Germany: personal tax guide

When German tax residence starts

A dwelling that you retain in circumstances showing it will be maintained and used can create German residence. Habitual abode is a separate test: a continuous stay exceeding six months normally counts from its beginning, ignoring brief interruptions, with a specific exception for certain private visits. This is not simply an annual 183-day switch.

Residents are generally within income tax on worldwide income; nonresidents remain taxable on specified German-source items. If another country also claims residence, examine the actual treaty and its tie-breaker. Local registration, a residence card and a foreign certificate are evidence, not substitutes for the tax tests.

The 2026 income-tax scale

The scale applies to taxable income after the relevant deductions, not gross salary or company turnover. Eligible jointly assessed couples use income splitting; the table is the individual scale. The progressive bands use statutory formulas rather than one flat rate on the whole income.

At €100,000 taxable income, the 2026 formula gives €100,000 × 42% − €11,135.63, rounded down to €30,864 of income tax. This example excludes the solidarity surcharge, any church tax, social contributions, credits and special income rules.

Dividends, interest and gains are not all ordinary income

Private capital income commonly uses the 25% separate rate, plus 5.5% solidarity surcharge on that tax: 26.375% before any church tax. The statutory savings allowance is €1,000 per person or €2,000 for qualifying jointly assessed spouses. A €10,000 taxable amount after allowances produces €2,637.50 at that combined rate, before other relief.

Exceptions matter for business assets, related-party financing and qualifying substantial shareholdings. The §17 regime can apply where a person held at least 1% of a company at some point in the preceding five years. Foreign funds also have their own distributions, advance-income and partial-exemption rules. Classify the asset before applying a rate or netting a loss.

Asset cost basis on arrival

Ordinary taxable securities gains normally use acquisition cost, including pre-residence purchases. A specific rule for substantial shareholdings can substitute the departure country’s exit-tax value where the statutory conditions are proved.

Illustration: where ordinary historical-cost treatment applies, €100,000 cost, €300,000 arrival value and €350,000 sale proceeds produce a €250,000 gain before costs and reliefs. The €200,000 pre-arrival appreciation is not automatically excluded.

• Section 20(4) requires acquisition cost and sale proceeds in foreign currency to be translated into euros at their respective transaction dates.
• Section 17(2) requires the pre-arrival appreciation to have been subject to a foreign tax comparable to German section 6 exit tax; the substitute value is capped at market value. This is not a universal arrival revaluation.

Property, crypto and the private-disposal rules

Private property disposals generally need review if acquisition and disposal are no more than ten years apart. A qualifying own-home exception depends on actual use, including the statutory sale-year and preceding-two-calendar-years alternative. Rental activity, development or trading can change the analysis.

Other private assets can fall within a one-year disposal period under §23, with an aggregate annual €1,000 gain threshold. That is a threshold rather than a deduction: reaching it can make the whole relevant gain taxable. Crypto transactions require asset and activity classification; business trading, staking/lending receipts and token exchanges should not be collapsed into a blanket “tax-free after one year” statement.

Foreign companies: residence first, CFC second

A foreign company managed from Germany can itself become German tax resident. If it genuinely remains foreign, CFC rules can still attribute income to German resident controllers without a distribution. These are different routes to taxation and should be tested separately.

The ordinary CFC control threshold is more than half of voting rights, capital, profits or liquidation entitlement, alone or with connected persons. Low taxation means less than 15% under the statutory computation. The active-income catalogue has detailed related-party trading and service exceptions; real activity in an EU/EEA state can support the specified substance exception only on its own conditions. A mailbox and outsourced paperwork do not establish that exception.

Departure can tax assets you have not sold

AStG §6 can deem qualifying company shares sold at market value when unlimited liability ends, shares are transferred without consideration to a nonresident, or German taxing rights are excluded or restricted. Its individual residence lookback is at least seven of the previous twelve years; §17 shareholding conditions must also be met.

The current investment-fund rules require a separate review where gains are positive and a person held at least 1% of the fund within the previous five years, or the departing holding in that fund has acquisition costs of at least €500,000. That is not a blanket €500,000 market-value exemption for an entire portfolio.

Seven annual instalments can be requested under §6, generally with security; disposals, large distributions and reporting failures can accelerate payment. A temporary-return relief has conditions and a normal seven-year period with possible extension. It is not an automatic cancellation just because the person later comes back.

Arrival and departure evidence to prepare

Before the move, inventory homes, travel, family location, employment, directorships, share percentages, historic acquisition costs and unrealised gains. Obtain defensible valuations where an exit or arrival rule calls for them. A valuation prepared after a sale negotiation can be harder to reconcile with the earlier facts.

In the transition year, retain foreign income and tax certificates as well as German payroll records. Treaty exemption, progression and credit mechanisms differ by income and treaty; a foreign tax payment is not automatically fully creditable. The return needs a dated explanation of which period and which taxing right each item belongs to.

Filing, payroll and related obligations

Salary withholding is a collection mechanism, not proof that every resident has completed the annual assessment. Foreign investment income, rental activity, multiple income streams and business participation can create filing work beyond payroll. The normal unrepresented annual-return rule is seven months after year end, with adviser rules, official extensions and special cases assessed separately.

Church tax, compulsory social insurance, inheritance/gift tax, property transfer charges and VAT are distinct from the headline income-tax scale. This guide does not assign one universal social contribution percentage: employment status, insurance category, contribution ceilings and international coverage determine it. Before signing an engagement, specify which of these additional workstreams is included.