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Taxation in Germany.
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sharter



Joined: 25 Jun 2008
Posts: 878
Location: All over the place

PostPosted: Sun Nov 14, 2010 9:19 am    Post subject: Taxation in Germany. Reply with quote

I teach for an oil company in Libya and worked in a merchant bank before I changed careers and got into ELT. As I have a son in Poland only 2.5 hours from Berlin, I've been thinking about making a move to Germany. It makes sense for me and I like the country and people. I have 15 years experience and am qualified. However, I know nothing about German taxation and many of the job ads don't specify if they pay gross or net salaries. How much tax would you pay on 3000 Euros a month? I make more than that net per month at the moment and have free BUPA, accommodation and food but I wouldn't mind taking a pay cut for some quality of life. As a teacher, I'd be very appropriate for banking / petrochemical companies, so I'm sure that finding a position will not be a problem. In fact, I'm open to any offers and need only give 28 days' notice. The salaries I've seen look suffice (not great) if they are net. Any opinions / info / offers would be much appreciated. Thank you in advance.
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sharter



Joined: 25 Jun 2008
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PostPosted: Sun Nov 21, 2010 9:47 am    Post subject: erm Reply with quote

Thanks for all the help. Someone must know surely!
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Hod



Joined: 28 Apr 2003
Posts: 915
Location: Home

PostPosted: Sun Nov 21, 2010 3:19 pm    Post subject: Reply with quote

German tax is humungously complicated. Estimates can be calculated using German Tax Calculators (or Steuer Rechner) online, e.g.

http://www.aktuell-verein.de/brutto-netto-rechner.php

Using the above link, Iíll assume:

- You are Tax Class 1 (single, no kids in Germany).
- You donít want to pay Church Tax or Social Security.
- You will pay your own health insurance.

A gross income of Ä3000 equates to a net of about Ä2400.

There is also some sort of pension payment freelance teachers are supposed to pay. Maybe a freelance teacher can advise.

German health insurance is nearly as complex as tax. I pay Ä250 a month.
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MrTeacherTraining



Joined: 18 Nov 2010
Posts: 1

PostPosted: Tue Nov 23, 2010 9:45 pm    Post subject: Re: erm - pay expectations in Germany Reply with quote

sharter wrote:
Thanks for all the help. Someone must know surely!


Just saw this.

First off, most teaching in Germany is on a freelance basis so no fixed contract, no deductions split with the employer and no paid holiday. Some contract positions do exist but often are less than advantageous for the teacher. This isn't intended to criticise schools per se - clients haven't revised their notions of fair pay for lessons in 20 years, adjusted for inflation.

So your quesion is: how much is a freelancer, at least in the short to medium term, working through schools and agencies rather than as a sole agent acquiring clients and cutting out the middleman, likely to earn?

You posit 3K as a ballpark figure.

EUR 3000 gross pcm would by my (admittedly weak) reckoning be EUR 37.50 per 90 minute lesson, at 20 lessons per week (i.e. 4 90 minute classes per day, 20 working days per month, Mon-Fri) If you want to spend less than 6 hours per day in the classroom, your hourly rate would obviously need to be higher.

EUR 37.50 is already at what I would call the high-end of typical freelance teaching rates in the parts of Germany I am familiar with (Hamburg and Berlin). I know that it is possible to charge more than this per lesson; in my experience, however, it isn't typical.

Typical "mid-market" rates (gross) would be anywhere between EUR 25-40 per 90 minute lesson.

I would say a more typical gross income for freelance teachers in Germany is around 2k.

You can expect (other things being equal) to pay out around 30-40% in deductions and other costs, being:

Income tax (Einkommensteuer)
Social Insurance (Pflegeversicherung)
State Pension (Rentenversicherung)
Solidarity Tax (to pay for German Reunification)
Church Tax (Kirchensteuer - if you declare a religion - to avoid this, you would have to officially leave your church: in triplicate)
Health Insurance (Krankenversicherung - different from Social Insurance)

Deduct that 40% to be entirely legal (granted, tax can be reduced depending on expenses, but that money's gone somewhere too) and you have about EUR 1200 net. From which goes rent (depends on where you are and what you need, but EUR 300-600 likely), utilities and other living costs, travel etc.

I strongly recommend contacting one of the local English Language Teacher's Associations in Germany - the closest one to where you plan to work. They can give you a more accurate local picture and act as a network. If you join, the fee is tax deductible. You can find a list of ELTAs at http://www.eltas.de/data/index.php/partner-organizations

Hope this is clear and helps.
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sharter



Joined: 25 Jun 2008
Posts: 878
Location: All over the place

PostPosted: Wed Nov 24, 2010 1:09 pm    Post subject: Thank you Reply with quote

That's more like it. Many thanks. Having a son in a big city in western Poland, which is now bloody expensive, I couldn't afford to work in Germany by the looks of it. Poznan house prices are now higher than those per square metre in Berlin. Nuts. Berlin's a great place, so I'll have to look into this some more. Thanks folks.
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scot47



Joined: 10 Jan 2003
Posts: 12165
Location: Ultima Thule

PostPosted: Thu Nov 25, 2010 1:16 pm    Post subject: Reply with quote

Berlin has certain attractions but what puts me off is the fact that it has become the "Pink Capital" of Europe. I preferred the days when my part I was the "Hauptsadt der DDR"
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Hod



Joined: 28 Apr 2003
Posts: 915
Location: Home

PostPosted: Fri Nov 26, 2010 11:13 pm    Post subject: Reply with quote

MrTeacherTraining wrote a good list of deductions. Iíd like to add some points.

Income tax (Einkommensteuer)
No getting away from this, although most Germans, whether skinflint freelance or wealthy employed, will complete an annual tax return to claw some taxes back.

Social Insurance (Pflegeversicherung)
Employees have no choice but to pay. I work freelance and, without breaking any laws, choose not to pay this. The downside is I wouldnít get full unemployment benefit. Oh dear.

State Pension (Rentenversicherung)
I definitely choose not to pay this. I see too many German pensioners driving Mercs. They know what I know Ė in twenty yearís time, the money will have run out.

Serious point for a number of professions including freelance teachers, who I think must pay this. Donít quote me, but I believe itís 19.5% of your gross salary, i.e. a lot. Iíd recommend doing some research and then taking the risk and not paying. I just donít believe anyone could afford it.

Solidarity Tax (to pay for German Reunification)

Have to pay this one too, Iím afraid. Like anyone whoís spent a few hours in an old DDR backwater, I look at the 20% unemployment figures and wonder just where does the money go?

Church Tax (Kirchensteuer - if you declare a religion - to avoid this, you would have to officially leave your church: in triplicate)
Simplest one of the lot. Just donít tick the Religion box when you register.

Health Insurance (Krankenversicherung
- different from Social Insurance)
Whereas the most complicated comes last. In 2009, the rules changed and everyone had to have health insurance from a Germany-approved company. From first-hand experience, Iíve seen this rule enforced, with non-EU citizens rejected when making visa applications at the Foreignersí Department (Auslaenderbehoerde).

German insurance isnít cheap. But if youíre EU, youíll never need set foot in the Auslaenderbehoerde. In fact, as an EU person, you could live and work in Germany with no insurance at all, but itís not the wisest option (neither is relying on an E111 / EHIC card). Instead, go for a yearly policy with BUPA or A La Carte. By all means, go for a German insurer, but the premiums will start at 200 a month. Either way, get expert advice.

-----

Sharter, you probably know about the Berlin Ė Warsaw train service, stopping at Poznan amongst other places.


Last edited by Hod on Fri Nov 26, 2010 11:26 pm; edited 1 time in total
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Hod



Joined: 28 Apr 2003
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PostPosted: Fri Nov 26, 2010 11:21 pm    Post subject: Reply with quote

scot47 wrote:
Berlin has certain attractions but what puts me off is the fact that it has become the "Pink Capital" of Europe. I preferred the days when my part I was the "Hauptsadt der DDR"


Come on, Berlin's not knee deep in such types. Maybe you're going to the wrong parts?
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sharter



Joined: 25 Jun 2008
Posts: 878
Location: All over the place

PostPosted: Sat Dec 04, 2010 12:02 pm    Post subject: yep Reply with quote

I know the train well as my son lives in Poznan, which is now more expensive than Berlin. EFL Poland is over if you want a life. 800 Euros a month is barely a living wage. IH pay about 550. I do a rotation out of Libya.
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ioamosalerno



Joined: 09 Aug 2011
Posts: 40
Location: Belgium

PostPosted: Sat Oct 29, 2011 7:58 am    Post subject: Reply with quote

hallo, quick question about taxes/social insurance and what not:
Is it possible to file German taxes from the USA? or, is it possible to file taxes immediately after the turn of the year, and then leave the country with no problem? I am thinking about staying in Germany and teaching for 2 months (Nov - Dec), and then returning to the US at the turn of the year. The only thing is that if I do so, I'm worried about filing taxes. I will no longer have an address in Germany (or anywhere in Europe for that matter) to receieve correspondence from the tax authorities. I am a freelancer, and I have heard rumors that I'm not compelled to pay taxes if I earn under a certain amount, and I have also heard that I can totally (and legally) avoid paying into social insurance if I am only here for less than 2 years.... thanks for any help
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Tina23



Joined: 16 Mar 2005
Posts: 37
Location: Dusseldorf

PostPosted: Tue Jan 03, 2012 8:02 pm    Post subject: Reply with quote

Quote:
State Pension (Rentenversicherung)
I definitely choose not to pay this. I see too many German pensioners driving Mercs. They know what I know Ė in twenty yearís time, the money will have run out.

Serious point for a number of professions including freelance teachers, who I think must pay this. Donít quote me, but I believe itís 19.5% of your gross salary, i.e. a lot. Iíd recommend doing some research and then taking the risk and not paying. I just donít believe anyone could afford it.


Trust me, you don't want to do this! I work as a freelancer and for several reasons (I was ill for some months, getting unemployment benefits whilst working about 5 hours a week and therefore not paying the Rentenversicherung because I assumed, wrongly, that they were being paid directly by the social security) I didn't pay into the system. They have now told me I should have paid, and I've to pay it all back... Someone working in any sort of teaching capacity, whether teacher, yoga instructor or tennis coach, HAS to pay the Rentenversicherung! It really p*sses me off, as the money could be much better invested in some sort of private pension scheme, but that's the way it is.
And with the money I'm earning as a freelance teacher of both German and English, I can definitely hardly afford it!
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the_otter



Joined: 02 Aug 2010
Posts: 134

PostPosted: Wed Jan 04, 2012 2:08 pm    Post subject: Reply with quote

I've just seen this thread. So many helpful posts! Thanks, people. Before now I've always found myself blanking out when someone tries to explain the German taxation system to me.
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Hod



Joined: 28 Apr 2003
Posts: 915
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PostPosted: Wed Jan 04, 2012 5:26 pm    Post subject: Reply with quote

My words quoted above deal with two topics:

1. State Pension (Rentenversicherung) Ė If youíre fully employed with a contract, health insurance, etc, you must pay this as part of the overall Sozialversicherung. This costs a lot, but you need to pay it to qualify for any sort of unemployment or other benefits. You get a pink card with an insurance number in the post.

If youíre a freelancer, you do not have to pay any Sozialversicherung.

2. This 19.5% special freelance teacher and selected other jobs tax, which I donít really understand, is different from Rentenversicherung.
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Tina23



Joined: 16 Mar 2005
Posts: 37
Location: Dusseldorf

PostPosted: Thu Jan 05, 2012 12:30 am    Post subject: Reply with quote

I don't think anyone understands the tax system over here! Hell, I was born here and have spent half my life in this country and I STILL don't understand it. Hence my walking right into this situation I'm in now, paying back a whole year's worth of pension payments.
As a freelancer you can normally choose to pay this, but as a freelance TEACHER you have no choice, you have to pay. The guy I spoke to at the Deutsche Rentenversicherung was very clear about that. It's stated
http://www.deutsche-rentenversicherung.de/SharedDocs/de/Navigation/Rente/Berufsgruppen/pflichtversicherte/Selbstaendige_node.html here as well.
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artemisia



Joined: 04 Nov 2008
Posts: 867
Location: the world

PostPosted: Thu Jan 05, 2012 2:56 am    Post subject: Reply with quote

It's a labyrinth. The enactment of an old law (1913? From the days of the Kaiser!!) has only made things worse. Of course the Govt. is just grabbing money from wherever it can and must've been thrilled to stumble across that one. I was pretty sure that nearly 20% tax was for social security for freelance teachers, and this confirms it.

Tina23, you may be stuck with the current debt to pay back but can you take on translation work, thereby changing your work status? Or will doing any amount teaching still be a problem?
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