do, it doesn t take like 8 months till they issue you your final tax assessment, that s a fairy tale...in general, it takes about 4- 8weeks...

Answer 2

Germany has VAT just as the UK does. That's got nothing to do with your job though. They do have income taxes and they are withheld from your pay (PAYE) just as in the UK. The primary difference is that filing a tax return and settling up is mandatory at the end of the year. It takes about 8 months to complete the process as they are 100% audited so you're typically finishing up with one tax year as you get ready to file for the next. The tax laws are so complex that most people hire a tax expert to handle it for them. If you take the job, someone at your workplace can assist you with sorting out a local bilingual expert.

Answer 3

Well it's Germany. It does cost more to live there and scence houses are right on top of eachother and lots of people! it probably will be much higher to live there.