In Germany the gross income is taxed and the level of taxation depends on the size of the gross income and the family status of the employee.
There are six “tax classes” (I – VI) and the class applicable depends on whether a person is married, has children or “a second income”. If a house hold contains two partners who are both working, the combination of tax classes may offer large benefits. Details about tax classes are noted in the digital income tax system “ELStAM”.
The employer has access to this electronic wage tax card and stores the details about your salary there. The taxes automatically deduct from the gross salary every month.
An income tax return must be presented to the tax office annually (“annual adjustment of wage tax”). All income you had in the previous year (plus any interest and/or rental income), is offset against the taxes paid until then. In addition, there are so-called “tax-allowances” and many opportunities to “offset” outgoing against tax. Based on the information you provide the tax office with, you may receive some money back.
Since the German tax system is complicated, it can be worthwhile seeking advice from an income tax association, a so-called “Lohnsteuerverein”, or a tax consultant. The finance offices are also obliged to provide information.
If you are a member of the Catholic or Protestant churches, you have to pay church tax in Germany. Members of the Jewish community pay the Jewish culture tax, the "Kulturesteuer", which corresponds to church tax. There is no tax for members of other religions.