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WHAT CHANGES IN GERMANY

Everything that changes in Germany in 2023

From large tax cuts to better cope with rising inflation to new benefits for employees, there are a slew of changes coming as we enter 2023 on Sunday. Here are the top ones, and how they affect people in Germany.

Published: 28 December 2022 10:59 CET
Updated: 2 January 2023 15:40 CET

Everything that changes in Germany in 2023

The World Time Clock (Weltzeituhr) in Berlin's Alexanderplatz. Photo by INA FASSBENDER / AFP

Taxes and benefits changes

With Germany’s federal government now in its second year in office, 2023 will see the rollout of many campaign promises all three parties made on taxes and benefits—as well as additional measures to help mitigate rocketing inflation.

Some are designed to transfer more money to the recipients through various benefits, while others allow you to keep more of your earnings in the first place.

Basic tax-free allowance to increase

The Grundfreibetrag – or “basic allowance” – refers to how much money you can make in a year before being subject to tax. With steady increases over the last few years, the first €10,347 a person made in Germany in 2022 was subject to no tax at all, with the money made on top of that being taxable. In 2023, that number will increase by €561 to €10,908.

Higher income threshold before entering top tax rates

Currently, earning €58,597 annually puts you into the high income tax bracket. Any earnings over this threshold are subject to the top tax rate of 42 percent. Starting next year, the threshold of what someone in Germany has to earn before paying a 42 percent rate increases by more than €3,000 to €61,972 annually. This measure is designed to help avoid what’s known as ‘cold progression’, where pay rises are eaten up by inflation but people are still taxed on their extra earnings. However, this won’t affect the special tax rate for the very wealthy. That threshold starts at €277,836 annually and will remain the same.

Home Office tax credit to go up

Currently, you can claim up to €600 a year in tax credits for working at home, with €5 allocated per day you work at home up to the maximum. This is meant to offset certain costs, such as heating, that can go up because you’re at home more. In 2023, this amount will increase to €6 a day up to 210 days, meaning people can write off up to €1,260 a year, according to Germany’s Finance Ministry.

Germany’s traffic light coalition will roll out several new tax measures in 2023 – designed to allow people to keep more of the money they earn. Photo by Markus Winkler on Unsplash

Automatic expense deductions to go up

The lump sum for income-related expenses – known in German as the Arbeitnehmer-Pauschale – will be increased to €1,230 as of January 1st. This is the amount of expenses that tax offices automatically deduct from employees’ earnings when they fill in a tax return, meaning receipts aren’t required for things like office supplies and travel costs up to this amount. January will mark the second time this lump sum has been raised in the past year: it was raised retrospectively from €1,000 to €1,200 for 2022 as part of the first relief package.

Pension contributions to become tax-deductible, but health insurance contributions to rise

Starting in 2023, money you pay into your pension will be completely tax deductible, reducing your overall tax burden.

But it’s not all good news. Many of Germany’s public health insurance funds – put under strain due to the pandemic’s costs – are upping their so-called additional health insurance contributions (or ‘premiums’) from next year. Previously, statutory health insurers were only allowed to charge an additional 1.3 percent on top of the basic contribution of 14.6 percent of income. From next year, that figure will increase to 1.6 percent – and it seems that many insurers are keen to take advantage of the new freedom to hike their fees.

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“Midi” Jobbers to get some tax relief

In Germany, jobs where someone earns between €525 and €1600 per month are called “midi-jobs.” In midi-jobs, the worker doesn’t make quite enough to be subject to full tax obligations – or social insurance protections – under German labour law. Instead, midi-jobbers make health and social insurance contributions on a sliding scale, meaning they pay less tax. As of January 1st, the midi-job limit will increase from €1,600 to €2,000 per month, allowing more people to save on contributions.

Dual citizenship to finally be allowed for non-EU nationals naturalising as German

In a long-awaited decision, Germany’s Interior Ministry is set to present its draft citizenship reform law to the Bundestag for debate in either January or February.

The law, once approved, will allow non-EU nationals naturalising as German to keep their other passport by default. Right now, they normally have to give it up.

The law will also shorten the time it takes that someone needs to have been resident in Germany from eight years to five – and in some cases – even three years.

Parliamentarians expect the law to pass by summer 2023.

Bürgergeld (or ‘Citizen’s Allowance’) comes into force

In political win for Chancellor Olaf Scholz’s ruling Social Democrats, the new Bürgergeld benefits replace the old Hartz IV long-term unemployment insurance schemes. People receiving it will get an allowance for further training, aimed at allowing them to pursue higher-paying and more sustainable work. Benefits are also going up by more than €50 to €500 per month, while up to €40,000 in assets from benefit claimants will be protected for a year under the scheme.

Tax-free bonuses to employees

Starting in 2023, employers will be able to pay their employees up to €3,000 in tax-free bonuses in the coming years to cushion high inflation. No income tax will be payable on such bonuses until the end of 2024. However, it remains to be seen how many employers will make use of the option and actually pay out the optional extra income.

Housing allowance to go up

Housing allowance – or Wohngeld – is available to low-income households in Germany, particularly pensioners with low monthly stipends or people working minimum wage jobs. It’s designed to help these households pay rent or utility costs.

Some may also be eligible for extra heating subsidies over this winter. At the moment, it can be complicated to determine is someone is eligible, but the government wants to expand the scope of the support to include an estimated two million people – up from the current 600,000. They also want to adjust the amount people receive to the new realities of the energy market.

The average household on Wohngeld currently receives a supplementary €177 per month. The government plans to substantially increase this to €370 per month starting on January 1st.

A view of Stuttgart.

A view of Stuttgart. Housing is getting more expensive in Germany, particularly in cities. Housing allowance will see a big increase in 2023. Photo: picture alliance/dpa | Marijan Murat

Child allowances to be extended

Germany’s child benefits, which see parents receive money for each child they have to help pay the costs of supporting them, are getting an overhaul. Families currently receive €219 per child for the first two children, €225 for the third one and €250 for any more than that. As of January 1st, families will get €237 for the first three children, with €250 per additional child going to anyone with a larger family.

New laws and regulations

From better protection of employees to trying to minimise plastic waste, there are also several new pieces of legislation coming into effect on January 1st.

Electronic sick note

Starting on January 1st, employers will be required to accept electronic sick notes. Employees who fall ill, and who have statutory insurance, will then no longer have to submit a paper certificate of incapacity for work (Arbeitsunfähigkeitsbescheinigung) to their employer, but will receive a printout for their records.

Last nuclear power plants to be taken off the grid

In mid-April, the last German nuclear power plants will be taken off the grid. The Isar 2, Neckarwestheim 2 and Emsland power plants should have been shut down at the turn of the year as part of the nuclear phase-out, but their operating lives were extended to help Germany cope with the energy crisis.

The nuclear power plant in Gundremmingen, Swabia, stopped operating on December 31st 2021 as part of Germany’s nuclear phase-out. Photo: picture alliance/dpa | Stefan Puchner

Tobacco tax increasing

In order to “continue to ensure the health policy steering effect,” the Federal Ministry of Finance is gradually increasing the tax on tobacco. Between 2022 and 2026, the price of a pack of cigarettes (20 pieces) will rise by an average of eight cents per year. The pack of fine-cut tobacco (Feinschnitt) and the minimum tax for cigars/cigarillos and pipe tobacco will also be adjusted.

No more compulsory vaccination for nursing staff

The compulsory vaccination for employees in hospitals and nursing homes, which has been in effect since March, is set to be abolished on January 1st. The reason is that the currently dominant Covid variants are better able to evade the immune response of people who have been vaccinated or have recovered than previous ones.

More and more experts consider the Covid pandemic to now be endemic – including top virologist Christian Drosten.

Changes for cars and trucks

Buyers of plug-in hybrid vehicles will no longer receive federal subsidies from 2023. In addition, the premiums for purely electric vehicles will decrease. As of September 1st, subsidies will be limited to private individuals.

The lorry toll on Germany’s trunk roads will also be raised in 2023, in order to take greater account of the costs of noise pollution and air pollution.

A highway full of cars and Lkws. (Photo by Matthias Balk / dpa / AFP) / Germany OUT

CO2 tax on heating to be split

From January, landlords will in many cases have to contribute to their tenants’ climate levy for heating. The so-called CO2 tax is divided between tenant and landlord according to a graduated model. The less climate-friendly the house, the more the landlord must pay. Until now, tenants have had to shoulder the entire cost of the levy, which is supposed to help reduce climate-damaging carbon dioxide emissions.

New mandatory reusable packaging

Another overarching change is the mandatory re-usability for delivery services, catering services and restaurants. From January 1st, delivery and catering services, as well as restaurants and cafes (including those situated in supermarkets), will be required to offer reusable containers in addition to single-use packaging for takeaway food and drink.

Small businesses with a maximum of five employees and a sales area of up to 80 square meters are exempt from this rule. However, they should point out to their customers that the food they have ordered can also be filled using their own containers.

Better tracing of supply chains

International supply chains are increasingly in the focus of human rights activists. Under the new Supply Chain Act, companies will be obliged to pay more attention to where their goods actually come from and the working conditions of the people who produce them. The act applies to companies with more than 3,000 employees, and obliges companies to react to human rights abuses carried out by their suppliers.

Aid organisations and trade unions will be given the opportunity to represent those affected by violations before German courts.

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Everything that changes in Germany in April 2023

End of the (last few) Covid rules

“Rules – what rules?” is likely to be the question on everybody’s lips when the Infection Protection Act quietly expires on April 7th – and it’s true that, unless you work in a clinic or care home, the end of this bill probably won’t change much in your day-to-day life. With the end of masks on public transport in large swathes of Germany back in February, Germany toppled one of the last few Covid rules it had – and since then people have generally only needed an FFP2 mask for the odd doctor visit.

That said, the end of the bill is pretty significant in another way. It signals the end of a three-year pandemic that shook the world and the official recognition that a virus that was once so deadly has now become endemic. Just like the winter flu and common cold, Covid is here to stay, but nobody will be feeling too sentimental about leaving the days of lockdowns, tests, and vaccine passes behind us.

No more sick notes by telephone

On March 31st, special regulations allowing people to get a sick note from their doctor over the phone will expire. This was initially intended to avoid unnecessary Covid infections but, given the much less risky situation at present, officials don’t think there’s a need for it anymore.

However, there could still be a way to avoid lengthy stays in the doctor’s waiting room in future. If your GP offers the service, you can always get your sick note (or Krankschreibung) after a video appointment instead – provided your illness doesn’t require a physical inspection.

Higher tax allowances

In the days of grim financial news, there’s a bit of light on the horizon for taxpayers as higher tax-free allowances for both employees and single parents will apply from April.

Starting next month, the so-called Arbeitnehmerpauschale (employee lump sum) will be hiked up to €1,230 per year. This is the amount of expenses the tax office assumes you’ll have in relation to your work and deducts from your taxable salary (without needing proof) each year.

The tax-free allowance for single parents will also be increased to at least €4,260 (plus €240 for additional children), meaning single mums and dads get to keep a little bit more of their salaries.

If you’re feeling a slight sense of deja vu, it may be because both of these tax-free amounts actually went up at the start of this year, but April marks the first month they will be factored into your payslips. So if you see a little bit extra in your bank account next month, that could be why.

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Deutschlandticket goes on sale

It was meant to be hitting the ticket offices back in January, but as the saying goes: better late than never.

From April 3rd, the official pre-sale of the €49 ticket will kick off, allowing early birds to set up their Abo via Deutsche Bahn ahead of the launch of the ticket in May.

Of course, some states have been much quicker off the mark than Germany’s rail operator, so if you live in Frankfurt or Berlin, for instance, you may have already got your subscription sorted.

It’s worth noting that some states are working on further concessions for students or pensioners, while some people may be able to get the ticket cheaper via their work, so be sure to check with your employer first to see if you’re entitled to a ‘Jobticket’.

An S-Bahn train in Cologne. Photo: picture alliance/dpa | Henning Kaiser

Microsoft hikes its prices

First it was gas, then it was groceries, then it was beer – and now even software products are going up in price.

Starting in April, tech giant Microsoft has announced price rises across its cloud products, which include Microsoft 365, Office 365 and Dynamics 365 as well as Microsoft Defender and Teams. The price hikes will depend on the product, but some customers could see their subscription go up by as much as 20 percent.

To justify the move, the company pointed to changes in the value of global currencies and said it wanted to make its pricing more consistent for customers around the world. This is also something they’ll look at twice a year going forward – so brace yourself for even more price hikes six months down the line.

Gay men are allowed to give blood

A rule that banned homosexual men from donating blood will be scrapped in April. From then on, anyone will be allowed to give blood regardless of their gender or sexual orientation, or whether they are cis or trans.

What will continue to remain the case is that people who regularly change their sexual partner – or have multiple sexual partners – will not be permitted to give blood. This is determined via a questionnaire that potential donors fill out beforehand.

Painters, builders and agency workers get a pay rise

Life is getting more expensive in Germany, but some workers are also set to get a healthy boost to their wage packets from April.

Under a collective agreement that was signed back in January, painters and varnishers got their basic hourly wage hiked to €18.39 in the western states and Berlin and €17.86 in the eastern states.

Workers a little lower down the pecking order are now due a pay rise as well, as the industry-specific minimum wage for helpers will rise to €12.50 per hour and the second minimum wage will increase to €14.50.

A painter and decorator at work. Low-paid workers in this sector are set to get a pay rise in April. Photo: picture alliance/dpa/dpa-tmn | Kirsten Neumann

As well as painters and varnishers, construction workers can also look forward to more money from April 1st. Wages in western Germany will be increased by two percent and in eastern Germany by 2.7 percent, and workers will be given a bonus of €1,000 to compensate for inflation.

The collective agreement also stipulates that workers will receive compensation for travelling to construction sites. These are paid as lump sums and are based on the number of kilometres.

Temp or agency workers will also be taking home a little bit extra next month as the minimum wage in their sector increases to €13 per hour.

New questions on driving tests

Thinking of biting the bullet and getting a German driving licence? Then make sure you have an up-to-date practice test, as 44 new questions are set to be added to the theory test from April.

Of these new questions, 23 will only apply to Class B licences – the type that most drivers need in order to get behind the wheel.

If you’re using one of the popular apps to prepare for your test, you’ll need to ensure this is fully up to date by the time you sit down for the exam.

Lights go back on in towns and cities

The clocks are going forward this week, and the evenings are set to get lighter in more ways than one. As well as a precious extra hour of sunshine late in the day, towns and cities will once again be permitted to illuminate their statues, fountains, building sites and public buildings at night.

A cyclist rides past the fountain on St. Johanner Markt in Saarbrücken. Photo: picture alliance/dpa | Oliver Dietze

That’s because the emergency energy saving measures introduced last September are due to expire on April 15th – provided they’re not extended. This legislation was initially brought in following Russia’s invasion of Ukraine at a time when Germany was struggling to reduce its energy usage and its dependence on Russian gas. But with winter behind us and the gas storage facilities still relatively full, this summer will likely see a much more relaxed approach to energy usage.

Nuclear power plants to close

Just as Germany looks set to loosen up its energy-saving rules, the country’s three remaining nuclear power plants – will be powered down for (potentially) the last time.

As part of the government’s transition away from nuclear power and coal, these three plants – Isar 2, Neckarwestheim 2 and Emsland – were originally set to be shut down at the end of 2022. However, due the war in Ukraine and the ensuing energy crisis, the government kept them in operation – but the Federal Office for Nuclear Waste has announced that these will close in the middle of April.

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