Uncategorized - MW Expat

FACTA for Expats in Germany: Everything You Need to Know

Posted on October 3, 2024October 3, 2024 by Clara

For American expats living in Germany, managing finances and complying with tax laws can be particularly challenging. One of the most complex regulations expats must navigate is the Foreign Account Tax Compliance Act (FACTA). In this guide, we’ll break down everything American expats need to know about FACTA: from who needs to report, to how it affects your relationship with German banks, and the steps you can take to ensure compliance while avoiding penalties.

What is FACTA?

Passed by the U.S. government in 2010, the Foreign Account Tax Compliance Act (FACTA) requires U.S. citizens, including those living abroad, to report their foreign financial assets to the Internal Revenue Service (IRS). While its primary focus is on U.S.-based taxpayers, it also significantly impacts American citizens living abroad, adding layers of compliance for expats, including those in Germany,

Although many U.S. citizens in Germany may already be paying German taxes, FACTA adds an extra layer of reporting that is often difficult to understand.

How Does FACTA Affect U.S. Expats in Germany?

For American expats living in Germany, FACTA introduces unique challenges. This is because even though you may be fully settled in Germany and paying taxes there, your German bank is required to report your account details to the U.S. IRS if you meet certain thresholds.

Your obligation to file is based on the value of your foreign assets and your filing status:

Single taxpayers living abroad: $200,000 at the end of the year or $300,000 at any time during the year.
Married taxpayers filing jointly abroad: $400,000 at the end of the year or $600,000 at any time during the year.
Single taxpayers living in the U.S.: $50,000 at the end of the year or $75,000 at any time during the year.
Married taxpayers filing jointly in the U.S.: $100,000 at the end of the year or $150,000 at any time during the year.

If the value of all your foreign financial accounts exceeds the threshold, you are required to report these accounts to the IRS. All in all, even if you’re paying German taxes, your U.S. tax obligations remain.

Is FACTA mandatory for everyone?

One common question expats often ask is whether FATCA reporting is mandatory in Germany or not. The answer is yes: FACTA is mandatory for any U.S. citizen living in Germany with foreign financial assets exceeding the specified thresholds, and they must file the IRS Form 8938. This includes checking, savings, investment and retirement accounts held in Germany or any other country. Even U.S. citizens with dual German citizenship are not exempt from FACTA reporting.

Do German Banks Ask for FACTA Compliance?

German banks are required to comply with FACTA to avoid U.S. sanctions. The U.S. government imposes a 30% withholding tax on U.S.-sourced income for non-compliant foreign banks, which incentivizes German banks to gather and report information on their U.S. clients.

This is why expats often find that German banks request U.S. tax forms like the W-9 or W-8BEN to ensure they meet U.S. regulations. When you open a bank account in Germany, the bank will likely ask for your U.S. tax identification number and require you to complete additional paperwork.

What Information is Reported Under FACTA?

Reporting FACTA reporting for expats in Germany includes a wide range of accounts: checking accounts, savings accounts, pension funds, brokerage accounts and investment portfolios held with German banks. You must report:

Foreign pensions
Foreign stocks
Foreign financial accounts
Foreign mutual funds
Foreign hedge funds
Foreign partnership interests
Foreign real estate owned through a foreign entity (only the entity must be reported, not the real estate itself)
Foreign-issued life insurance

Penalties for Non-Compliance

The IRS requires detailed reporting on foreign accounts to ensure that all income earned globally is declared and taxed accordingly. The penalties for failing to comply with FACTA can be severe. U.S. expats in Germany who do not report their foreign accounts could face fines up to $50,000 or more, depending on the extent of non-compliance. In addition, German financial institutions may refuse to offer services to U.S. citizens who fail to provide the necessary documentation for FACTA reporting.

For U.S. expats, this means that opening and maintaining a bank account in Germany can involve additional steps, such as filling out U.S. tax forms. Moreover, German banks will share your account information with the IRS, which may include balances, income and transfers. This level of transparency can feel burdensome but is essential for meeting U.S. tax obligations.

How to Report FACTA Forms

To comply with FACTA, expats in Germany must file Form 8938 with their annual U.S. tax return. This form requires detailed information about each foreign account, including the maximum balance during the year, account numbers, and the financial institution’s details. It’s crucial to gather all this information from your German bank before the tax season begins.

Deadlines and Reporting Timeline

FACTA reporting follows the same deadlines as regular U.S. tax filings. Typically, this is April 15th, but U.S. expats living in Germany are granted an automatic two-month extension, moving the deadline to June 15th. You can also request an additional extension until October 15th if necessary. Ensuring timely reporting is key to avoiding penalties.

What is FBAR and How Does it Apply in Germany?

FBAR (Foreign Bank Account Report) is another reporting requirement separate from FACTA. While FACTA requires reporting to the IRS, FBAR is filed with the Financial Crimes Enforcement Network (FinCEN). If your total foreign account balances exceed $10,000 at any time during the year, you must file an FBAR. This threshold is lower than that for FACTA, so many expats in Germany must file both.

Common Challenges Expats Face With FACTA

Dealing With Dual Taxation

Between Germany and the U.S. American expats in Germany are often subject to dual taxation, which complicates the process of managing financial accounts. Although Germany and the U.S. have a tax treaty to avoid double taxation, FACTA reporting remains a separate requirement, adding more complexity. Ensuring compliance with both U.S. and German tax authorities can be a significant burden for expats.

Finding Compliance Assistance From Abroad

Navigating FACTA’s complexities while living in Germany can be daunting. Many expats turn to professional tax advisors familiar with both U.S. and German tax regulations to help manage their reporting requirements.

Navigating the complexities of FACTA as an American expat in Germany can feel overwhelming, but understanding your obligations under the law is crucial to staying compliant with U.S. tax regulations. While FACTA reporting is mandatory, expats who stay informed and organized can avoid penalties and manage their financial responsibilities smoothly. By working closely with your German bank and seeking professional tax advice, you can ensure that your foreign accounts are reported accurately to the IRS. Feel free to contact us if you need further assistance. We now have a live chat feature available on every page! If you have any questions, just click to start a conversation, and our team of experts will be happy to assist you shortly.

What our clients say about our services

I have had an incredible experience with Dabar Reimer. She is very well experienced and was able to provide solutions for multiple scenarios. I am very thank full to her and highly recommend having a discussion with Dabar before choosing your next insurance policy.

They have been so patient and thorough with helping during every step. I couldn’t imagine doing this on my own!

My agent, Anja Lampert is super friendly and helpful throughout the entire process. Excellent service provided.

The support I have received from Dabar was outstanding. She was always available to answer all my questions, and helped me out through the whole process. Thank you so much!

I have appointed with Alex as the to-go person for all matters. Honestly he is providing the best service someone can get in Germany, solving problems literally in minutes! Highly recommend MW Expat Solution!

It was a brilliant experience with MW expat. Right from filling up my details online, receiving a prompt call to book an appointment for detailed discussions of my needs to finally having a zoom call to talk to an advisor face to face was quick efficient, and re-assuring. I had the privilege to talk to Adriana Gonzalez, who was nothing short of brilliant. She was extremely composed, utterly professional, and very helpful.

Secure your future abroad with tailored insurance & pension plans

Get expert advice on the best solutions for expats – personalized to fit your unique needs. Start planning today!

Choosing the Right Pension Plan in Germany

Posted on August 21, 2024September 10, 2024 by Clara

Planning for retirement is one of the most important financial decisions you’ll make in your lifetime. The decisions you make today will directly impact your financial security in the future. A well-chosen pension plan can provide peace of mind, knowing that your retirement years will be financially secure. With an array of options available, choosing the right pension plan in Germany can seem overwhelming, but understanding your options is the first step to ensuring a comfortable retirement.

1. Finding the Right Pension Plan in Germany

A pension plan is a retirement savings program that allows you to accumulate funds over time, which are then paid out as a regular income after you retire.

Germany’s pension system is comprehensive, offering various options to ensure financial security in retirement. The primary categories include the state-subsidized pension schemes like Riester Rente and Basis Rente (also known as Rürup Rente), company pension schemes (Betriebliche Altersvorsorge, bAV), and private pension plans. Each of these has its own benefits, contribution requirements and potential payouts. Understanding these options is essential for choosing the right pension plan in Germany to suit your needs. You can find further information about Germany’s pension schemes here.

2. Overview of pension plans as a key retirement tool

Pension plans are designed to provide a steady income stream during retirement, acting as a crucial component of a comprehensive retirement strategy. They can help replace a portion of your pre-retirement income, ensuring you can maintain your lifestyle even after you stop working.

Therefore, selecting the right pension plan in Germany plays a vital role in securing your financial future. They provide a structured way to save and invest for retirement, often with tax advantages that make them an attractive option. Additionally, many employers offer matching contributions, which can significantly boost your retirement savings. All in all, it’s essential to choose the right pension plan in Germany that aligns with your financial goals, risk tolerance and retirement timeline. By investing in a pension plan, you’re ensuring that you have a reliable source of income in retirement, reducing the risk of outliving your savings.

3. Factors to Consider When Choosing a Pension Plan

We understand that choosing from a wide range of unfamiliar pension schemes can be challenging and it’s normal to feel overwhelmed. That’s why we want to share the key factors you should take into account when selecting the right pension plan in Germany:

State-sponsored vs. private pension plans

In order to choose the right pension plan in Germany, one of the most fundamental choices is between state-subsidized plans and private pension options. State-subsidized pension plans are designed to encourage savings by offering significant tax benefits and government incentives.

For instance, the Riester Rente provides direct subsidies and tax deductions, making it a popular choice for employees, especially those with families. The Basis Rente, also known as the Rürup Rente, is particularly attractive for self-employed individuals and high-income earners, offering substantial tax deductions on contributions. These state-subsidized plans are appealing due to their security and guaranteed benefits, which are backed by the government. However, they also come with certain restrictions, such as predefined contribution limits and fixed retirement ages.

On the other hand, private pension plans offer greater flexibility and control over your retirement savings. These plans are not subsidized by the government but allow for a broader range of investment choices and adjustable contribution levels. Private pensions can be tailored to fit individual needs, making them ideal for those who want more control over how their money is invested. While private plans may involve higher fees and greater exposure to market risks, they also offer the potential for higher returns, particularly for those who are financially savvy and willing to take on more risk. Ultimately, the choice between state-sponsored and private pensions depends on your personal preferences, financial situation, and long-term retirement goals

Risk tolerance

Risk tolerance is a crucial factor in choosing the right pension plan in Germany. It refers to your ability and willingness to endure fluctuations in the value of your investments. If you have a low-risk tolerance, you might prefer the stability and predictability of state-subsidized plans like the Riester Rente or company pension schemes (bAV). These plans typically offer guaranteed returns and are less vulnerable to market volatility, making them suitable for individuals who are risk-averse or nearing retirement age.

Conversely, if you have a higher risk tolerance, you might be more comfortable with private pension plans that are often linked to the performance of the financial markets. While these plans come with the potential for greater returns, they also carry a higher risk of loss, particularly in the short term.

Financial goals and retirement age

Your financial goals and expected retirement age are critical when choosing the right pension plan in Germany. If your goal is to retire early, for example, you’ll need to select a plan that allows for accelerated savings and provides sufficient income to sustain you throughout a potentially longer retirement period. State-subsidized plans like Riester and Basis Rente often have defined retirement ages that align with the statutory retirement age in Germany, usually around 67 years. These plans are structured to provide steady income at a later stage in life and may impose penalties for early withdrawal.

In contrast, private pension plans offer more flexibility regarding withdrawal timing, allowing you to tailor your retirement plan to your personal goals. If you aim to retire early or have specific financial milestones you want to achieve before retirement, a private plan might better suit your needs. Additionally, private plans can be more adaptable to changes in your financial situation, offering options to adjust contributions and investment strategies as you move closer to your retirement date. Aligning your pension plan with your financial goals ensures that you have the necessary resources to enjoy a comfortable retirement.

Fees and costs

All pension plans come with fees and costs, which can significantly impact your retirement savings over time. Understanding how fees will affect your overall savings is crucial when evaluating the right pension plan in Germany. State-subsidized pension plans generally have lower fees, particularly when offered through employer-sponsored schemes like the bAV. These plans benefit from economies of scale, meaning administrative and management fees are spread across many participants, reducing individual costs. Additionally, the tax advantages associated with these plans can further offset fees, making them a cost-effective option for many savers.

However, private pension plans often involve higher fees, especially if they include actively managed investments or complex financial products. These fees can include management fees, administrative fees, and sometimes advisory fees. While private plans offer more investment options and potential for higher returns, the associated costs can erode your savings over time, particularly if they are not carefully managed. It’s essential to review the fee structure of any pension plan before committing, ensuring that the benefits outweigh the costs. Comparing the total cost of ownership over the life of the plan can help you make an informed decision that maximizes your retirement savings.

Investment options

The variety of investment options available within a pension plan is another critical factor to consider. State-subsidized pension plans and company pension schemes often have a more limited range of investment choices, typically focusing on low-risk, stable investments that aim to preserve capital and provide steady returns. This approach is ideal for those who prefer security and predictability in their retirement savings.

On the other hand, private pension plans offer a broader range of investment opportunities, including stocks, bonds, mutual funds and other financial instruments. This diversity allows you to tailor your portfolio according to your risk tolerance, investment horizon, and financial goals.

In conclusion, choosing the right pension plan in Germany is a critical step toward securing a comfortable and financially stable retirement. By understanding the different types of pension plans, assessing your risk tolerance, aligning the plan with your financial goals, and carefully considering fees and investment options, you can make an informed decision that meets your long-term needs. Whether you opt for an employer-sponsored plan, a private plan, or a combination of both, the key is to start early and stay consistent with your contributions.

With the right strategy in place, you can look forward to enjoying your retirement years with peace of mind. We’re excited to announce that we now have a live chat feature available on every page! If you have any questions, just click to start a conversation, and our team will be happy to assist you shortly.

What our clients say about our services

They have been so patient and thorough with helping during every step. I couldn’t imagine doing this on my own!

My agent, Anja Lampert is super friendly and helpful throughout the entire process. Excellent service provided.

The support I have received from Dabar was outstanding. She was always available to answer all my questions, and helped me out through the whole process. Thank you so much!

What’s the Best Pension Scheme in Germany in 2024?

Posted on August 16, 2024September 10, 2024 by MW Expat

Choosing the best pension scheme in Germany in 2024 is a key focus for anyone planning their retirement. Germany’s pension system is designed to provide financial security in retirement through a combination of public, private and occupational pension schemes. Expats living and working in Germany face unique challenges when it comes to pension planning, as they may not have the same level of familiarity with the German system as native citizens. Additionally, they often have more complex financial situations, with pensions from multiple countries and potential plans to return to their home country in retirement.

With ongoing changes and new developments in 2024, it’s essential to understand the options available to make informed decisions about retirement planning. In this article, we’re going to explore the different options for expats and try to designate the best pension scheme in Germany in 2024.

1. Types of pension schemes available in Germany

Germany offers three primary types of pension schemes, including public, private and occupational pensions.

Public pensions (Gesetzliche Rentenversicherung). This mandatory state pension system is funded by contributions from employees and employers.
Private pensions. Voluntary plans like the Riester and Rürup (Basisrente) pensions that individuals can choose to enhance their retirement savings.
Occupational pensions (Betriebliche Altersvorsorge). Employer-sponsored pension plans that provide additional retirement benefits.

Identifying the best pension scheme in Germany in 2024 requires a clear understanding of these types and how they fit into your financial goals.

2. Public, private or occupational pension plans: benefits and drawbacks

Before we delve into each pension scheme, it’s necessary to present the advantages and disadvantages of public, private and occupational pensions. Determining the best pension scheme in Germany in 2024 will depend on how well these options align with your personal circumstances.

1. Public pensions are the backbone of Germany’s retirement system, ensuring a basic level of income based on an individual’s earnings history and contributions. They provide a sense of stability and security, particularly for those with lower incomes or inconsistent employment histories. However, for some people, public pensions alone may not be the best pension scheme in Germany in 2024 due to the potential insufficiency in maintaining the same standard of living in retirement, particularly for higher earners.

2. Private pension plans offer additional security and flexibility, making them a strong contender for the best pension scheme in Germany in 2024. They are typically investment-based, which can lead to potentially higher returns over time. Nevertheless, this investment-based approach also comes with greater risk, as market fluctuations can impact the value of the pension fund.

3. Occupational pensions, sponsored by employers, serve as an additional layer of financial security. Contributions are typically made by both the employer and the employee, providing a steady stream of income in retirement. For many expats, these might represent the best pension scheme in Germany in 2024 due to their portability and the steady stream of income they can provide in retirement. The main drawback is that they are also subject to the financial health of the employer and may be affected by changes in employment status.

When considering the best pension scheme in Germany in 2024, these benefits and drawbacks must be weighed carefully. You can find further information on different German pension plans on this link.

3. Special pension schemes for specific professions

In order to determine the most suitable pension scheme in Germany, expats should always take into account their specific profession. Certain professions in Germany benefit from tailored pension schemes, which may influence the choice of the best pension scheme in Germany in 2024:

Civil servants receive generous, government-funded pensions as part of their employment benefits. These pensions are often more substantial than those available to employees in the private sector, reflecting the public sector’s commitment to supporting its workforce in retirement.
Self-employed individuals and freelancers face unique challenges when it comes to pension planning, as they typically lack access to employer-sponsored pension schemes. As a result, many of them turn to the Rürup pension.

Corporate executives frequently have access to enhanced occupational pension plans with substantial employer contributions.

4. Legal changes in 2024 affecting pension planning

In 2024, several legal changes are impacting pension planning. These changes aim to address emerging challenges and enhance the efficacy of retirement savings schemes across the country:

Increased retirement age. One of the prominent legal changes in 2024 is the continued gradual increase in the statutory retirement age. This adjustment is implemented to ensure the long-term sustainability of the public pension system in light of demographic shifts, such as an aging population and longer life expectancies.
Enhanced tax incentives. Another crucial legal reform in 2024 revolves around the enhancement of tax incentives, particularly for private pension schemes like the Riester and Rürup plans. These tax incentives are designed to incentivize individuals to save more for retirement by offering attractive tax breaks on contributions.

Regulatory reforms. In addition to changes in retirement age and tax incentives, regulatory reforms in 2024 focus on improving the transparency and accessibility of private pension products. These reforms aim to address concerns regarding the complexity and high fees associated with some private pension plans, making them more attractive and accessible to a broader population.

In conclusion, choosing the best pension scheme in Germany in 2024 depends on individual circumstances, including employment status, income level and retirement goals.

However, while all pension schemes in Germany offer their own set of advantages and disadvantages, occupational pensions stand out as a particularly secure option from our point of view. Sponsored by employers and often complemented by contributions from employees, occupational pensions provide a steady stream of income in retirement and offer the advantage of portability. You can find further information and updates on occupational pensions here. Nonetheless, the choice of the best pension scheme in Germany in 2024 ultimately depends on aligning these options with personal financial objectives and long-term plans.

Reach out to us for personalized advice. Our experts are here to provide comprehensive information and guide you through the complexities of pension planning in Germany! We now have a live chat feature available on every page so, if you have any questions, just click to start a conversation, and our team will be happy to assist you shortly.

What our clients say about our services

They have been so patient and thorough with helping during every step. I couldn’t imagine doing this on my own!

My agent, Anja Lampert is super friendly and helpful throughout the entire process. Excellent service provided.

The support I have received from Dabar was outstanding. She was always available to answer all my questions, and helped me out through the whole process. Thank you so much!

The German Pension System: The Ultimate Guideline

Posted on June 17, 2022April 3, 2023 by MW Expat

As an expat coming to Germany, we understand that the German pension system can be hard to understand. If you come to work in the country and are employed, you will contribute to the pension system, just like every other citizen. Does this sound too confusing? Read this article to better understand how the pension system works in Germany for expats!

What is the German pension age?

The German pension system is experiencing some major changes in terms of retirement age. Nowadays, the official retirement age for women is 65 years and 67 years for men. Over a transition period from 2012 to 2029, this will gradually climb up to official retirement age. In addition, an early retirement is possible in Germany if you have worked for at least 35 years. However, for every year that you retire earlier than planned, 3.6% of your pension will be deducted. At the moment, 4 employees finance 1 retiree in Germany.

First step: taxation

First of all, you should be aware that all pensions are taxable in Germany. What does this mean? This means that you must declare all pension payments you get to the tax office, whether it is in Germany or in a foreign country. These payments may include a state pension, occupational pension scheme, Riester pension or private pension insurance.

In some cases, your pension could be subject to double taxation, which occurs when both Germany and your place of residency tax your pension income. As a result, you must determine whether the two nations have a double tax agreement in place.

In addition, as soon as you’ve paid into your pension for more than five years, you will receive an annual pension information letter with your pension balance and further information.

What is a mandatory state pension?

In Germany, the mandatory state pension (statutory pension) is known as the Gesetzliche Rentenversicherung (GRV). Employees contribute to the German state pension through payments to the German social security, where a proportion of the wage is paid. Instead of being saved or invested, these compulsory contributions are reallocated to pay for existing pensioners. The system is subsidized through the German state.

For expats who decide to leave Germany, two scenarios may occur. On the one hand, it might be possible to get a return on your half of the pension contributions to the state. If you have paid into the German pension scheme for less than five years, you can get half of your saved retirement back (only half of it, since 50% is paid by the employee and 50% by the employer; you can only get the amount paid by the employee back). You can receive this right away, but you have to submit a request for it.

On the other hand, if you have contributed to the German pension system for more than five years, you have to wait until you reach retirement age before you receive your German pension abroad. In this case, you will get the full retirement amount you saved for the time that you were contributing into the system.

However, the statutory pension insurance is not enough and it is usually advised to supplement it with a private pension fund. Contact us for a free consultation today to find out more information about this.

What is a Riester pension?

The Riester pension is one of the most complex parts of the German pension system. The Riester pension is a state-subsidised private pension plan. This is how it works: as an individual, you contribute to a private pension contract, bank savings plan or fund during your active working life. This way, you get state allowances, tax advantages and a monthly pension for the rest of your life.

What happens if you are still contributing with your Riester pension and you decide to leave Germany? Since these financial benefits are directly linked to your residency in the country, you are no longer eligible for additional subsidies and allowances from the German government. If you move to another EU country, you will not be required to repay anything and will be able to claim the benefits of the plan when you retire.

However, for non-EU citizens, the German government would expect you to repay any state contributions made to your Riester account by the time you retire. Taking this into account, the Riester pension system is only convenient for people who plan to stay in Europe for their whole lives.

What is a basis pension (Rürup) and BAV?

The basis pension, sometimes known as the Rürup pension, is named after its “creator”, Prof. Rürup. The Rürup pension was established to allow self-employed people and freelancers to save for retirement in the same way that employees do.

Moreover, a company pension scheme (bAV = betriebliche Altersvorsorge in German) is the creation of a supplementary pension through the employer from contributions of the employer, the employee, or both combined.

For expats who leave Germany, we have good news: both pensions can be transferred abroad.

What is a private pension insurance?

The private pension insurance (Private Rentenversicherung) is made up of individual pension investment plans set up by banks and insurance companies to raise your overall German pension entitlement when you reach the retirement age. There are good news for expats who leave the country: you can get your private pension in every foreign country around the world without any complications or deductions.

We hope that this article helped you better understand the way the German pension system functions and how you can take advantage of it as an expat. If you wish to learn more information concerning your personal options, contact us here!

Expat Life in Germany 2022: New Changes That You Should Be Aware of Now

Posted on March 3, 2022April 3, 2023 by MW Expat

Expat life in Germany can be especially daunting. Every year, new and updated policies come into effect that expats need to be aware of, often feeling overwhelmed by the sheer number of changes. While it may seem tough to keep up to date with all these alterations, the best way to make your life as an expat in Germany successful and fulfilling is by proactively preparing early for the inevitable policy shifts. With a little extra effort in understanding and learning the rules of the game around you, it’s possible to enjoy a journey filled with joyous cultural experiences.

Expats in Germany face significant issues, such as a language barrier and the difficulty involved in learning German, finding work, figuring out where to live, understanding the red-tape maze and bureaucracy, dealing with the culture shock, and more. While it can be challenging to navigate these hurdles, having a keen understanding of policy changes affecting expats will surely make things easier for you.

So, without ado, let’s explore the changing laws, rules, and regulations that are bound to affect you in 2022:

Social Security Changes

Here are the changes that will affect social security in Germany in 2022:

New Social Security Contribution Threshold

Each year, the federal government alters the social security contribution assessment ceiling. However, due to negative wage development in 2021, most thresholds will remain the same, and some will reduce. The income threshold for statutory health insurance and long-term care insurance contributions will remain the same this year.

Meanwhile, the threshold for pension insurance will vary across different federal states as the government tries to reduce the difference between pensions in western and eastern Germany. You should contact your expat insurance company to determine what these changes mean for your insurance.

Compulsory Insurance Limit Will Remain Unchanged

The compulsory insurance limit will remain at 64,350 euros each year. If you earn more than that, you can take our private health insurance in the country. It will allow you to discuss personal accident insurance and other medical insurance varieties with your provider.

Childless Individuals Will Pay Higher Long-Term Contributions

Germany will increase the contribution rates for long-term care insurance for childless individuals in 2022. They will justify this increment by stating that it will cost the state more to take care of them in their old age without children to take care of them. So, childless individuals aged 23 or more will see a 0.1% to 3.4% rise in their contributions.

Healthcare Changes

Germany’s healthcare is facing the following changes:

Digital Sick Notes

People working in Germany have had to send digital copies of their doctor’s certificates to their employer to avail sick leave for some time now. But from July 1, 2022, the doctor will send copies to the resident or expat international insurance company and your employer directly.

The Use of E-Prescriptions

The government wants to replace the pink prescription forms doctors use for prescribing medicine in January 2022, but the changeover to e-prescription hasn’t taken place yet. However, the Federal Health Ministry insists that the change, allowing your GP to send an e-prescription to the pharmacy directly, will occur this year.

EU Digital Certificate’s Limited Validity

The European Commission decreed in December 2021 that starting from February 1, digital COVID certificates will remain valid for nine months without a booster vaccine.

Online Organ-Donation Information

From March 2022, GPs will need to give you more detailed information about your organ donation options. A new online portal will enable you to register for organ donation or withdraw your prior consent.

Work-Related Changes

Here are the changes you should be mindful of when working in Germany:

Increment in Tax-Free Allowance

The country will increase the rudimentary tax-free allowance for adults by 204 euros. It means that single individuals will not have to pay taxes on the first 9,984 euros of their salary. For couples in a registered marriage, the amount is double.

Moreover, the taxable component of pensions will be 82% in 2022, and only new pensioners will be affected by this 1% increment. If you are facing trouble with your taxes, it’s best to reach out to financial services in Germany to make sense of them.

Minimum Wage Will Increase

Germany’s minimum wage will increase this year to 982 euros each hour. It will see a hike again in July and reach 1,045 euros per hour.

Unemployment Benefits

If you lose a job in the country, you can register online with the Employment Agency to receive unemployment benefits. All you will need is a valid electronic proof of identity.

Compulsory COVID Vaccines in the Healthcare Industry

In 2022, healthcare workers will need to present proof of vaccine to work in German hospitals, nursing homes, and other healthcare institutes.

Benefit & Allowance Changes

Here are the changes in allowances and benefits:

Increase in Hartz IV

Individuals receiving unemployment benefit II (Hartz IV) will receive more money this year. Single individuals will receive a three euro increase, which will take their benefit up to 449 euros per month. The standard rate for young people and children will also increase.

More Care Relief

Germany will offer further relief to caregiver relatives, care staff, and people in need of care. Individuals who receive care in their homes will receive a supplement from their long-term care insurance to ensure they can manage the rising costs.

Increment in Child allowance & Maintenance Advance

The Kinderzuschlag or supplementary child allowance that low-income families receive along with their regular child benefit will increase this year to a maximum of 209 euros each month. Meanwhile, the maintenance advance given to single parents who receive no or irregular maintenance payments from the other parent will increase per the rising minimum maintenance amount.

The Bottom Line

With each passing year, Germany introduces more new laws and policies that affect its residents and expats. These were merely some of the significant policies that would affect anyone living in Germany. I hope they help you navigate the new rules seamlessly.

Procedure to Open a Bank Account for Expats in Germany

Posted on February 24, 2022April 4, 2023 by MW Expat

The procedure to open a bank account for expats in Germany might seem challenging considering the language barrier and the mounds of paperwork. This helpful guide gives you all of the information on opening a bank account in Germany and makes the process easier.

Opening a German bank account is one of the first things expats should do when they arrive in the country. It can help them buy international expat insurance, an apartment, find a job, get various services, and so much more. Needless to say, a German bank account is indeed a necessity for anyone starting their life in the country.

The German Banking System

The German banking system comprises three main pillars of banks; private commercial banks, public savings banks, and cooperative banks. Aside from this, there are also several international banks, online banks, and mobile banks in the country.

If you move to Germany without a bank account, initially, managing finances will not be too difficult. This is because significant companies accept payments from major international debit and credit cards, such as Visa, MasterCard, and American Express.

However, if your account is with a bank that does not have a location in Germany, managing finances through it would be pretty tricky.

Types of German Bank Accounts

German banks offer different types of bank accounts to customers. They include the following:

Current Account

These are the standard and go-to accounts for German residents since they help pay bills and receive salaries. Most German banks offer both current and specialized accounts for expats and residents.

Savings Account

You can open a savings account alongside your current account, and it is designed to help you save and earn interest over time. Such accounts can be either instant access for saving or fixed deposits. The latter can be either instant access that includes higher interest and a minimum deposit or a fixed period that the money has to stay in the account.

Non-resident Account

Savings and current accounts are typically only available to German residents. Non-residents have specific bank accounts they can open while not having a permanent address. This is an excellent option for expats planning to move from their home country.

Digital and Mobile Accounts

There are several mobile-only bank accounts recently opening up in the country. Moreover, most banks also offer online banking via their banking apps.

Off-shore Accounts

This is perhaps the best option for expats planning to move to Germany. It is also an excellent option for those who frequently travel from one country to another or have to transfer their funds to different countries.

German Bank Options to Choose from

Expats can choose from various German bank options depending on their needs and preferences. They include the following:

TransferWise
Sparkassen and Volksbanken (Savings and Cooperative Banks)
Nationwide Banks (Private Banks)
Revolut
Online and Mobile Banks

How to Open a German Bank Account?

EU nationals will not have a difficult time opening a German bank account. However, non-EU residents might face some difficulties since they require proof of income and jobs within the country and show their permanent address in Germany.

Moreover, some banks might be reluctant to open bank accounts for expats since these people don’t have a previous credit history. It can be challenging for expats to get around the banking system and open an account for these reasons.

The best way to open a German bank account is to visit the bank yourself and provide them with all necessary documents. These include the following:

Your passport with a valid visa or residence permit
Evidence of income and employment
Permanent German residence
Proof that you are a student if you are opening an account as one
SCHUFA credit rating
Initial deposit

When you open a German bank account, you might also be required to prove your identity. This will likely be done with a webcam or email verifying code.

Moreover, if you plan to open a German bank account abroad, this option might only be limited to EU residents. The process is straightforward as you will simply need to submit your documents and sign them online.

Factors to Consider When Opening a German Bank Account

Before you open a bank account with one of the banks in the country, it is essential that you consider the following factors:

Research on all of the banking services they offer
If they provide customer support in English
If they give you term life insurance
What the maintenance and withdrawal fees are
If they offer online services
How extensive their banking network is
If they help you open international expat insurance

Final Words

This was an all-inclusive, comprehensive guide on opening an account as an expat in Germany. If you find any difficulties with this procedure, you can quickly get in touch with our experts. We can help you with the process and paperwork and provide you with guidance.

What is FACTA?

How Does FACTA Affect U.S. Expats in Germany?

Is FACTA mandatory for everyone?

Do German Banks Ask for FACTA Compliance?

What Information is Reported Under FACTA?

Penalties for Non-Compliance

How to Report FACTA Forms

Deadlines and Reporting Timeline

What is FBAR and How Does it Apply in Germany?

Dealing With Dual Taxation

What our clients say about our services

Secure your future abroad with tailored insurance & pension plans

Table of Contents

1. Finding the Right Pension Plan in Germany

2. Overview of pension plans as a key retirement tool

3. Factors to Consider When Choosing a Pension Plan

State-sponsored vs. private pension plans

Risk tolerance

Financial goals and retirement age

Fees and costs

Investment options

What our clients say about our services

Table of Contents

1. Types of pension schemes available in Germany

2. Public, private or occupational pension plans: benefits and drawbacks

3. Special pension schemes for specific professions

4. Legal changes in 2024 affecting pension planning

What our clients say about our services

What is the German pension age?

First step: taxation

What is a mandatory state pension?

What is a Riester pension?

What is a basis pension (Rürup) and BAV?

What is a private pension insurance?

Social Security Changes

New Social Security Contribution Threshold

Compulsory Insurance Limit Will Remain Unchanged

Childless Individuals Will Pay Higher Long-Term Contributions

Healthcare Changes

Digital Sick Notes

The Use of E-Prescriptions

EU Digital Certificate’s Limited Validity

Online Organ-Donation Information

Work-Related Changes

Increment in Tax-Free Allowance

Minimum Wage Will Increase

Unemployment Benefits

Compulsory COVID Vaccines in the Healthcare Industry

Benefit & Allowance Changes

Increase in Hartz IV

More Care Relief

Increment in Child allowance & Maintenance Advance

The Bottom Line

The German Banking System

Types of German Bank Accounts

Current Account

Savings Account

Non-resident Account

Digital and Mobile Accounts

Off-shore Accounts

German Bank Options to Choose from

How to Open a German Bank Account?

Factors to Consider When Opening a German Bank Account

Final Words