The German Wage Tax System is differentiating between 6 Tax Categories, depending to the linving-circumstances of the employees.
Tax Category I: Single, separated or married not living together who don’t fall into the category II or III.
Tax Category II: Single or separated people living with their child, who are entitled to a child's allowance.
Tax Category III : For people who are married, husband and wife are living together. Very interesting for people who are married and one of them has a high income while the other one has no income or a low income. Ideally the person with the low income will have Tax Category V and the other Tax Category III.
Tax Category IV : For people who are married, husband and wife are living together. Ideally for married employees while both of them receive similar wages. Both will then have Tax Category IV.
Tax Category V : For people who are married, husband and wife are living together. One of them has a Tax Card of Category III (form more information refer to Tax Category III).
Tax Category VI : For employees who have more than one employer, receiving wages from different employments will need a second or third, or… tax card of Tax Category VI. Ideally the employment with the lower income will get Tax Category VI.
Employees who are a member of a church will have to pay church tax. The church tax rate is depending to the state. In most cases the rate is 9 % from the Wage Tax.
The Social Insurance Contributions are generally paid half by the employee and half by the employer. These contributions are obligatory, limited to a maximum fee, containing the following contributions:
Pension Insurance: 19.6 % of the Gross Wage, will be paid by the employee and by the employer together, half by half.
Unemployment Insurance: 3.0% of the Gross Wage, will be paid by the employee and by the employer together, half by half.
Health insurance: 15.5% of the Gross Wage, 7,3% will be paid by the employer and 8,22% by the employee. If the salary of an employee is higher as a specific limit of 52.200 € (2013), the employee will be able to change into a private health insurance.
Health Insurance add on fee: The Health insurance add on fee of mostly 0.9 %. The employee itself has to take care about this fee. The fee can vary, dependent to the insurence company since 1st of January 2015. Find below the Health insurance add on fees from the 20 biggest health insureance companies:
AOK Bayern: 0,9%
AOK Baden-Würtemberg: 0,9%
AOK Hessen: 0,9%
AOK Niedersachsen: 0,8%
AOK Nordost: 0,9%
AOK Nordwest: 0,9%
AOK Plus: 0,3%
AOK Rheinland-Pfalz/Saarland: 0,9%
AOK Rheinland/Hamburg: 0,9%
Bahn BKK: 0,9%
Barmer GK: 0,9%
BKK Mobil Oil: 0,8%
Deutsche BKK: 0,9%
IKK Classic: 0,8%
IKK Südwest: 1,2%
KKH Kaufmännische Krankenkasse: 0,9%
SBK - Siemens BKK: 0,9%
Techniker Krankenkasse: 0,8%
Care Insurance: 1.95% of the Gross Wage, will be paid by the employee and by the employer together, half by half. The amount of Care Insurance will be reduced for employees having a child.
An employee with an yearly income of 8.130,- € (2013) won’t have to pay income tax, for married employees the limitation will be 16.260,- € (2013). In 2014 the limitation will be 8.354,- € for singles and 16.708,- € for a married couple.