You have secured a contract of employment with a Dresden research institution? Congratulations! Of course, you want your salary to make a positive difference for your available income and potentially also for the immigration office’s evaluation of whether you can sustain yourself and your family. Hence it is worth looking at and understanding the components of your salary, namely the deductions, which result in the difference between your gross and your net salary.
Income Taxation / Duty to declare your income
Benjamin Franklin once wrote in a letter to famous scientist Jean-Baptiste Leroy that “in this world nothing can be said to be certain, except death and taxes.”
For Germany, this much is true: Income tax is deducted automatically from your income from employment and tied to your tax ID. This is a number, which you receive in the form of a letter a few weeks after your local registration. The letter is an important document, which you should keep in a safe place, because a German tax ID stays valid throughout your life and is only issued once.
The amount of income tax deducted from your salary depends on your tax class (Steuerklasse), which in turn depends on your marital status, children and additional jobs you may take on. Six tax classes exist, denoted with roman numerals: tax class I for singles, II for single parents, III/V or IV/IV for married couples and finally VI for a second or third job. If you have children, you are probably eligible for a child tax break and should let your employer’s HR department know when signing your contract or as soon as a new child is born.
While scholarships generally are not considered taxable income (consult the awarding body, if in doubt), your German salary will be taxable if it is above a yearly minimum amount. Note that following the first year of moving to Germany, you are obliged to make an income tax declaration about your world-wide income. Don’t be alarmed: Only your German income will be taxed, but your world-wide income is used to determine the income tax rate to be applied to your German income. Only once you have been living and working in Germany throughout the year, may a declaration not be mandatory anymore. Income tax declarations for a year are always due on 31 May of the following year.
Social insurance deductions
Employees and employers pay mandatory contributions to 5 types of social insurance which serve to protect the current and former working population and their dependents financially from the consequences of 5 basic life risks with the aim of maintaining a stable standard of living if a risk comes to pass. Don’t get too excited: To avail of some of the benefits may require having paid contributions for some time. Only 4 types of social insurance contributions are visibly deducted on your payslip, because your employer covers one branch – accident insurance (Unfallversicherung, UV) – all on his own. The 4 deductions visible are:
- health insurance (Krankenversicherung, KV)
- pension insurance (Rentenversicherung, RV)
- unemployment insurance (Arbeitslosenversicherung, AV)
- long-term care insurance (Pflegeversicherung, PV).
Out of these, pension insurance is the only one which can be transferred to another EU member state later (more information at www.findyourpension.eu).
Follow this link for general information about the social insurance system.
If you are employed by, but not a civil servant at, a public service employer, such as the TU Dresden or many other research institutes, you may be paying into a mandatory or voluntary pension scheme (VBL) apart from the social insurance contributions outlined above (more information at www.vbl.de).
Gross salary – deductions = net salary
If you want to look up your gross and net income from a public service employer online, scan your contract of employment to locate the applicable collective agreement, your salary band, your salary level and, for part-time employees, your percentage share of a full-time equivalent (typically 50%, 65%, 66%, 75% or 100%). Usually at Dresden research institutes, the applicable agreement is TV-L (Ost), the salary band is E13 or higher, the salary level depends on recognition of previous experience (default is level 1). Finally the only other thing you need to know is the percentage contribution to your health insurance. Look up your net income by using the gross-to-net income calculator.
Whom to contact
For queries about your contract of employment or payslip (salary, taxes and other deductions), consult the responsible HR officer first (contact details on your salary statement).
For queries about your income tax and to apply for changes (e.g. of your tax class), contact or visit the Revenue office with a German speaking friend (usually Finanzamt Dresden-Nord or Dresden-Süd, as shown on your salary statement). See here for a list of Saxon Revenue Offices.