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Who is obliged to file a tax return in Germany and who isn’t?

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Who is obliged to file a tax return in Germany and who isn’t?
An instructor processing a tax return with a trainee. Photo: Markus Scholz/dpa-tmn
10:38 CEST+02:00
Now that the deadline for people in Germany to file their taxes is fast approaching, have you thought about whether or not it's mandatory for you to do so?

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People who live and work in Germany in certain circumstances are not obligated to file a tax return by May 31st.

Earners below a certain income level

If you earn below €8,820 per year as a single person or €17,640 annually together with your civil partner, you do not have to pay taxes on this income (i.e. file a tax return).

Employees in tax class 1

Employees in tax class 1 (Steuerklasse 1) whose only source of income is from their employer - a significant amount of the workers across Germany - also do not have to file a tax return.

The same applies to married people with tax class combination 4/4 (Steuerklassenkombination 4/4). In both these cases, filing one’s taxes is unnecessary since one’s employer pays the workers' taxes to the finance office.

But it could be worth filing a return nonetheless.

For the 11.5 million residents nationwide who received a tax refund in 2013, the Federal Statistics Office (Destatis) reported last year that the average refund was €935 per taxpayer. German tax association VLH recommends filing a tax return even if you're not obligated to do so.

Besides, if you submit your tax return voluntarily, you are not bound by the usual deadline - meaning that you can file your tax return retroactively for up to four years. 

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On the other hand, many working residents in Germany are obligated to declare their taxes as regulated in Germany’s Income Tax Law.

If you identify with any of the following categories and instances, it's probable that you have to submit those pesky forms to the finance office.

Employers

Say you have worked for more than one employer in the same year. If your new employer hasn’t taken the figures from your previous employer into account when calculating your income tax, filing a return is necessary. If this is this case, you may see the capital letter "S" in line 2 on your income tax statement (Lohnsteuerbescheinigung).

Moreover, you must file your taxes if you are in tax class 6 - which is the case when you have two employers at the same time.

You also have to file if you have received "other benefits" from a new employer (e.g. vacation pay) and your current employer does not have your previous employer's income tax statement for the same calendar year.

Photo: DPA

Marriages

Married couple who have similar income levels normally pick tax class 4, meaning they don't have to file a return.

But if one of the couple earns considerably more than their spouse, it is often advantageous to pick either tax class 3/5 or 4 “mit Faktor” (with factor). If one does this one is obliged to file a tax return. Since 2010, tax class 4 with factor has been an option for those hoping to have a more accurate distribution of their income tax deductions based on their income.

The same applies if you or your spouse have applied for an individual tax assessment.

Marriage certainly seems to be the trickiest factor in knowing whether to file a return. If you have chosen to have your income assessed individually rather than as a couple, you need to file a return. This also applies if you do not want to equally split the training allowance (Ausbildungsfreibetrags) or the disability allowance (Behindertenpauschbetrags) for your child.

If you are an employee and divorced your partner last year but your ex-partner remarried in the same year, you also have to submit a tax return as the finance office needs to know who’s being assessed with whom. This also applies if the marriage was dissolved by the death of a spouse.

On the other hand, if you are not married to your child's parent and want to transfer certain allowances for one child or divide them equally, in certain instances both parents must submit a tax return - so that, for instance, apprenticeship tax allowances are only granted once.

Another example of when you might have to submit a tax return is if your spouse has limited tax liability and lives in another European Union country.

Wage compensation benefits

If you have received more than €410 per year in wage compensation benefits - such as benefits having to do with unemployment, illness, short-term work or parental leave - you must file a tax return even though these benefits are tax-free in Germany.

Additional income

If you have additional income, for instance income you collect from renting out your flat or from self-employment, it goes without saying that this needs to be declared in your tax return - particularly if this is over the sum of €410.

Loss carried forward from previous years

You must moreover complete the tax forms if you have tax balances from previous years which have not yet been settled. This minus will then be offset against your taxable income.

Self-employed people and business owners

If you run your own business or are self-employed (e.g. a freelancer), unlike workers employed by a company, your income tax is not deducted from your pay cheque each month - meaning you need to file it yourself.

If the tax office requests it  

If you receive a letter from the tax office and are asked to file your tax return for whatever reason, you must of course comply with this request.

Take a close look at the Income Tax Law if none of the aforementioned points describes your situation and you're unsure whether or not to file a tax return at all. Otherwise inquiring with a tax consultant could be handy.

FOR MEMBERS: Everything to know about becoming a freelancer in Germany

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