close

Solidarity surcharge tax abolished for 90% of German taxpayers

Solidarity surcharge tax abolished for 90% of German taxpayers

Solidarity surcharge tax abolished for 90% of German taxpayers

There’s nothing anything likes more than a tax cut, so you’ll be happy to hear that today the federal cabinet approved a bill to abolish the solidarity surcharge for 90 percent of taxpayers in Germany. 

Soli abolished for majority of German taxpayers

Despite meeting resistance from some factions in the grand coalition, Finance Minister Olaf Scholz’s bill to abolish the solidarity surcharge for the majority of taxpayers was today approved by the federal cabinet. First introduced in 1991, the solidarity surcharge (Solidaritätszuschlag or Soli for short) is a 5,5 percent supplementary rate on income tax and some business taxes that contributes towards the costs of German reunification. 

Scholz’s bill stipulates that the tax will be cancelled for 90 percent of people in Germany. Another 6,5 percent will have to pay a reduced Soli from 2021 onwards, depending on earnings. The top 3,5 percent of earners will continue to pay the solidarity surcharge in full. By continuing to tax the top 10 percent, the federal government will avoid a revenue shortfall of an estimated 10,9 billion euros per year. 

The CDU / CSU pledged during the last election to abolish the surcharge completely, and will now be demanding a roadmap on how this can be achieved in the future. Their coalition partners, the SPD, have maintained that they will allow this only if the super-rich pay more elsewhere, for example through a tax on assets. 

Will I stop paying solidarity surcharge tax?

If you’re wondering whether you will benefit from the tax break, the Ministry of Finance has put forward the following salary limits as a guide: single employees subject to social security contributions, who earn no more than 73.874 euros per year, will stop paying solidarity surcharge after 2021. If you earn up to 109.451 euros, you will continue to pay in part. Those who earn above this limit will pay the Soli in full. 

The limits are slightly different for families. Any family with two children, in which only one parent works, will pay no solidarity surcharge on a gross annual salary of up to 151.990 euros. Up to 221.375 euros, a partial payment is due, then the full surcharge beyond that. According to calculations by the Ifo Institute, this category of earner is the most likely to benefit - the new regulation could save you up to 1.800 euros per year. 

If you’re self-employed (i.e. a freelancer or you run your own business), the figures are again slightly different. 88 percent of traders subject to income tax will be exempt from the solidarity surcharge. 6,8 percent will no longer have to pay in full.   

Abi

Author

Abi Carter

Abi studied History & German at the University of Manchester. She has since worked as a writer, editor and content marketeer, but still has a soft spot for museums, castles...

Read more

JOIN THE CONVERSATION (0)

COMMENTS

Leave a comment