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Important changes
- Germany's Bundestag approved the voluntary military service law. Every 18-year-old man must complete online fitness questionnaires from January 2026. And from July 2027, every 18-year-old man must undergo compulsory medical checks. [1, 2]
- The Bundestag finally passes the pension reform. The pension reform will now go to the Bundesrat for the vote on 19th December. More on it later.
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Bundestag Passes Pension Reform
Germany's Bundestag approved the Rentenpaket today. It got 318 votes in favor. This gives Chancellor Merz's coalition a strong win.
The reform brings the following changes.
Pension level remains at 48%
The pension level remains at 48% of the current average wage of all insured persons until 2031. Without this reform, the pension level was supposed to decline.
For now, there is no rise in your pension contributions. The government is funding the gap using tax money. However, you can expect the contributions to increase from 18.6 to 19.8 from 2028 onwards.
Active pension
From January 2026, people working beyond their retirement age will receive the first €2,000 of their monthly salary tax-free. You also get relief from social security contributions.
Read more about active pension in our past newsletter here.
Mütterrente
Currently, for children born before 1992, the mother receives 2.5 pension points for the years she was unable to work to care for the child. However, under this new reform, the mother will receive the full 3 points.
This is similar for the parents of kids born after 1992.
The reform also applies to fathers who took time off to take care of their child. The government funds the gap using tax money.
Prior employment ban lifted
Earlier, it was tough for your former employer to hire you once you reached retirement age. However, the prior-employment ban has now been abolished. This means your former employer can rehire you on a temporary basis in the same position.
Next Steps
The pension reform package has only been approved in the Bundestag. The Bundesrat still has to vote on it. The vote will be held on December 19.
If the pension reform package passes the Bundesrat, then the changes will take effect from January 1, 2026.
What does this mean for you?
The German pension system works with an intergenerational contract. This means that the current working population pays for the pensions of the retirees.
With this reform passed, it increases the burden on the current generation.
Given the current demographic shift, there won't be enough working people to pay for the current generation's pensions when they retire.
This means you need to handle your retirement planning yourself. The best way to do so is to
- invest a fixed monthly amount in broad market ETFs,
- real estate,
- set aside some amount in a savings account,
- private pensions, etc.
Understand the German pension system ->
Sources: bundestag.de, bundesregierung.de
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Key takeaways from the webinar
Freelancer vs. Trader (Gewerbe)
- Only certain professions qualify as freelancers. The rest are considered traders (Gewerbe).
- Freelancers and traders must complete a tax registration form to obtain a business tax number.
- Traders must also register at the Gewerbeamt.
Different legal forms in Germany ->
Small business regulation (Kleinunternehmerregelung)
- Small business regulation is not a legal form. It's a VAT regulation.
- You can only use the small business rule if annual revenue stays under €25,000.
- Being a Kleinunternehmer means you don’t charge VAT, but you also cannot deduct VAT from expenses.
- Businesses with high expenses or business clients often benefit from not using the rule.
Learn more about small business regulation ->
Invoicing and record-keeping
- Every business transaction must have a supporting document. E.g., invoices for income, receipts for expenses, etc.
- Germany is moving toward mandatory e-invoicing; PDF/Word invoices will no longer be accepted in the future.
- You must store all tax-related documents for at least eight years.
How to create a legally valid invoice ->
Social security & taxes
- Self-employed individuals must manage their Social Security contributions themselves. Health insurance is the only mandatory insurance for them. For certain self-employed professions, pension insurance is also mandatory.
- Deductible expenses include home office costs, utilities, equipment, software, training, transportation, and professional services.
- Travel and meals are allowed but heavily scrutinized.
Tax deductible expenses in Germany ->
Deadlines
- Annual tax deadlines (income tax, VAT annual return, Gewerbesteuer) are July 31 of the following year (without a tax advisor).
- Monthly/quarterly VAT returns are due by the 10th of the following month.
Common pitfalls
- Not keeping receipts or mixing personal and business transactions.
- Waiting too long to organize bookkeeping results in lost deductions.
- Filing a tax return is mandatory for all individuals who are registered as self-employed in Germany. It doesn't matter if you earn 0€ or 100,000€.
- Don't expect the Finanzamt to notify you about the rules and regulations. You have to ensure that you are aware of all the latest regulations and follow them.
You can watch the complete webinar and download the slides by signing up here.
We are also launching our new ebook on how to start a business in Germany on 25 December 2025. We are giving away the first 100 copies for FREE. Register here to recieve your free copy.
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Can Your Manager Force You to Cancel Your Approved Vacation?
In Germany, once your vacation is approved, your employer cannot simply take it back.
Rights around vacation days
- You receive at least 20 paid vacation days per year if you work a five-day week (§3 BUrlG).
- Once your employer approves your vacation, it is legally binding for both sides.
- Your wishes must be considered when planning time off (§7 (1) BUrlG).
When can an employer cancel your vacations?
Your employer can cancel your vacation only in emergencies that threaten the company’s survival. Every day operational problems, such as a sick colleague, a big project, etc., are NOT valid reasons.
Your Rights if Your Employer Cancels Your Vacation
- All canceled days must be returned to your vacation balance.
- You must be reimbursed for all non-refundable costs (flights, hotels, tours).
- The employer must prove the emergency and justify the request.
How to handle forced vacation cancellation
- Stay calm and point out that the approved vacation is binding.
- Ask for the reason in writing.
- If you choose to cancel your vacation voluntarily, negotiate reimbursement first and get it in writing.
- Contact your workers' council if available and if required.
- Get legal advice if your employer insists without a valid reason.
Best legal insurance in Germany that covers labor law ->
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Launching a new ebook on 25th Dec 🎉
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Early access to our new book, "How to Start a Business in Germany," is now open.
The first 100 readers will receive the ebook at no cost. In return, we request the readers' feedback to improve the book.
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Handling Insurance Policies After a Relative’s Death
When a loved one passes away, handling paperwork can feel overwhelming. However, it’s essential to notify their insurance companies quickly. The reporting deadline depends on each insurer’s policy.
Notify these insurance companies immediately
Depending on the contract, the reporting deadlines range from 24 to 72 hours. This is not much time to find the necessary documents.
This is why you must keep insurance documents where your relatives can easily find them. Also, let your relatives know the document location in advance.
You must also inform the statutory pension insurance provider about your relative's death. If the deceased person was receiving a pension, payments will stop immediately.
If you fail to inform the insurer, you'll have to repay any overpaid pension amounts.
These contracts end automatically
The contracts end once you notify the insurance company about your relative's death. You must provide a death certificate as proof.
As a relative, you'll receive a refund for any overpaid premiums.
These insurance policies continue until cancelled
If the deceased person was the policyholder, you must also report their death as soon as possible.
You can either cancel the contract or transfer it to your name. Until the cancellation takes effect, the contracts remain in force.
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A Request 🙏
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So, if you find what we are doing helpful, please leave a simple star rating or a short review on Google. This will help more users discover GermanPedia.
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Latest News
-
The EU fined Elon Musk's X €140 million for
- deceiving users with paid blue checkmarks that no longer verify identity,
- hiding political ad data, and
- blocking researchers from public platform information. [1]
- Shop bankruptcies surged among small retailers, as they faced competition from big chains and online giants. [2]
- A tax relief package raised commuter allowances and cut VAT on restaurant food to 7%. [3]
- Germany is providing an extra €100 million via KfW to Ukraine to help repair and maintain Ukraine’s energy infrastructure after Russian attacks. This is on top of €60 million already pledged this year. Germany stressed strict compliance and governance rules amid recent Ukrainian anti-corruption investigations. The UK and Sweden have also announced new energy-related support packages for Ukraine. [4]
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Community Shoutouts! 📣
- LegalWeg* offers to file an Untätigkeitsklag for FREE if your case qualifies.
- KS/Auxilia* legal insurance is offering a 15€ Amazon Voucher. We found KS/Auxilia - Jurprivat legal insurance plan the best in our research.
- SIM24* is offering a 60GB mobile data plan for 9.99€ per month.
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C24* is offering a 75€ bonus for opening a new account. You must also transfer your existing checking account using the CHECK24 account switching service.
- Perplexity is offering a 12-month Pro subscription for free. You can sign up here.
- Google Gemini is offering a 12-month free Pro subscription to students. You can get it here.
- Join our Facebook community. Ask questions, share experiences, join webinars, and stay updated about your rights, laws, and latest changes in real time.
- Follow us on LinkedIn, Facebook, X, Instagram, and Pinterest to get more insights about Germany daily.
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