Cost of Living in Germany

With an average of 30 percent, rent and housing-related costs such as heating, electricity gas, etc. swallow the biggest share of the average German household’s net income. Needless to say, rent varies greatly between regions and cities and depends on the humbleness of your abode. It is thus not uncommon for someone living in larger, more attractive cities such as Frankfurt or Munich to spend significantly more than one third of his or her net income on rent.

The good news: During recent years, the rate at which rent increases has been much lower than the overall inflation rate, meaning that prices have actually gone down. Again, those looking for a place in coveted areas might not feel that way. The most expensive city is Munich with rents rarely below €12 per square meter. In Frankfurt, you can also easily end up paying €11 per square meter. Those two cities are followed by Hamburg, Bonn, Cologne, and Mainz.

Berlin remains a great exception among Germany’s large cities. A square meter often comes in at no more than €7 or €7,5. This depends greatly on the area. Moreover, rents in Berlin, alongside with those in Baden-Württemberg, BAVARIA and Hesse, have also recorded the steepest rise during the past years. In contrast, rents have fallen in the eastern states which still experience westbound migration flows. In cities such as Dresden or Chemnitz you don’t have to expect to pay much more than €4 per square meter.

Other expenditures

After rent, the two biggest chunks of the average household’s net income go into food, personal hygiene and household products (12 percent) and services (12 percent). About 10 percent is spent on MOBILITY (public transport, fuel etc.) and 6 percent on clothing.

So how come Germany has a reputation of being expensive if so many European countries give you less for a EURO? In fact, groceries, household products, and other basics to fulfill your everyday needs are not at all more expensive than in other countries, on the contrary: the German Academic Exchange Service DAAD informs its STUDENTS that €800 will allow a modest lifestyle but no more.

It’s the prices of going out and having fun that makes Germany expensive–those most visible to the eye of a tourist. Countries such as Italy and Spain have a culture of having a coffee or a snack on the street and thus seldom charge more than a EURO for a coffee. In Germany, prices between groceries in the supermarket and beverages and food in a restaurant or a café vary substantially. A regular coffee will often cost at least €2. A tall latte may be more than €3 in some cities. A glass of water may come in at €2–it’s definitely not free as in many other countries. Half a liter of beer is sold for anything between €3 and €5. A cheap glass of WINE costs €4 but there’s no upper limit. According to Lonely Planet travel guide publisher, a mid-range meal will set you back by €8 to €16. €9 should be earmarked for a ticket to the movies. The good news is that many cultural events such as opera and THEATER performances as well as arts exhibitions receive public subsidies, keeping down prices, especially for STUDENTS.

Salaries and taxes

TAXES and SOCIAL SECURITY contributions in Germany may take away a larger share from your gross salary than in your home country. Like in any other county with a complex SOCIAL SECURITY system, it’s not that easy to figure out what will be left of your gross income once TAXES and other payroll withholdings have been deducted.

Taxing matters

The first time you officially register, you should also pick up your tax registration card (Lohnsteuerkarte) along with a little brochure (in German) explaining the basics of German tax law and your tax status. After that, a new tax registration card will be mailed to you at the end of every year. When registering your tax class (Steuerklasse), you must show proof of your marital, family, and employment status.

Although some positions are tax-free or not subject to German TAXES (so as to avoid double taxation), chances are that you will be subject to most German taxes, primarily income tax. Forget everything you know about income tax in your home country. In most countries, there are a handful of tax rates depending on your income bracket, and there are well-defined deductibles, meaning that it’s not all too difficult to calculate what you owe and what you’ll be getting back. Not so in Germany, where the income tax rate currently goes from 15 percent to 42 percent depending on your gross income.

If you are permanently employed, your employer will deduct the TAXES as well as all SOCIAL SECURITY payments from your pay. All those TAXES are only deducted from a certain amount of your salary. The system is complicated and figuring out what you’ll have left at the end of the day is virtually impossible without a tax consultant or a good COMPUTERprogram. Expatriates working in Germany for a limited period can stay in their domestic SOCIAL SECURITY programs, providing they prove their stay here is limited and their employer is not a German company.

If you are officially registered with a religious community that levies a church tax, these charges will also be automatically deducted from your pay. To avoid the church tax, don’t enter a religious affiliation when you first register but note that this might preclude you from certain church services such as marriages, baptisms and burials.

You will have to file an income tax return (Einkommensteuererklärung) for each year of paid employment in Germany with the local tax office (Finanzamt). Germany has a complicated system of tax deductions, and the laws do change, so if you think you’re entitled to get some money back, it’s advisable to seek professional help. This holds doubly true for anyone who is self-employed or runs their own business. In those cases, deductions play a major role and engaging the services of a good tax consultant (Steuerberater) can save you tens of thousands in TAXES a year.

If you have trouble finding a decent tax consultant by word-of-mouth, you can turn to the German Tax Advisors Association (Deutscher Steuerberaterverband). This group provides a free search service which matches a taxpayer’s profile to a fitting advisor among its 26,000 voluntary members. If your tax position is less complex, you might simply choose one of the semi-public tax consulting associations (Lohnsteuerhilfevereine) which are usually listed in the yellow pages.