Most foreigners (and many Germans too) are not familiar - even if they speak German - with the meaning of the German tax terms and abbreviations. Therefore we compiled a small dictionary with paraphrases which may help you. Should you need further explanations or have annotations to the translations or to the paraphrases please feel free to contact us. If you found this information usefull, please tell it a friend.

German English Paraphrase
Krankenversicherung health insurance For a typical German employee this insurance is mandatory. The insurance premiums are calculated based on the gross salary (15,5%) will be split equally to the employee and the employer. The employee can freely choose from several mandatory health insurance companies (e.g. AOK, Barmer Ersatzkasse, IKK-Direkt and many others). The different mandatory health insurance companies vary only minimal in their performance. This premium cover not only the health insurance of the employee, but also all family members withour own income (so called "Familienversicherung").
Rentenversicherung pension insurance or pension scheme All employees are mandatory members of the goverment controlled pension scheme. The premium is also calculated based on the gross-salary of the employee with a fixed percentage (in 2008 19.9%). Employee and employer split the premiums to each other so the effective premium for the employee amounts to be 9.95% of the gross salary. The maximum gross-salary on which the premium is calculated raises annualy and amounts to be in 2008 EUR 5.300 (old federal states) and EUR 4.500 (new federal states).
Einkommensteuer income tax Please refer to my seperate page regarding the German tax system taxations for individuals
Lohnsteuer wage tax or withholding tax The wage tax is a special collecting form of the income tax. The employer is obliged to withhold a defined amount of income tax directly from the gross salary and pay this amount directly to the tax authorities. By the end of the year or on leaving the company the employer issues a tax certificate (Lohnsteuerbescheinigung, Lohnsteuerkarte) to the employee. In former years (up to 2003) the certificate was given on the wage tax card but nowadays this procedure is completely handled electronically and the employee just receives a print-out of the data which has been provides from the employer to the tax authorities.
Finanzamt tax office or revenue office The tax office is the local agency of the financial administration of the federal states in Germany. The local tax office is resonsible - with certain exceptions - for all tax payers resident in the local area. In bigger cities several local tax office exists.
Arbeitslosenversicherung unemployment insurance The unemployment insurance provides for the employee financial cover in case of unemployment for a limited period of time (currently 12 month). The premium is similiar to the premium of the pension insurance except the percentage is 3.0% (since 2011) of the gross salary.
Doppelbesteuerungsabkommen Double taxation treaty To avoid a double taxation of income in more than one country, Germany negotiated with several countries double taxation treaties. Such treaties overrule local tax law and assign the income (depending on the kind of income) to Germany or the second country.
Arbeitserlaubnis working permit In case a foreigner (mostly Non-EU residents) wants to work in Germany, local law requires a valid working permit before the foreigner is allowed to work. High penalties can be assesed to the employee and/or the employer if offened against this law.
Einkommensteuerbescheid income tax assessment notice ne with income is usually obliged to hand in a income tax return. The hand-in period usually ends by the end of May of the following year. An automatic time line extension until end of December of the following year is granted if the tax return is prepared by a certified tax advisor (Steuerberater). As all tax returns are under permaned audit by the tax authorities, a tax assessment notice will be issued by the local tax office. This also includes the final tax assessment and the calculation of a refund or an additional payment.
Pflegeversicherung nursery insurance The nursery insurance is also mandatory for all employees and provides financial cover for costs of outpatient and home care. The premium is similiar to the premium of the health insurance execept the percentage is 2,35% (since January 2015). Depending on the federal state employees (1.175%) and employer (1.175%) split the premium by half (except in federal state "Freistaat Sachsen" where the employee pays 1.675% end employer pays 0.675%).
Gehaltsabrechnung pay slip or salary statement As there are several withholdings from the gross salary each employee receives a monthly pay slip to determine the net payment. The employer has to withheld taxes (wage tax, church tax, solidarity surcharge) and social contributions (health, nursery, unemployment and pension insurance premiums) and - if applicable - other net deductions (e.g. company car usage). For a better understanding please see a sample pay slip with English comments.
Solidaritätszuschlag solidarity surcharge The tremedous costs of the reunion of the Federal Republic of Germany with the former German Demokratic Republic forced an imposition of a temporary special surcharge in 1991. The solidarity surcharge currently amounts to be 5.5% of the income tax/wage tax.
Lohnsteuerklasse witholding category To determine the witholding wage tax amount excactly you basically need to calculate the income tax of the person. To simplify the procedure of the calculation every taxpayer is categorised into 6 diffrent witholding categories depending on the life situation:single person without children (type 1),single person with children (type 2),head of household (married person with the major family income) (type 3), married person (type 4), married person where the spouse if head of household (type 5), single or married person with a second employment income (type 6). The classification will be entered at start from the registry office (Einwohnermeldeamt) on the electronic wage tax card, but may be altered anytime during the year on the demand of the employee. Please note that changes will be made by the local tax office.
elektronische Lohnsteuerbescheinigung electronic witholding tax certificate After the year has ended the employer issue a witholding tax certificate to the employee and transmit the data via electronic data transfer to the tax office. The employee has to enter the information such as gross salaray and the amount of wiothheld taxes in his individual income tax return. Please check my sample witholding tax certificate with comments for further information about the details.
Steuererklärung tax return Every person with own income is obliged (with several excepions) to file a anual income tax return.
Steuernummer TIN Taxpayer identification number. Currently the TIN will be issued from the local tax office and the layout vary from federal state to federal state. The current TIN of federal state of Northrhine-Westfalia shows the local tax office, the area within the local tax office and a determination number, each section divided by a slash ("230/1234/5678"). Since 2008 a second nationwide TIN is implemented.
Sozialversicherungsnummer Social security number Unlike in the US, a German social security number is soley used to identify the person for social security reasons. The number concists of a 12 digit number (trivia: digits 3 to 8 shows the birthsday of the person and digit 10 will be the first letter of the birthname). Example: 53 311269 C 001
Buchführung bookkeeping If you are doing self-employed business in Germany you are obliged to calculate somehow the profit earned in one year and state this income in your (now mandatory) tax return. The bases of such profit calculation is always a bookkeeping. The minimal requirements of a bookkeeping for tax purposes can still be archived with Microsoft-Excel(Sales/Expeses in rows, each transaction in one line), but usually a certified tax advisor handles the bookkeeping for small/mid-size companies and self-employed persons.
Jahresabschluss financial statements If you are obliged by German commercial code to setup financial statements , these have to include several mandatory information: balance sheet, prift/loss account, fixed asset register, notes to the financial stement (mandatory only for corporates)
Handelsgesetzbuch (HGB) German commercial code The German business behavior is regulated in the German commercial code. It handles all type of companies and provides the local bookkeeping standards (German GAAP). E.g. the classification of a German balance sheet and profit/loss account.

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