Taxation for Foreigners in Germany in 2026

Life in Germany quickly raises a practical question for Ukrainians: how does the local tax system work? The rules apply to various categories—from employees to the self-employed and property owners. Situations involving concurrent income from Ukraine require special attention. Relocate.to writes about this.

What taxes apply in 2026, how payroll deductions are calculated, why temporary protection status does not exempt you from tax obligations, and what to do about a Ukrainian sole proprietorship—we’ll cover all of this in the article below.

Not sure how to properly register your business and report your income in Germany?

A business law attorney from the Visit World portal will guide you through every step—from determining your self-employment classification to interacting with the Finanzamt.

Who is subject to German taxation in 2026?

Anyone who receives income or owns property subject to tax obligations under German law is subject to German taxation. Temporary protection under §24 AufenthG does not, in and of itself, exempt you from such obligations. The following factors are relevant: place of residence, source and type of income, place where the work is actually performed, as well as the provisions of the agreement between Ukraine and Germany.

Residing in Germany for more than 183 days a year does not automatically mean that a person is required to pay tax on every euro earned in Ukraine. In international situations, tax residency is determined first, followed by an assessment of the specific sources of income and the applicable international agreement.

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Categories of Taxes in the German Tax System

The German tax system encompasses several distinct taxes with different rules for calculation and payment. Employees are primarily subject to income tax, the solidarity surcharge under certain conditions, and church tax for members of religious communities. Entrepreneurs and business owners deal with VAT, trade tax, and corporate income tax. Property taxes and municipal fees form a separate category.

Key tax terms encountered by Ukrainians in Germany:

• Einkommensteuer — income tax on an individual’s earnings;
• Lohnsteuer — tax withheld by the employer from wages;
• Solidaritätszuschlag — solidarity surcharge paid by certain taxpayers;
• Kirchensteuer — church tax for members of religious communities;
• Umsatzsteuer — value-added tax (VAT) for businesses and the self-employed;
• Gewerbesteuer — trade and industry tax for entrepreneurs;
• Körperschaftsteuer — corporate income tax, particularly for GmbHs;
• Grundsteuer — property tax;
• Kfz-Steuer — vehicle tax;
• Hundesteuer — municipal dog tax.

Social security contributions for health, pension, unemployment, and long-term care insurance are not technically considered taxes. For an employee, the difference isn’t always obvious, since the employer withholds both types of payments before depositing the salary into the employee’s account.

What drivers in Germany need to know in 2026 — find out more at the link.

Progressive income tax scale in 2026

Germany has a progressive personal income tax scale. The basic tax-free allowance (Grundfreibetrag) in 2026 is 12,348 euros per year. Income up to this amount is taxed at a zero rate. Beyond that, the rate gradually increases, reaching 42% at the top of the scale, while a 45% rate applies to particularly high incomes.

The progressive nature of the system means that different portions of taxable income fall into different brackets on the scale. The 42% or 45% rate is not automatically applied to all income once a certain threshold is exceeded. The actual tax burden depends on the taxpayer’s income structure and personal circumstances.

High-Demand Occupations in Germany 2026 — listed here.

How are payroll deductions calculated?

Payroll deductions in Germany are calculated based on the difference between gross and net pay. Gross pay is the amount earned before deductions, as specified in the employment contract. Net pay is the amount remaining in the account after deductions for Lohnsteuer, the solidarity surcharge (if applicable), church tax, and social security contributions. Two employees with the same gross pay rate may end up with different net pay amounts due to differences in marital status and tax class.

The second factor is the tax class (Steuerklasse), which determines the amount of monthly deductions from

salary. It does not reflect the final annual tax burden and depends on marital status and the data registered in the tax system. There are six main classes in Germany:

• I — unmarried employees;
• II — single parents under specified conditions;
• III — one spouse in a qualifying combination;
• IV — married couples with similar incomes;
• V — the other spouse in a qualifying combination;
• VI — second and subsequent jobs.

In our previous article, we discussed the best cities in Germany for expats to live in 2026.

Taxpayer Identification Numbers

The German system uses two different numbers—Steuer-ID and Steuernummer—which serve different functions. The Steuer-ID, or Steueridentifikationsnummer, is a personal identification number assigned to a taxpayer on a permanent basis. An employer uses it to correctly withhold tax from wages. The Steuernummer is assigned by the tax authority in connection with a specific tax matter and is most commonly found among entrepreneurs and the self-employed.

Confusion between the two numbers creates difficulties when submitting documents and reporting income. Correct identification is important for employers, banks, the Finanzamt, and other institutions.

About fines in Germany in 2026—read more in this article.

Ukrainian Sole Proprietorship While Residing in Germany

Continuing business operations through a Ukrainian sole proprietorship from Germany carries certain tax risks. The assumption that “I pay a single tax in Ukraine, so I don’t need to file anything in Germany” may prove to be incorrect. Under German regulations, the following factors are relevant: the place of registration of the sole proprietorship, the individual’s place of residence, the place where the work is actually performed, and the German classification of such activities.

Special attention is needed for professionals who physically work from Germany while continuing to receive payment through a Ukrainian sole proprietorship. This includes programmers, designers, consultants, translators, online instructors, and bloggers. Improper reporting of such activities may lead to additional obligations toward the Finanzamt.

See also: How to Start a Business in Germany: A Detailed Guide for Foreigners.

Important! Taxation in Germany requires a precise understanding of an individual’s family, employment, and business circumstances. A Visit World business lawyer can help you navigate the classification of your activities, the status of your Ukrainian sole proprietorship, the reporting of income from Ukraine, and the preparation of documents for the Finanzamt. Personalized guidance helps you avoid mistakes when dealing with the German tax system.

Schedule a consultation with a business lawyer from the Visit World portal to get answers tailored to your specific situation in Germany!

Reminder! In a previous article, we discussed the highest-paying professions in Germany and the top jobs that don’t require a college degree.

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