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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.

Everything that changes in Germany in 2023
The World Time Clock (Weltzeituhr) in Berlin's Alexanderplatz. Photo: 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.

READ ALSO:

“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.

READ ALSO: The rules in Germany around ‘mini’ and ‘midi-jobs’

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.

READ ALSO: INTERVIEW: Germany on track to pass dual citizenship despite opposition

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.

READ ALSO: Germany reaches agreement on Bürgergeld – with a couple of catches

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

READ ALSO: Wohngeld: How many people in Germany can get help with rising living costs

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. 

READ ALSO: What benefits are you entitled to if you have children in Germany?

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.

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.

READ ALSO: Calls to end Covid measures as top virologist deems pandemic ‘over’

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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For members

WHAT CHANGES IN GERMANY

Everything that changes in Germany in April 2024

From more restrictions on receiving Elterngeld (parental allowance) to cannabis legalisation to higher heating costs, there are many changes coming to Germany at the start of the new month on Easter Monday.

Everything that changes in Germany in April 2024

Partial legalisation of cannabis to be allowed

After much debate, Germany’s controversial cannabis act was officially signed into law on Friday, March 22nd. As of April 1st, the new law will allow possession of up to 25 grams for personal consumption from the age of 18, and cultivation of up to three cannabis plants in one’s own home with up to 50 grams of cannabis for personal use.

It will also permit so-called ‘cannabis social clubs’, or non-commercial cultivation associations with a strict set of rules. For example, no smoking is allowed on site, and members can’t grow more than 50 grams per month.

READ ALSO: Germany gives green light to partially legalise cannabis from April

New rules to to receive Elterngeld

New parents who go on Elternzeit (parental leave) will as of April 1st only be able to receive Elterngeld (parental allowance) if they have a joint household income of lower than €200,000. The threshold, reduced from the previous €300,000 in order to trim Germany’s 2024 budget, applies to couples. As of next year, the threshold is set to sink further.

As of April 1st, parents are also no longer able to take Elternzeit together for as long and receive Elterngeld at the same time.Although the previous 14 months of standard Elterngeld will remain, from April it will only be possible to stay at home with your partner for one month of this and receive Elterngeld at the same time – and only in the first year of their child’s life.

There will be exceptions for multiple births, premature babies and children with disabilities.

READ ALSO: Elterngeld: How Germany is changing the rules around parental allowance

New fuels at petrol stations 

Germany wants to become climate-neutral, and new and more environmentally friendly diesel fuels are to help it eventually achieve this goal. Several new alternatives are to be introduced at filling stations in the spring: the first two, B10 and XTL, could be officially available as early as April. Before car owners lift the nozzle, however, they should find out whether their Auto can even tolerate these fuels.

Higher heating costs

From April 1, VAT on gas and district heating will be increased from the reduced rate of seven percent back to the original rate of 19 percent. In Germany, the rate was temporarily reduced as part of a comprehensive relief package to ease the financial burden on people living here. It went into effect on October 1st 2022, as many people struggled with rising energy costs following Russia’s invasion of Ukraine.

Energy bill

Energy costs in Germany went up quickly following Russia’s invasion of Ukraine in February 2022. Photo: picture alliance / dpa | Jens Büttner

Many new driving test questions

Anyone taking their theoretical test to get a German driver’s licence on or after April 1st has a bit more prep work to do. There will be a total of 61 more questions added to the test, both for a regular licence and several special categories. 

‘Blitzermarathon’ hunts down speeders

Anyone on the road can expect more speed checks and speed traps as part of the European Speedweek from April 15th to 21st, 2024 (Monday to Sunday). 

This includes the speed camera marathon (Blitzermarathon) on Friday, April 19th. So drivers, be sure to take your foot off the gas and keep an eye on the speedometer. Otherwise you’ll lose money and possibly even your license.

New Deutschlandticket for students 

Starting with the new semester in April, many universities in Germany will be offering their students the Deutschlandticket for nationwide public transport for €29.40 per month.

The ticket, which normally costs €49, allows for unlimited travel on the U-Bahn, S-Bahn, trams and regional trains.

Qualification allowance

The so-called qualification allowance (Qualifizierungsgeld), which will be available from April 1st, is intended to provide employees with financial support to participate in further training measures. It acts as a kind of wage replacement so that employees can be released from work and continue their training while keeping their job.

The aim is to increase employees’ professional skills and adaptability and to prepare them for any changes in their field of work. The grant facilitates access to further vocational training and is intended to help secure and improve employability.

READ ALSO: What is Germany’s ‘qualification allowance’ to upskill employees?

Mobility allowance for trainees

From April, Azubis (short for Auszubildende, or trainees getting their official qualification) whose company is far away from their place of residence will be entitled to a mobility allowance. Two family trips home per month will be covered in the first year of training.

The allowance is primarily intended to cover the mobility needs of people who need more money for professional, social or health reasons.

Students and trainees in Germany will soon have more affordable mobility options. Photo by Kirill KUDRYAVTSEV / AFP

Minimum wage increases in two sectors

As of April, painters or varnishers who have completed an Ausbildung (training) in their fields will receive at least €15 per hour, while unskilled workers in this sector will get at least €13 per hour.

For security staff at airports in Bavaria (except Munich Airport), Mecklenburg-Western Pomerania, Saxony, Saxony-Anhalt and Thuringia, the minimum wage will rise to €18.32 if they have passed the official examination to become an aviation security screener. All other security staff will then receive €16.95.

The general minimum wage in Germany is currently €12.41 per hour.

New international train routes connecting Germany with Austria and Italy

Starting April 8th, the first of a series of new trains from Austrian national railways (ÖBB) will operate on routes such as Munich-Innsbruck-Bolzano, and Munich-Innsbruck.

ÖBB promises passengers a superior travel experience with upgraded amenities, including multi-adjustable seats with increased privacy, additional storage options, integrated charging stations, and improved signage for easier navigation.

Gatorade returns to Germany

Especially American readers will know of the brightly coloured sports drink Gatorade. For better or worse, it’s making its return to German shelves after a 15 year absence, with the flavours lemon, orange, “cool blue” and “tropical burst” to be available in some supermarkets starting in April.

Upcoming public holidays 

It’s no April Fool’s Joke: The first day of the month (Easter Monday) is a national public holiday. And while that’s the only official extra day off work during April, employees can enjoy an extra long night out on Tuesday, April 30th, sans guilt. That’s because Wednesday, May 1st, is Labour Day, another public holiday across Germany.

READ ALSO: What days will workers in Germany get off in 2024?

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