Expat Tax in Germany—Laws, Regulations, and Benefits for UK Expats

This article provides a clear overview of the tax obligations facing UK expats in Germany, including applicable income and capital taxes, filing requirements, and how your residency status is determined for tax purposes in 2025.

Do UK Expats Have To Pay Taxes in Germany?

The tax obligations of UK expats in Germany are primarily determined by their tax residency status:

1. Tax residents: UK expats who are considered German residents for tax purposes are liable for German tax on their worldwide income, including earnings from foreign sources.
2. Non-residents: UK expats classified as non-residents are only taxed on income derived from German sources, such as salary from a German employer or rental income from property located in Germany.

What Determines Tax Residency in Germany?

Tax residency in Germany is determined by three primary factors:

1. Length of stay
2. Permanent home
3. Centre of vital interests

Length of Stay

If you spend more than 183 days in Germany within a calendar year, you are considered a tax resident and are liable for tax on your worldwide income. This 183-day period includes both consecutive and non-consecutive days, meaning that even short, infrequent stays contribute to the total.

Permanent Home

If you own or rent a property in Germany that you use as your permanent home, you will likely be classified as a tax resident, regardless of how many days you physically spend in the country.

A permanent home is defined as a place where you are staying under circumstances that indicate a non-temporary intention. This may be:

• An owned residence (apartment, house, or other dwelling) that is regularly available for personal use
• A long-term rental with a lease agreement
• A residence that is not considered temporary accommodation (for instance, a room at a friend’s apartment or house)

Centre of Vital Interests

If the permanent home factor cannot be applied—either because you do not maintain a permanent home in Germany or the UK, or because you have one in both jurisdictions—your tax residency will be determined based on the centre of vital interests.

This criterion follows Article 4 of the OECD Model Tax Convention, considering where an individual’s personal and economic ties are strongest—such as family location, permanent employment, and habitual abode.

You will be considered a tax resident of the jurisdiction with which you maintain stronger economic or personal ties. For instance, you may be considered a German tax resident if your family lives or spends most of the time in Germany or if you generate the majority of your income from German sources.

What Taxes Are UK Expats Liable for in Germany?

If you are considered liable for taxation in Germany as a UK expat, it is crucial to understand the various types of taxes that may apply. The primary taxes UK expats in Germany may be subject to include:

1. Income tax
2. Solidarity surcharge
3. Church tax
4. Trade tax
5. Capital gains tax
6. Property tax
7. Value-added tax
8. Environmental taxes

Income Tax

If you are considered a German resident for tax purposes, your worldwide income—including income earned in the UK—will be subject to German income tax.

Germany employs a progressive income tax system, meaning that different portions of your income are subject to different tax rates. The 2025 tax brackets for individuals are as follows:

Solidarity Surcharge

The Solidarity Surcharge is an additional 5.5% levy on income tax liability, originally introduced to fund Germany’s reunification in the 1990s. Although largely abolished for lower and middle-income earners since 2021, it still applies to high earners.

You may be subject to the surcharge if your income tax liability exceeds €16,956 (for single filers) or €33,912 (for couples filing jointly), which typically corresponds to a taxable income of around €65,500 (single) or €131,000 (joint). The surcharge is applied progressively above these thresholds.

Church Tax

Germany imposes a church tax on tax residents who are registered members of the following religious communities:

1. Evangelical
2. Jewish
3. Roman Catholic
4. Old Catholic
5. Reformed

The tax is automatically deducted from your monthly salary, with the rate depending on the German state in which you reside:

If you did not declare a religion when registering your address in Germany, you will not be charged this tax. You can also leave the church by submitting a declaration at the local office. This is a formal process and affects your access to religious services (marriages, baptisms, etc.).

Trade Tax

If you own a registered business in Germany, you will need to pay trade tax in addition to income tax. The base rate for trade tax is 3.5%, but actual rates vary by municipality.

Most cities apply a multiplier—a percentage set by local authorities and applied to the base rate—to determine the final tax rate. This means that the total tax owed depends on where your business is registered. As a result, effective trade tax rates typically range between 7% and 20.3%.

Sole proprietors and partnerships with profits up to €24,500 annually are exempt from trade tax. For registered associations, only the first €5,000 in annual profit is exempt. Corporations are not eligible for any exemption and must pay trade tax on their full profit.

Sole proprietors and partnerships may offset a portion of the trade tax paid against their personal income tax, up to a maximum of 3.8 times the trade tax base amount. The offset is limited and cannot exceed the personal income tax payable on business income. This relief is not available to corporations.

Capital Gains Tax

Capital gains tax (CGT) in Germany is levied at a flat rate of 25% on most investment income, including profits from selling stocks, bonds, and other financial assets. In addition, a 5.5% solidarity surcharge is applied to the CGT amount, bringing the effective rate to 26.375%. If church tax applies, the total rate may reach approximately 28%.

Each taxpayer is entitled to an annual investment income exemption of €1,000 (€2,000 for married couples).

For real estate, CGT does not apply if the property is held for more than 10 years or used as your primary residence for at least two full calendar years plus the year of sale. Otherwise, gains may be taxed at your personal income tax rate.

Property Tax

After purchasing a property, you must pay a mandatory real estate transfer tax equal to 3.5–6.5% of the purchase price, depending on your state.

If you own property in Germany, you must also pay an annual property tax based on the land and building value. The base rate varies by property type, and municipalities apply their own multipliers, meaning tax rates differ by location—but the overall burden stays relatively low.

The new property tax model introduced in 2025 includes recalculated land values and standardised base values (Grundsteuer B reform). Due to its complexity and significant variation at the municipal level, you should consult a professional expat tax adviser to ensure correct assessment and compliance.

Value-Added Tax

Germany’s value-added tax (VAT) applies to most goods and services. The standard rate is 19%, but a reduced 7% VAT applies to essential items like food, books, public transportation, and medical services.

The tax is included in the price at checkout, which means that consumers pay VAT automatically when purchasing goods or services.

Businesses must charge VAT on sales and submit regular VAT declarations to the tax office. Some small businesses are allowed to operate VAT-free if their revenue is:

1. Below €25,000 for the previous year, and
2. Expected to be below €100,000 for the ongoing year

The downside is that such businesses cannot claim input tax deductions, which means that certain business expenses, such as office equipment, are not tax-deductible.

VAT-exempt businesses may not reclaim input VAT on business expenses, which can significantly affect profitability for service providers and freelancers.

Environmental Taxes

Germany imposes several environmental taxes to promote sustainability and reduce carbon emissions. Some of the main taxes include:

• Energy tax: Applied to fuels like gasoline, diesel, and heating oil. Rates vary, and the tax is paid alongside the product price upon purchase.
• Motor vehicle tax: The motor vehicle tax is levied on registered vehicle owners, and it depends on engine size and CO₂ emissions. This tax is automatically deducted from your bank account once per year, but you can pay it manually, too. You can also choose to pay semi-annually or quarterly, but this incurs an additional surcharge.
• Aviation tax: A tax on air travel from German airports, with rates depending on the flight’s destination. The airline company pays the tax, which is then included in the ticket price.

Filing Tax Returns as an Expat

The general deadline for submitting a tax return as a German resident is July 31st, but you will be eligible for an extension until the following February if you engage a tax consultant. You can also submit a written application to your local tax office requesting an extension.

Most UK expats use ELSTER, Germany’s online portal, to file their returns, as it is convenient and straightforward. Ensure ELSTER registration is completed early, as authentication is typically done via post and may take several weeks to process. Key documents you’ll need to provide include:

• Your tax ID/tax number
• Your local tax office details
• IBAN of your German bank account
• Your employment tax statement (typically issued by your employer)
• Proof of payments for tax deductions, if applicable

If you don’t have any additional income aside from your employment compensation, filing a tax return is optional. If you’re uncertain about your tax filing obligations, it’s recommended to consult a tax adviser who can assess your income and assist you with filing your tax return correctly.

What Are the Key Provisions of the UK-Germany Double Tax Treaty?

UK nationals residing in Germany may receive income from UK pensions, property, or employment. Without careful tax planning, this can result in dual tax exposure in both jurisdictions. To prevent this, the UK and Germany have signed a Double Taxation Agreement (DTA) that determines how income is taxed across borders.

The DTA allocates taxing rights between the UK and Germany for various income types and outlines mechanisms for tax relief, such as exemptions or tax credits. The key provisions include:

Employment Income

Employment income is generally taxed in the country where the work is physically performed. However, if you are a German tax resident and work temporarily in the UK for fewer than 183 days in a rolling 12-month period, and your employer is not a UK entity, that income may remain taxable only in Germany.

Pensions

The taxation of pension income depends on the type of pension:

• UK State and Government Pensions: These are typically taxable only in the UK, even if you are a German tax resident.
• Private and Occupational Pensions (including SIPPs): These are generally taxable only in Germany if you are a tax resident there. However, under Article 17(2)(b) of the DTA, if the UK provided tax relief on contributions made to the pension scheme in the 15 years prior to the pension income being drawn, the UK may retain a partial or full taxing right.

Capital Gains

Capital gains derived from the sale of immovable property (e.g. UK real estate) are typically taxed only in the country where the property is located, regardless of your tax residency.

Relief for Double Taxation: Exemption with Progression

Germany applies an “exemption with progression” method to certain foreign income, including some UK-sourced earnings. This means the exempt income is not directly taxed in Germany, but it raises your overall German tax rate, increasing the effective tax on your other German-taxable income.