According to Google, Germany is ranked as the 8th safest tax haven in the world by The Financial Secrecy Index.
Getting a job basically means you are required by law to pay taxes, so long as you earn more than ungefähr 450 € monatlich.
The first time my Rechnung which breaks down what was charged and how much was paid arrived, I was blown away by all the numbers and seltsame Worte. It was incredible, to go through the papers and see how much tax I paid for the month and what dept was sorted. Rentenversicherung, Arbeitslosenversicherung, Krankenversicherung and Pflegeversicherung, Kirchensteuer, Lohnsteuer usw.
First of all, when you sign a job contract, you are asked to submit a bunch of papers. One of such papers is gotten from the Finanzamt and it includes your Steuernummer and Klasse. The tax class works in quite an interesting method. Basically, whatever class you choose determines how much tax you pay.
Now, choosing a tax class depends on…wait for it…your relationship!
So if you are single or separated you are class 1. Class 2 is for single/separated with a child which entitles you to a child allowance. Class 3 is for married or widowed workers (if spouse is dead for a year). Class 4 is for married people who both work. Class 5 is for married persons who would normally be in 4 but partner is in 3. Class 6 is for workers with more than one job. Completely confusing oder? Hell most Germans find it confusing too so hey! So you basically have the choice within the options to choose what works for you. Beispiel : I am a class 5 while Gorgeousness is a 3. So since he earns more than I do, he pays less tax and I pay more of it, giving us the chance to pay all our bills with no wahala. Head banger indeed! There are a few websites that helps you calculate the tax percentages. Back in Nigeria, I had no idea how my tax worked or what the laws required me to pay. I just got my pay after my tax was paid. Was I in any class? I have no idea. Will probably investigate and compare! Ha, Nancy Drew much?
In den USA, when you buy stuff in a store for example, tax isn’t included until you get to the counter and this drives me totally bonkers. I like to pick up an item and know that whatever the price tag is, is what I pay at the counter! Good going Europa!
I think it’s amazing how the tax system works. It is probably way better in the other 7 Länder before Germany on that safe tax haven list. I mean as great as the German system is, the country ranks 8th on said list….go figure!