Church Tax Explained

This article provides an introduction to Church tax and explains how Church Tax affects Salary, Wage and Income Tax calculations.

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What is Church tax?

The tax is on an individual’s affiliation to a religious community that is a recognised public-law corporation.

Persons who are affiliated to or members of a community that imposes church tax are liable for the tax. Whether or not a person belongs to a church is decided under the internal law of the church.

A further criterion for deciding whether a person must pay church tax is that person’s place of residence or habitual abode within the meaning of the Fiscal Code.

Church tax is a surcharge levied on top of income tax, wages tax and (as of 1 January 2009) final withholding tax. The amount of this surcharge tax is determined by resolutions on church tax adopted by the religious communities entitled to impose the tax. It varies in the different Länder, ranging from 8% to 9%.

The tax base for church tax is the amount of  

• Income tax,
• Withholding tax on income from capital or
• Wages tax an individual pays.

Child tax-free allowances are taken into account even if they are not claimed as deductions from taxable income because it is more advantageous for the taxpayer to claim child benefit instead.

Besides income tax (wages tax), most church tax acts also permit assessment on the basic tax amount calculated for the purposes of real property tax, although this tax base is now seldom used.

If married couples practise different faiths and if they file a joint tax return, the church tax is either

(i) Computed for each faith on half of the joint income tax or

(ii) First computed as if both persons were members of the same faith, and then divided between the two religious communities.

The second method of computation can be applied only when both communities’ church tax rates are the same. If only the husband or the wife is a member of a church entitled to levy church tax, the tax is always computed on an individual basis. Tax payable by the spouse who is a church member will in this case be based on his or her share of the joint income tax or wages tax.

Some church tax acts include provisions under which

• A special church contribution is imposed if a church member earns no or only minimal income, while his or her spouse is the primary earner but does not belong to a church
• A minimum amount of church tax applies, which is collected if the church member does not have to pay any income tax or wages tax
• A legal minimum is stipulated for the amount of church tax payable

The church tax paid (minus any refunds) can be deducted as a special expense. However, this does not apply if it has been paid as a surcharge on either withholding tax on income from capital or final withholding tax. Nevertheless, the effect of the deduction of church tax as a special expense is taken into account when calculating the withholding tax on income from capital, provided the two taxes are paid together.

Church tax is levied on the basis of church tax acts enacted by the legislative bodies of the Länder. The Länder authorities are also responsible for supervising the relevant church regulations.

Church tax is collected by the state, but the revenue accrues to the churches. The different churches that are entitled to impose the tax use the revenue to perform their functions.

As a rule, church tax is assessed and collected by tax offices in the course of income tax assessment. If the taxpayer is subject to wages tax, his or her employer computes the church tax at the rate valid for the employee’s place of residence and remits it together with the wages tax to the tax office.

The payment of tithes, deriving from the biblical practice of sacred offerings and made compulsory by a synodal decree of 585, is held to be the oldest regular source of ecclesiastical revenue on German soil. The payment of ecclesiastical tithes was enforced by civil law throughout the empire by a statute of Charlemagne passed in 779, and in the following centuries became a substantial source of revenue for funding ecclesiastical functions. It took the form of a tenth of the produce from crops, vineyards and fruits, as well as from cattle and other animals. In the Middle Ages, and notably during the crusades, the popes also assumed the right to levy tax for ecclesiastical purposes. In Protestant areas, the reformation led to widespread secularisation of the sovereign rights and possessions of the churches, after which the Protestant churches were initially compelled to depend on voluntary contributions. In the course of general secularisation following the Final Recess of the Reich Deputation of 1803 the churches finally forfeited not only their possessions but also the right to collect tithes as well, although the territorial rulers who benefited were at the same time placed under an obligation to render financial compensation to the churches. This obligation was gradually replaced at regional level by arrangements to introduce a modern form of church tax, beginning in Oldenburg in 1831 and followed by church tax acts in Hesse-Darmstadt in 1875, Prussia in 1875/1905, Württemberg in 1887/1906, Baden in 1888 and Bavaria in 1912. The right of religious communities that are public corporations to levy taxes in accordance with the provisions of Länder legislation was guaranteed throughout the territory of Germany for the first time by Article 137 paragraph (6) of the Weimar Constitution of 1919.

This right was reaffirmed by both sides in the Reich Concordat of 1933, in Länder Concordats (Bavaria, Baden) and in agreements between the state and the Protestant Church.

In 1949 the above-mentioned article from the Weimar Constitution was included in the Basic Law enacted in Bonn. The right of religious communities to levy taxes has also been expressly acknowledged in the constitutions of several Länder (Bavaria, Hesse, Rhineland-Palatinate, Saarland).