Financials in Germany

International Money Transfers to and from Germany

International Money Transfers to and from Germany

Transferring money Internationally can sometimes be expensive, especially if you are not aware of the hidden charges, exchange rates and fees that you may be subjected to. It may be helpful to find out this information in advance so that when the situation arises you aren't left dumbfounded by the costs.

A large majority of the problems one may experience is not going through a reliable merchant when carrying out their transaction. Though at a first glance, some options may seen significantly cheaper than others, and thus more attractive, it is important to thoroughly analyze the means you are planning on using in order to ensure that there aren't other costs that will be incurred. If there are, in no time, you may realize that their prices only seemed low because everything was hidden well, just to lure you in.

Expatriates working in Germany often send money back to their home country, to their families or to a savings account they have at home if they have a German bank account where their salary is deposited. For those who have properties overseas and have to make regular payments on their properties, not taking the proper precautions can mean that your property will cost a lot more in the long run.

The main problem for many comes with the exchange rate. When sending money to a country that doesn't use the Euro, you have to be ware of the exchange rate. Euro to Pounds, Euro to Dollars, whatever it is, you need to know where you will be offered the best rate. Most people tend to just do the transactions through their banks. However, this can be one of the most expensive ways, as their exchange rates are typically not as good as elsewhere. When transferring money through your bank, you may not only be looking at losing money through the unfavorable exchange rates but also due to other fees that are applied on International transactions.

Though it may not be a burden to incur some of the fees one time, when you make multiple transactions a year, it all adds up and if you look back you may realize that it was indeed a lot pricier than you had anticipated. Be sure to compare the rates that your personal bank offers with the rates you may get at another currency specialist. Using a currency specialist is a popular and usually a better option. Reports show that the savings lie between 2 and 4 percent when opting for a specialist rather than going through your bank. 

 

Currency specialists may be your best option when it comes to transferring money abroad. Be sure to check that the specialist you are using is indeed credible and has all the correct license and documentation needed to carry out that form of business. Many people have switched to using a currency specialist, especially for larger and more frequent transactions.

 

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American Expats and the IRS in Germany

American Expats and the IRS in Germany

 

One thing that Americans need to keep in mind when living and working in Germany is that they are still obligated to file their taxes with the Internal Revenue Service . There is often some confusion when it comes to the filing of taxes to the IRS when coupled with working in a foreign country. The penalties for not knowing this aren't very high as the IRS is rather lenient in these cases and they do understand the confusions that may occur. However, provided this has just been brought to your awareness, it is important that you contact the right authorities and figure out what steps you need to take next in order to have everything clarified.

 

Finding out information on taxes and the IRS in Germany is not very difficult. The Internal Revenue Service now has an office located in Frankfurt at the United States Consulate. This office was put in place to lessen the stress from Americans living and working in Germany when it comes to filing taxes. Now Americans have access to all the information that they will need and can always phone or write when additional information or documents are required.

 

If however, one is attempting to withhold information or hide their earnings from the Internal Revenue Service, the consequences may be harsh. Those who have tried to defraud the system may be looking at jail time, the seizure of property, high fines and possibly other consequences. So in this case it is better to stay on the right side of the law. Where as in the past, it may have seemed as though the IRS wasn't fully equipped to know when a citizen in living and working in a foreign country, today they are a lot more verse in finding these things out.

 

 

The contact details for the Internal Revenue Service in Frankfurt are:

 

Address:          U.S. Consulate General Frankfurt,

                        Internal Revenue Service

                        Giessener Str. 30

                        60435

                        Frankfurt/Main

 

Tel. Number:   069 7535 3834

 

Email Add. :    irs.frankfurt@irs.gov

           

Website:          http://www.irs.gov

 

There are some cases in which an American living outside of the United States may not be liable to pay taxes. This however, does not mean that they are exempt from filing. One instance where this is possible is when your salary does not exceed a certain amount. At this point you may be eligible for  exemption from paying taxes on your foreign earned income.

 

To be excluded one of the following requirements need to be fulfilled:

Substantial Presence Test

Bona Fide Residence Test

Upon exclusion, a Form 2555 needs to be completed and attached to the Form 040.

In order to ensure that you are filing your paperwork correctly, be sure to contact the IRS if there is anything that you are uncertain about. They are there to help you and in the long run it's better to be safe than sorry. [...]

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Finding Banks that Offer Online Banking in English

Dealing with banks is not always easy, and dealing with anything when there is a language barrier makes whatever it is you are dealing with a whole lot more difficult. So, if you are moving to Germany, you may want to do a little bit of research to find which bank is best suited for you.

Which bank to choose?

Before you make your move across the world, you should check with your local bank to see if they have an additional branch in Germany. Some of the smaller banks will not, but if yours does, it will make that portion of your transition a whole lot easier.

Something else to ponder when choosing a bank in Germany is ATM locations. You may want to check how many ATMs are located around the areas where you live and work to make sure you have easy access to cash and your account when you need it.

Be sure, when you do visit a bank to open an account, that you bring with you multiple forms of identification and proof of residence. As a foreigner, you may have even more paperwork to go through than the average citizen. It never hurts to be a little extra prepared.

Banks with online banking in English

 

 

The following lists of links are for banking websites that offer their online services in English. For most, you may just have to click on a link in one of the upper corners labeled “English.”

·         CitiBank – From the CitiFirst website, change the language setting to English, then change the country option to Germany. Before you can proceed, you must acknowledge your residency in Germany.

·         Deutsche Bank

·         Targo Bank – Go to the login page, and from there click on “switch to English.”

·         HypoVereinsbank – From their main page, click on the link for “English Profile” at the top of the web page.

·         Postbank

·         Commerzbank

Non-English options

Of course, you do not have to make online banking in English a priority. If you do choose to bank somewhere that does not offer online banking in English, then there are ways to make banking run as smoothly as possible. The most basic option is to learn the appropriate key words and phrases in German so that you can use an online banking platform in German without feeling terribly lost and confused. If you are planning on learning German anyway, dealing with your bank entirely in German could be beneficial to you.

Also, many banks hire employees who are bilingual. If you are able to go to your bank whenever you need anything, you can always request to talk to someone who speaks English. Of course, you always have the option of hiring a translator to help you along with the process as well.

Another thing to keep in mind is if the bank you do choose does not have their online banking site available in English, there are many websites to help you translate – though not always with complete accuracy. In fact, some browsers, like Google Chrome, will translate an entire website for you.

 

Finding banking in Germany should not be too difficult a task, nor should finding someone to assist you in English. Hopefully, you are able to find the kind of bank you want with English language online banking available to you if you need it.[...]

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Saving for the Future – Private Pension Plans in Germany

For an expatriate living in another country, possibilities for retirement plans may seem difficult or confusing. The best way to solve this is to hire a financial adviser to offer the best options and advice for each individual financial situation. There are many options available to those looking to save money for the future —one of those options is a private pension plan.

What is a pension plan?

A typical pension plan in the U.S. is a contribution of funds set up by an employer to invest on the employee’s behalf as part of a retirement plan. This pool of funds, to which money is contributed by the employee and employer, is often tax exempt.

Pension plans in Germany and other parts of Europe are different, however. There are three different types of pension plans in most European countries, including Germany. One is the government funded one, similar to the U.S.’s Social Security—another type of pension plan is similar to the one described above, and has much in common with a 40(k) plan. The last type is the private pension plan, which is what this article will go over— private pension plans are similar to personal savings and investment plans.

Private pension plans available in Germany

 

 

Riester-Rente

There are two private pension plans available to people living and working in Germany. The first is the Riester-Rente or Förder-Rente plan. One of the benefits of this particular plan is that it includes government bonuses, or subsidies. Not everyone is eligible for this personal pension plan. Those eligible for this plan include:

·         Anyone paying German wage or income taxes

·         Employees who are subject to withholding tax, or Lohnsteuer, who are enrolled in and contributing to the Public Retirement Fund

·         Persons receiving unemployment benefits

·         Military conscripts and persons completing the mandatory national service by doing community service work

·         Civil servants

·         German military members

·         Judges

·         Persons with permanent disabilities that prevent them from working

·         Spouses of eligible persons

The annual government subsidies fluctuate throughout the years. In order to receive the annual subsidies, those enrolled must contribute at least €60 per year; however, in order to receive the maximum subsidies, those enrolled must contribute at least 4 percent of their annual income. A maximum of €2,00 can be saved per year, including premiums and subsidies. Also, all contributions, including subsidies, qualify as special expenses for tax purposes and are tax deductible, with a maximum deduction of €2,00 per year.

Benefit payouts are subject to German income tax, however, they are not subject to any flat or capital gains taxes. Contributions made to the plan are guaranteed to the buyer at the end of the contract, and the money is not subject to any legal claims or attachments. An individual may begin to receive benefit payouts at age 60, and may receive payments in lump sums, annuities, or both.

Rürup-Rente

The second type of personal pension plan available is the Rürup-Rente, or Basis-Rente, plan. This plan is geared more toward individuals who are freelancers, self-employed, and high-income earners. This plan is similar to the Public Retirement Insurance in the way it handles taxation and benefits. The difference, however, is that the Public Retirement Insurance plan is pay-as-you-go financing, whereas the Rürup-Rente works by capital cover.

The plan is centered on people with high tax burdens, however, anyone can participate if they so choose—persons who contribute to this plan, unfortunately, will not receive additional subsidies. To make up for that, contributors are allowed to deduct a large amount of their contributions from their taxes as special expenses. Also, there is no flat tax rate when revenues are collected.

There is a maximum amount that a person can invest per year that is tax-deductible. The amount for single persons is €20,000, and the amount for married couples is €40,000.

One of the major benefits of the Rürup-Rente is that the amount in the pension cannot be reduced, not even if the contributor is collecting unemployment or collecting benefits from Hartz-IV. The contributors are guaranteed their pension for life. Also, the amount of money invested is protected from any legal claims or attachments. In the event of the contributor’s passing, the money in the plan may not be transferred or inherited. Pension payment begins after the age of 60. Also, there is no lump-sum option and the plan may not be borrowed against or sold.

 

The details and ins and outs of pension plans may be confusing, but they are necessary to prepare for the future. To get started, talk to a financial adviser. [...]

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Using Credit Cards and Other Forms of Payment while Staying in Germany

When traveling, and especially when moving to another country, it is best to know in advance how an individual can spend money upon arrival. There are many options for spending money abroad, however, with the abundance of credit card use in the United States, it is important to understand how well an individual can go about spending money on credit cards while visiting or living in Germany.

Using Credit Cards

 

 

Certain types of locations will typically accept credit cards. Some restaurants, gas stations, shopping centers, department stores, hotels, and other larger places are where a credit card may be accepted. If a location does accept credit cards, they may only take Visa and MasterCard, so those with other credit cards should be wary. However, due to transaction fees, many stores and places in Germany simply do not accept credit cards. For this reason, it is wise to know what alternatives are available while shopping and living in Germany.

Other forms of payment

Cash is always the best form of payment. Cash is accepted everywhere and is easily accessible. Many ATMs in Germany will accept most debit cards. However, not all ATMs accept debit cards from banks based in the United States, so a little bit of searching or research may be required. When traveling, it is beneficial to check with an individual’s main bank to see if his or her debit card is accepted in ATMs in Germany.

Another option is a EuroCheque card, or EC card. If an individual plans on residing in Germany for any length of time, he or she should open a bank account with a local German bank. Should someone decide to open a bank account in Germany, he or she will be issued an EC card, which is used like a debit card. When receiving the card, the user will be issued a personal identification number, a PIN, to be associated with that card. The card can be used at a point of sale in many locations, simply look for the EC or Maestro logo at the location. The EC card can also be used in nearly any ATM in Germany. As long as the ATM has the EC or Maestro logo, an individual can use their EC card to get cash at that ATM.

Another card available to travelers and expatriates is the Maestro card by MasterCard. It works like an American debit card, however it works at more ATMs and points of sale because it is compatible with a chip and PIN machine like the EC card. Chip and PIN machines are common in Europe as they offer additional protection because they read the chip embedded in the card and require a PIN to access the card. They are similar to credit and debit card machines in the United States, which read the magnetic strip and require a PIN. For more information on the Maestro card, click here.

 

A little bit of research and preparation can go a long way when visiting or moving to a new country. Simply figure out what methods of payment are favorable and whether or not opening a bank account in Germany is a viable option. Then get the appropriate card or simply stick with cash. Though, it is wise to always have cash on hand either way, just in case. [...]

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German Retirement and Pension

The German Retirement and Pension System is a pay as you go system where fees are deducted from ones monthly income. This falls under the category Rentenversicherung (retirement insurance) and is reduced from your salary by your employer. Proof of your contribution can be seen on your payslip. Employees are usually not notified of this deduction. Non German residents working in Germany are also liable to make this contribution into their retirement fund as qualification is based on the payment of German taxes.  Those on a short term contract in Germany, who are sent overseas by their company may be exempt from paying these fees in the case that their contract does not exceed five years.

 

The basis of the German retirement and pension system is a three pillar system. The first pillar refers to the gesetzliche Rentenversicherung which is an obligatory deduction of salaries where a percentage is paid into the funds. The second pillar covers, voluntary pension insurances related to occupation. The third pillar deals with private insurances taken out by the individual.

 

How does the pension system relate to expatriates living in Germany.

 

Not being German doesn't exempt one from participating in the German pension system. If you are working in Germany, paying taxes, and staying for a long period of time, you too will have the opportunity to benefit from the pension system. This doesn't commit you to staying in Germany for your retirement. Payment into both the public and private systems can be cashed out to those who have spent the required amount of time in Germany, but have chosen to retire in another country. It is important to note that while company benefits may be paid out to expatriates that have left Germany, premiums aren't as secure, and may not be refunded. Check if the laws for pension are in favour of your native country when it comes to receiving your German public retirement benefits. Knowing this information is necessary as receiving German pension may affect pensions that you would have otherwise received in your own country. Each country has its own rules and regulations when it comes to pension and thus it is essential that you know them and do thorough research in order to determine what you are entitled to.

 

Provided you are of retirement age and have contributed to the pension system during your residency in Germany, having stayed less than five years in Germany, there is the possibility that you may be able to receive your pension in the form of a lump sum rather than having the benefits run on a monthly schedule.

 

When can you receive your retirement funds?

 

 

The typical age of retirement is 65. However, there are circumstances where an earlier or later retirement are possible. Those desiring to work past the typical age of retirement may opt to receive their payment at a later date. Those opting for an early retirement may be able to access their benefits during this time. [...]

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