Banks & Finances Germany

When choosing a bank in Germany for foreign citizens, it is important to consider factors such as the availability of services in English, the ease of opening an account, and the presence of physical branches. Here are some banks that are considered most foreigner-friendly:

 

N26: A digital bank; offers a convenient mobile app, free basic accounts, the possibility to open an account online without needing a German address, support in English, up to three free ATM withdrawals per month.

 

Commerzbank: One of Germany's largest banks; numerous physical branches, free virtual Debit Mastercard, support in English, access to personalized financial advice.

 

Revolut: A digital bank; offers free international transfers, the ability to hold and exchange multiple currencies, integrated features for expense management.

 

DKB (Deutsche Kreditbank): A digital bank; offers primarily online services; free accounts, free Visa debit card with attractive conditions, competitive savings account rates; requires a positive Schufa credit rating, limited support in English.

 

Comdirect: Offers online banking with low fees; free accounts, free cash withdrawals worldwide, support in English; lacks physical branches.

Opening a bank account in Germany is an important step for any foreigner moving to the country. This process is fairly simple and straightforward, provided you know the necessary steps and documents.

 

Types of bank accounts

Girokonto (Current Account): Used for daily operations such as receiving a salary, paying rent, and bills; the most common type of account in Germany.

 

Tagesgeldkonto (Daily Account): If you have accumulated some amount in your Girokonto and do not need these funds in full in the near future, but are not ready to place them in a yearly Sparkonto (Savings Account), but wish to secure them and earn income from the bank, you can open a Tageskonto. Upon opening, you can freely and freely transfer your funds between the Tageskonto and Girokonto, while earning a minimal interest (about 1% annually) on the balance in the Tageskonto. When opening any account that earns interest, it is important to know that less than 1,000 euros in interest income per year will not be taxed, provided you sign the relevant agreement at the bank. Otherwise, these incomes must be included in the annual tax return.

 

Sparkonto (Savings Account): Intended for accumulating funds and earning interest; not usually used for daily transactions.

 

Sperrkonto (Blocked Account): Required for students and visa applicants; this account confirms the availability of sufficient financial means for living in Germany.

 

Account opening process

 

Necessary documents:

- Account opening application: Fill out the application form.

- Identification: Passport or another valid ID.

- Visa or residence permit: To confirm your legal residence in Germany.

- Proof of residence: A document confirming your address in Germany, which can be obtained from the local registration office. Important: without official registration in Germany at the jurisdiction of the bank branch, opening an account is not possible.

- Proof of income or employment: For example, an employment contract or recent payslips.

- SCHUFA credit rating: Some banks may require this document to assess your creditworthiness.

 

Account opening process

Visit to the bank or online application: Some banks require a personal visit to open an account, while others offer the ability to open an account online.

Identity verification: For online applications, the PostIdent procedure may be required, which involves visiting a post office with your passport and a special form from the bank.

Account activation: After checking the documents, the bank will activate your account, and you will receive access details, such as the account number and card.

Using an ATM: ATMs that support international cards can be found in banks and on the streets. Look for Visa, MasterCard, Maestro, or Cirrus logos on the ATM to ensure compatibility with your card. Also, almost all banks support several languages besides German. Ensure that your PIN is four digits, as German ATMs may not support longer codes.

Fees and charges

 

Your bank's fees: Your bank may charge a fee for international transactions. It is usually a fixed amount or a percentage of the withdrawal amount. Check these fees before traveling.

 

ATM fees: Banks in Germany, such as Deutsche Bank, Commerzbank, and others, often do not charge additional fees for cash withdrawals for their customers, but there may be a fee for foreign cards. Private ATMs (e.g., Euronet) usually charge higher fees.

 

Exchange rate: Use bank ATMs rather than private ATMs to get the best exchange rate. Always choose to withdraw in the local currency to avoid DCC (Dynamic Currency Conversion), which often offers less favorable exchange rates.

 

Cash withdrawal tips

Avoid frequent withdrawals: Try to withdraw enough money in one go to avoid multiple fees.

Avoid ATMs in airports and tourist areas: Such ATMs often charge higher fees.

Notify your bank: Inform your bank about the trip to avoid card blocking due to suspicious activity.

Use ATMs in banks: ATMs located in bank branches are safer and have lower fees.

Avoid dark and deserted places: Try to use ATMs in busy and well-lit areas, especially in the evening.

Online services

Wise: Transparent fees, favorable exchange rates, transfer tracking capability; suitable for transfers to more than 80 countries with low fees and no hidden charges.

 

PayPal: High fees and less favorable exchange rates compared to other services; speed and convenience, ability to send to more than 200 countries.

 

MoneyGram: Fast money delivery, cash pickup available at MoneyGram locations worldwide; high fees and less favorable exchange rates.

 

Western Union: Wide network of locations worldwide, cash pickup option; high fees, especially when transferring using a credit card.

 

Bank transfers

Use your bank to send an international transfer: You will need the recipient's bank account details, including IBAN and SWIFT/BIC code; high level of security and reliability; high fees and less favorable exchange rates.

Foreigners residing in Germany can obtain a loan under certain conditions:

 

Creditworthiness (SCHUFA)

An important factor is your credit history in Germany. Banks check your SCHUFA report, which reflects your credit activity, such as previous loans and their repayment. Even with a poor credit rating, it is possible to obtain a loan through specialized credit institutions like Auxmoney, which offer loans based on a p2p model.

 

Documents:

- Passport and residence permit.

- Proof of income (pay slips for the last 3-6 months).

- Bank statements.

- Rental contract to confirm your address.

 

Bank offers: You can contact traditional banks like Deutsche Bank, Commerzbank, Sparkasse, as well as online platforms like Verivox and Smava, to compare loan offers.

 

 

Foreigners can also obtain a mortgage in Germany.

 

Requirements:

Having a residence permit and legal status in the country.

Stable income. The higher the income, the higher the chances of obtaining a mortgage.

Banks usually require a down payment, which can be up to 20% of the property's value.

 

Documents:

- Passport and residence permit.

- Employment contract and pay slips for the last 6-12 months.

- Balance sheet for the last 2 years for self-employed individuals.

- Proof of existing savings or assets.

- Creditworthiness report (SCHUFA).

 

Advice

Consultation: Seek consultation from a financial advisor or mortgage specialist to choose the best offer.

Bank transfer (SEPA): A bank transfer is a reliable and widely used method for paying for large purchases. It is especially convenient for bill payments or purchasing goods through online stores. The advantage lies in security and the ability to track transactions. It is important to note that it is preferable to use a transfer based on an invoice after receiving the goods to minimize risks.

Cash: Despite the growth of cashless payments, cash remains popular in Germany, especially for large purchases in private transactions. However, for purchases exceeding 10,000 euros, identity verification and data registration are required to prevent money laundering.

Real estate payment

The initial down payment, usually 20-30% of the property's value, is transferred to a special account managed by a notary. After the property title is registered, the remaining amount is transferred to the seller's account via bank transfer. Cash payments are not allowed.

 

Car payment

Buying a new car: In most cases, purchasing a car is done through a bank transfer. Some dealers may accept cash payments, but this is not recommended due to limitations on large cash payments.

You can lease a car or obtain a car loan through banks or specialized financial institutions. These are popular financing methods, especially for new cars.

 

Buying a used car

Cash: Cash payments remain a popular method, especially when buying a car from a private individual. For large amounts (over 10,000 euros), proof of funds may be required according to anti-money laundering laws.

Bank transfer: Applicable for both private sellers and car dealers. Ensure the seller has bank details (IBAN, BIC).

Instant payment system: Allows for real-time money transfer if both parties have the respective accounts. Available only in banks supporting this service.

Cheque: More acceptable for car dealers than for private individuals; rarely used due to the risk of forgery and long processing times.

Main ways to save and investment opportunities available in Germany:

 

Tagesgeldkonto (Current account): An account with a variable interest rate that allows money to be withdrawn at any time without losing interest.

Advantages: Flexibility, instant access to funds, no limit on the amount.

Disadvantages: Low interest rates compared to other investment instruments.

Suitable for: Short-term savings and creating a reserve fund.

 

Festgeldkonto (Deposit account): An account with a fixed interest rate for a specific period (from several months to several years).

Advantages: Higher interest rates compared to Tagesgeldkonto, income stability.

Disadvantages: Lack of access to funds until the end of the deposit term.

Suitable for: Medium-term and long-term savings.

 

Stocks: Buying shares in companies with the aim of receiving dividends and capital appreciation.

Advantages: Potential for high returns, dividends.

Disadvantages: High risk, market volatility.

Suitable for: Investors with a high level of risk tolerance and a long-term perspective.

 

Exchange-traded funds (ETFs): Funds traded on an exchange that track an index or market sector.

Advantages: Low costs, diversification, liquidity.

Disadvantages: Limited control over the fund's composition.

Suitable for: Beginner investors and those looking for low-cost options with diversification.

 

Bonds: Debt instruments issued by companies or governments to finance their projects.

Advantages: Predictable income through interest payments, less risk compared to stocks.

Disadvantages: Low income compared to stocks, risk of issuer default.

Suitable for: Conservative investors seeking stable income.

 

Real Estate: Purchasing residential or commercial property for rental or resale.

Advantages: Stable rental income, property value appreciation.

Disadvantages: High initial investments, maintenance, and management expenses.

Suitable for: Long-term investors with sufficient capital for significant initial investments.

 

Alternative Investments

Cryptocurrencies: Digital assets, such as Bitcoin, traded on cryptocurrency exchanges.

Gold: Investments in physical gold or gold securities.

Foreigners living and working in Germany must adhere to the country's tax laws, which can be complex and multifaceted. Here are the main aspects to consider:

 

Income Tax: All residents of Germany are required to pay income tax on their worldwide income. The tax rates are progressive, ranging from 14% to 45%, depending on the income level.

From 2024, the tax rates are as follows:

- Up to €11,604: 0%

- From €11,605 to €62,809: from 14% to 42%

- From €62,810 to €277,825: 42%

- More than €277,826: 45%.

 

Social Contributions: In addition to income tax, employees in Germany are required to pay social contributions, including pension insurance, health insurance, and unemployment insurance. These contributions can amount to up to 22% of income.

 

Property Taxes

Property Transfer Tax: Charged upon purchasing property and ranges from 3.5% to 6.5% of the property's value depending on the federal state.

Annual Property Tax: Paid annually and ranges from 0.26% to 1% of the property's value.

 

Capital Gains Tax: Applied to income from dividends, interest, and capital gains. In Germany, the capital gains tax is 25%.

 

Double Taxation: Germany has double taxation agreements with more than 90 countries, including the USA, the UK, and many others. These agreements help avoid double taxation of income and determine in which country taxes will be paid.

 

Inheritance Tax: Applied to property transferred through inheritance. Rates vary from 7% to 50% depending on the amount of inheritance and degree of kinship.

 

VAT: The standard VAT rate in Germany is 19%, but for certain goods and services, such as food and books, a reduced rate of 7% applies.

 

It is always advisable to consult with a professional tax advisor for specific advice tailored to your situation.

Residents of Germany: Foreigners residing in Germany for more than 183 days a year are considered tax residents and are required to declare their worldwide income. Residents pay taxes on all their income regardless of source; those who have additional sources of income apart from salary, such as rental income, capital investments, and income from abroad, are required to file a declaration.

 

Non-residents: Non-residents pay taxes only on income earned in Germany. This applies, for example, to income from renting property in Germany or salaries earned from working in Germany.

 

Documents for Tax Declaration

- Wage Tax Certificate: Provided by the employer and contains information on your gross income and taxes withheld during the year.

- Bank Statements: Confirmation of transactions such as received income or paid deductions.

- Receipts for Deductible Expenses: For example, educational expenses, medical bills, and other similar expenses.

- Medical Insurance Documents: Proof of medical insurance payments as they can be deductible.

- Forms for Declaring Other Types of Income: Depending on your income source, additional forms may be required, such as Anlage S (for self-employed), Anlage KAP (for capital investment income), Anlage V (for rental income).

 

Methods of Filing Tax Declaration

 

Online Via ELSTER: The official platform for filing tax returns online; the platform is available in English.

 

Using Tax Software: There are commercial programs such as SteuerGo, Taxfix, Smartsteuer that will help you fill out and submit your declaration online; these programs are available in English and offer step-by-step instructions; the cost of such programs usually is about 30 euros.

 

Tax Advisors: If you have a complex tax situation or are unsure about the correctness of filling out your declaration, it is worth consulting a tax advisor. They will help you optimize taxes and avoid mistakes. The services of tax advisors can cost from 700 to 1500 euros depending on the complexity of the case, but they can ensure higher tax returns.

 

Tax Associations: Provide assistance in preparing tax returns for an annual membership fee based on your income. They are suitable for employees, but not for the self-employed or freelancers.

 

Deadlines for Filing a Tax Return

The tax year in Germany runs from January 1 to December 31. Declarations for the previous year must be submitted by July 31 of the following year. If the declaration is prepared by a tax advisor, the deadline is extended to December 31.

In the case of voluntary submission of a declaration for a tax refund, you can submit a declaration for the last four years.

 

It is always useful to consult a professional tax advisor for specific advice tailored to your situation.

Registration and Status

Freiberufler (Freelancer): Suitable for professions related to science, art, education, and medicine. No registration in the commercial register and no payment of trade tax (Gewerbesteuer) is required.

Gewerbetreibender (Trader): For all other types of activities. Registration at the trade office is required and trade tax must be paid if the annual income exceeds 24,000 euros.

Registration with the tax office: The self-employed must register with the tax office within four weeks after starting their activity.

 

Taxes and Contributions

Income Tax: The income tax rate varies from 14% to 45% depending on income. The self-employed must file an income tax declaration annually and pay taxes quarterly.

Value Added Tax (VAT): The self-employed are required to charge VAT on their services. The standard rate is 19%, the reduced rate is 7% for certain goods and services. VAT returns are submitted monthly or quarterly depending on the amount of VAT paid in the previous year.

Social Contributions:

The self-employed must pay for health insurance themselves. They can choose between public (about 14.6% of income plus an additional contribution of 1.3%) and private insurance. Public insurance can be more advantageous for people with low income, as contributions depend on income.

Contributions to the pension fund are voluntary, but it is recommended to plan your pension savings in advance.

Tax Deductions:

The self-employed can deduct professional expenses from taxable income, such as office rent, equipment, transport costs, and other work-related costs.

Deductions for a home office are possible provided the space is used exclusively for work and has no other function.

Support Programs:

In Germany, there are support programs for the self-employed, such as start-up subsidies and grants. These programs can help with initial capital and business development.

 

Recommendations

Use tax software and online services: Programs like Taxfix will help simplify the process of filing tax returns.

Consultation with a tax advisor: For complex cases, it is recommended to consult a professional tax advisor to avoid mistakes and optimize taxes.