Germany Plans Tax Reductions For Skilled Foreign Professionals; Here Are The Details

The plan includes tax rebates of 30 per cent, 20 per cent, and 10 per cent over the first three years, subject to approval. However, the specific eligibility criteria are yet to be disclosed

To tackle the labour shortage and stimulate economic growth, the German government is set to implement substantial tax reductions for newly arrived skilled foreign workers. As part of Germany’s "growth initiative," this plan aims to offer partial tax exemptions for these workers during their first three years of employment in the country.

The tax relief measure is essential for the country as it grapples with a severe shortage of skilled workers in multiple sectors. This proposed tax rebate targets newly arrived professionals, aiming to enhance Germany's appeal as a destination for skilled foreign talent. The plan includes tax rebates of 30 per cent, 20 per cent, and 10 per cent over the first three years, subject to approval. However, the specific eligibility criteria and details on the allocation of these rebates have yet to be disclosed.

German Finance Minister Christian Lindner stated, "We are creating a tax rebate for foreign professionals during their first three years in Germany. There will be rebates of 30 per cent, 20 per cent, and 10 per cent for those people who come here as qualified specialists." 

If approved, this measure will be reviewed after 5 years to evaluate its effectiveness and impact on the labour market.

Language barriers also present a significant challenge, as Germany currently ranks only fifth among the most attractive destinations for skilled immigrants. While many prospective foreign workers have positively received the proposed tax incentives, they have faced substantial criticism from opposition politicians and trade unionists. Critics argue that these incentives could result in discrimination against domestic workers.

Deutsche Welle reports that some members of the governing parties have also voiced concerns. Green Party lawmaker Beate Müller-Gemmeke highlighted Germany's principle of equal treatment, suggesting that such measures might unfairly benefit newcomers over current residents and nationals. "From my point of view, it would be a bit of discrimination against nationals if we were to say that those who come from other countries are exempt from paying tax on at least a certain part of their salary," Müller-Gemmeke stated.

Federal Minister of Labour Hubertus Heil also opposed the plan, advocating instead for a focus on reducing bureaucratic obstacles and expediting the visa issuance process to better facilitate the entry of skilled workers.