Taxation in Germany

Taxes in Germany are levied by the federal government, the 16 states (Länder), and municipalities (Städte/Gemeinden). The system combines direct and indirect taxes and has been reshaped by reunification in 1990 as well as Germany’s membership in the European Union. Today, the largest sources of revenue are income tax and value-added tax (VAT), which together fund a wide range of public services, infrastructure, and social welfare programs.

The constitutional framework is defined by the Basic Law (Grundgesetz), which allocates taxing rights between the federation, the states, and local authorities. Some taxes are collected exclusively at the federal level, such as customs duties and certain excise taxes, while others are shared between levels of government. Municipalities retain the right to levy local taxes, including property tax (Grundsteuer) and trade tax (Gewerbesteuer).

Germany’s tax system covers both residents and, under specific conditions, non-residents with income generated in the country. Corporations, both public and private, are subject to corporate taxation, while exemptions exist for certain non-profit organizations and religious institutions. Additional revenues are derived from real estate transfer tax, inheritance and gift taxes, capital gains tax, the air passenger tax, and motor vehicle taxes.