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Banks & Taxes in Germany
A Comprehensive Guide about Opening a Bank Account and Managing Your Taxes
If you move to Germany, setting up a local bank account where you can manage your finances should be a priority. You must have proof of a permanent address before you can do this. In this Banks and Taxes in Germany section, we explain how to open a bank account, plus Germany’s tax system, which has treaties with more than 100 countries.
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Read this section to top up your knowledge on bank accounts and the tax system in Germany. There are several important facts to know about—bear in mind you might need to earn a certain amount every month so you can meet a bank’s minimum deposit requirements. All German banks offer current and savings accounts.
And although many Germans are quite traditional when it comes to managing their finances, it is possible to bank online, and we explain how. We also cover tax brackets, bank transfers, and some of the best banks you can use.
How to Open a Bank Account in Germany
If you are planning to relocate abroad, you should consider how to open a bank account in Germany for non-residents. Setting up a German bank account might not be absolutely necessary, as you can probably get away with managing your finances solely online by using your account from back home. Despite this, if you want to save on fees for international payments, you can open a bank account in Germany with one of the country’s many reliable institutions.
When you arrive in Germany, if you simply want an account with a reliable, trustworthy bank, you can join a Sparkasse—these are banks run by the state. Joining allows you to withdraw cash from any Sparkasse in the country with no extra charges. Another plus point is that there are several branches of these banks in towns and villages, so you should be able to visit one in person if you need to.
Nevertheless, one downside of Sparkassen is that, as an expat, you might run into bureaucratic problems. These banks do offer modern banking options, like online banking and mobile apps. But be prepared to pay about 3 EUR (3.40 USD) per month if you want an individual Sparkasse account with online banking available.
In Germany, one of the most common forms of transaction is a bank transfer (Überweisung). You need the following information to complete a bank transfer:
- Name of the account holder.
- Account number (Kontonummer) or an IBAN code for international transfers.
- Bank routing number (Bankleitzahl) or a BIC or swift code for international transfers.
- Name and location of the bank.
The same procedure applies to schedule a standing order (Dauerauftrag). A standing order is a regular payment you can set up to pay other people, companies, or send money to your other accounts. This sort of payment can be changed or canceled whenever you want, while a direct debit is set up by the organization to which you are making a payment.
Another common method for financial transactions is the Einzugsermächtigung (direct debit authorization): you give permission to the recipient’s bank to withdraw an agreed sum from your account on a regular basis.
This authorization is used for regular payments where the amount varies (e.g., for phone bills and other utilities). You can revoke the permission at any time and it is also possible to reverse recent payments.
The way electronic financial transactions are processed is currently changing throughout Europe. The Single Euro Payments Area (SEPA) was created to establish one electronic payment system across the entire EU (including Iceland, Liechtenstein, Monaco, Norway, and Switzerland).
This means that since 1 February 2014, the IBAN and BIC are required for all bank transfers and direct debits in these countries, including domestic transfers. A money transfer within Germany takes two or three business days and is usually free.
Opening a Bank Account Online in Germany as a Non-Resident
It is possible to open a bank account with a Germany-based bank as an expat and non-resident before you claim Permanent Resident status. Nevertheless, you will have to be in Germany to do so.
If you prefer to open an account as a non-resident at a traditional, physical bank, and get face-to-face advice and service, be aware of any relevant bank fees or minimum deposits you might have to pay. You might need to be employed so you can make deposits of at least 1,000 EUR (1,110 USD) per month at banks that require this level of minimum monthly deposit.
There are alternatives to brick and mortar banks, though. Opening a mobile account with some of the best online banks available in Germany might be a good and fast option. There are several excellent services which allow you to receive your salary and organize your finances via your mobile device. However, the process might be easier overall if you speak and understand German.
If you are going to sign up for a bank account online, you will need to prove your identity. For this, you can do the PostIdent.
- First, you need to take your passport, national ID card, or student registration to a local post office in Germany with your printed identity verification bank form.
- You will have to sign a document there which will be sent to the bank.
Your bank should cover the cost of the PostIdent process. You can also confirm your identity online with Deutsche Post. If you have access to a lawyer, they can also verify your identity. Your lawyer will need the same identity verification form plus one of the forms of ID mentioned above.
The Best Online Banks in Germany
If you need to apply for a bank account online and/or you want an account with digital services, it is worth researching the followings banks:
- Fidor Bank
- Deutsche Bank
You might also be able to open an account with these banks before you arrive in Germany. If you don’t want to navigate bank account terms in the German language, Comdirect and DKB might not be for you—they generally don’t offer an English sign-up process.
Bank Fees and Minimum Deposits
As mentioned earlier in this section, some local German banks will require you to deposit a minimum amount each month and this amount can reach 1,000 EUR (1,110 USD) or more. But if you have a job in Germany that pays you at least this amount, you will be fine! The minimum wage is 1,584 EUR (1,450 USD) a month or 19,008 per year (20,700 USD).
Many banks will charge you a small fee each month to use their services. Most currently have negative interest rates too, making it hardly worth saving, as your money will not accumulate interest. However, monthly fees are usually no more than 5 EUR (5.60 USD). Netbank and Postbank charge 4.85 EUR (5.40 USD) and 1.90 EUR (2.10 USD) per month respectively.
No-Fee Bank Accounts in Germany
- Commerzbank is free unless your balance falls below 1,200 EUR (1,360 USD)
- ING DiBa
Students’ “Blocked” Accounts
Foreign students coming to Germany need to demonstrate they can support themselves financially while they study in the country. Part of this often involves opening a “blocked” bank account and depositing at least 10,236 EUR (11,390 USD) in it. Students cannot access this account until they are in Germany, and then they can withdraw up to 853 EUR (950 USD) per month.
Required Documents to Open a Bank Account as a Non-Resident
Once you are living in Germany, it should be easier for you to set up an account with a local bank or Sparkasse. Remember, you will need to verify your identity and be subject to a credit check. To apply for a bank account in Germany, you need the following documents:
- Your ID card or passport
- Proof of address registration or Meldebescheinigung (a registration certificate you must get within 14 days of living at your new address in Germany)
- German tax ID number
You may also need:
- a residence permit;
- an employment contract.
Students will require:
- proof of home address;
- a foreign tax identification number.
Find out with your chosen bank which other documents you need so you do not waste your time. If you are already employed, you might need to take pay stubs or a copy of your employment contract.
The Best Banks in Germany
It is not easy to grow your savings in German banks at the moment. Interest rates at numerous German banks are in negative numbers, partly due to the European Central Bank’s low interest rate policy. In fact, the average interest rate at banks in Germany is only 0.14%. So, you might want to choose your bank based on its convenience, additional services—such as internet banking—and/or reputation.
The Top Banks in Germany Listed
- Deutsche Bank
- KFW Bankgruppe
- DZ Bank
- Landesbank Baden-Württemberg
If none of these banks seem suitable, you could look into German Sparkasse branches that are located throughout the country.
International Banks in Germany
Frankfurt is home to the most foreign banks, including US giant Goldman Sachs and the Royal Bank of Scotland, living up to its reputation as the financial epicenter of Germany. Below you can see more international banks in different German cities:
- BNP Paribas
- Credit Lyonnais
- ING Group
- Merrill Lynch
- State Bank of India
- Banco Santander
- Barclays Bank
- Hanseatic Bank
- Lloyds Banking Group
- Citibank Privatkunden
- Mizunho Bank Ltd.
- MUFG Bank
- Sumitomo Mitsui Banking Corporation
- ICICI Bank
- UniCredit Bank AG
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What is the Tax System in Germany?
The tax system in Germany is what is called “progressive”, meaning the amount you pay will increase the higher the tax bracket you fit in to. Tax rates range from 0% to 45%. Married couples who file their taxes together also benefit from more favorable rates than single taxpayers.
The tax year runs from January 1st to December 31st and you can file your tax returns up to May 31st.
What is the Income Tax in Germany?
The data below shows individuals’ eligibility to contribute PAYE tax in Germany.
|Up to 9,408 EUR (10,465 USD)||No tax|
|9,408 EUR and over||14% tax|
|57,051 and over||42% tax|
|270,500 and over||45% tax|
A married couple with a joint tax return and an annual income lower than 18,816 EUR (20,930 USD), will not be eligible to contribute PAYE taxes in Germany.
If you earn more than 57,051 EUR (63,600 USD) but less than 270,500 EUR (300,890 USD) per year, your earnings are subject to a tax rate of 42%. For incomes over 270,500 EUR (300,890 USD), the highest tax rate of 45% applies. You can calculate your income tax with this official wage and tax calculator.
In addition to the Lohnsteuer (the wage tax that your employer deducts from your salary each month), you have to pay the so-called “solidarity surcharge.” This is 5.5% of your basic income tax. Those who pay up to 972 EUR (1,100 USD) in income tax or up to 1,944 EUR (2,200 USD) if you are a married couple, do not have to pay this additional charge.
The solidarity surcharge is expected to generate 20 billion EUR (22.25 billion USD) for the German federal government in 2020. The surcharge was brought in in 1991 to cover the costs of the reunification of the former East and West Germany and the Gulf War. It also supports countries in central, southern, and Eastern Europe.
This tax was supposed to be temporary, but despite arguments to abolish it there hasn’t yet been a decision to terminate it. In November 2019, the federal cabinet proposed eliminating the tax for 90% of people who currently pay it while another 6.5% would see their surcharge reduced. The charge has already been reduced from 7.5% in 1997 to the 5.5% rate levied today.
Types of Taxes in Germany
Your tax obligations in Germany will vary depending on if you are employed or self-employed, single or married, and your income. If you are going to work for a company then you will pay income tax and social security contributions, but you don’t need to worry about filling out forms because your employer does that for you. If you are self-employed, you will need to do your own tax returns.
Taxes for self-employed people in Germany are quite straightforward. You must inform the German tax authorities and file a tax return once a year. The process is as follows:
- First, register with your nearest tax office in Germany. Search for your nearest office on the Federal Central Tax Office’s website.
- Next, fill in the Fragebogen zur Steuerlichen Erfassung registration form and submit it at the local tax office.
- Receive your German tax number (Steuernummer) and VAT number two to four weeks later.
- Include your tax number on any invoice you send.
- File your tax return online via Elster, “your online tax office.”
Visit bundesfinanzministerium.de for explanations and help with filing your tax return.
If you were ever christened or baptized, you are automatically eligible to pay church tax (Kirchensteuer) in Germany unless you opt out. Church Tax is 8 or 9% of your annual income tax liability, depending on where you live.
To opt out, you must technically “leave the church.” Just deciding to stay at home on a Sunday instead of going to church is not enough. You have to leave officially—this involves going to your Standesamt (civil registration office) or Amtsgericht (official court) and paying up to 31 EUR (35 USD), as well as bringing your ID and Meldebescheinigung (certificate of registration of living at an address in Germany).
If you are married, you must also bring your Heiratsurkunde (marriage certificate). Note that if you receive a letter or questionnaire from the church-tax office or Kirchensteuerstelle, you are not legally obligated to complete and return it.
Tax-relevant information on employees, such as how many children they have or their religious affiliation, is registered on their electronic tax card (elektronische Lohnsteuerkarte).
You just need to provide your employer with your tax identification number and date of birth. Then they can access all your relevant tax information from the German central revenue service (Bundeszentralamt für Steuern) and add you to the company payroll.
The national corporate tax rate in Germany is 15%. Other corporate taxes are:
- Municipal tax: 14-17%
- Real property tax: 0.35% multiplied by the local coefficient
- Real estate transfer tax: 3.5-6.5%
Anyone working in Germany pays 14.6% of their salary to social security to cover necessities, such as health insurance, and invalidity insurance. The contributions to that 14.6% are as follows:
- Pension insurance is 18.7%, of which 50% is paid by the employee.
- Unemployment insurance is 2.55%, of which 50% is paid by the employee.
- Health insurance is 14.6%, of which 50% is paid by the employee.
- Long-term care insurance, which supports those who have a severe long-term health condition, makes up 3.05%.
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