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What you need to know about filing your tax return in Germany

Not filed your tax return in Germany yet? Don’t panic, there's still a few days left. Whether you're self-employed or an employee, we spoke to a tax expert to get answers to some key questions on taxes in Germany.

What you need to know about filing your tax return in Germany
Tax season can be tough but it's not impossible. Photo: DPA

We updated this article after it was first published in July 2019.

What happens if you file your taxes late?

So let’s break this down first: If you are freelance or self-employed in Germany you must pay Einkommensteuer (income tax) and submit an annual tax declaration.

The deadline for submitting your Steuererklärung (tax declaration) yourself (without a tax accountant/Steuerberater) was previously May 31st. But that deadline has now changed to July 31st. That means you have until the end of the month to get it done.

So there’s still a few days left. But what happens if you miss the deadline?

Tax advisor Thomas Zitzelsberger, who's been helping English-speaking internationals in Germany for 20 years as the founder of Expattax, said the Finanzamt (tax office) could “issue a penalty” if it’s late. But it’s not clear how much the penalty would be.

That may depend on “how late you are, how often you have been late already (in the past) and how much you really owe,” said Zitzelsberger.

“If you are late for the first time and don’t owe a lot, there is a pretty good chance of no penalty at all or a rather low one.”

Note that the first €9,408 (if you are unmarried and not in a civil partnership) you earn is not taxed. For couples who are married or in a civil partnership the amount is €18,816.

READ ALSO: The ultimate guide to paying taxes in Germany

 

Is it possible to get an extension with your local Finanzamt?

Don’t count on it.

“This is a new deadline this year (in 2019) and it is still a bit unclear whether extensions will be granted after July 31st if you file without an accountant,” he said.

“I would not bank on it. So, if you owe a lot, my advice would be to submit as soon as possible. If you do not owe a lot or expect a refund, you do not have much to worry about it anyway.”

Just to be clear, if you go through a tax advisor or accountant, you'll have until the end of February 2021, to complete your declaration for the previous tax year (also an increase of two months from the previous deadline of December 31st).

Is it possible to NOT submit a tax return at all?

There's no way of getting out of this, especially if you are self-employed or freelance.

“If you are self employed, you have to file a tax return every year and there is no way around that even if your income is small,” said Zitzelsberger. “When you think about it: how would the tax office know that your income was small last year, unless you report that fact. They can only determine your tax bill if you submit the relevant information.”

It's a different picture if you're an employee. Zitzelsberger said millions of people in Germany never file a tax return but it all depends on your circumstances on whether you should submit one or not.

“If you are based in Germany for the full year and work here for the full year and have no income outside of your salary – there is no need for you to file a tax return,” he said.

“When you think about it, your employer takes taxes from your salary on a monthly basis, reports your income to the tax office and all is sorted. So, the tax office already knows all about your income situation and you can take it that your taxes are paid.”

READ ALSO: These are the 8 German tax breaks you need to know about

READ ALSO: Prostitution, dogs and loneliness: A look at Germany's weirdest taxes

But you could have to submit a tax return.

“Lets say you are in this employee income situation and you have some money in the bank and you earn some interest and some dividends,” said Zitzelsberger. “This is income outside of your salary, but as long as this is below the annual tax free allowance for investment income of €801 – or double for a married couple – it still does not require a tax return. 

“Now, lets assume you have a bit more money in the bank and you have interest and dividends above the tax free allowance.

“If you have your investments with a German based institution, a flat rate of 25 percent is withheld at source on your investment income and your taxes are sorted. Still no tax return is required. If you have your investments with a non-German institution, you will need to report that income in the form of a tax return.”

Apart from the circumstances mentioned above, Zitzelsberger said anyone can submit a return in Germany if they are a tax resident there.

“This would then be a voluntary declaration,” he said. So, when would you do that?

“Well, really only if you expect a refund; otherwise it would obviously be a waste of your time,” said Zitzelsberger.

Generally speaking, a person can expect a refund if they were a resident in Germany for part of the year only, if they had significant work related expenses, if their children go to a private school, or if they have large medical expenses, among a long list of other expenditures. 

Do some research or speak to a tax advisor to find out if you might be due some tax back.

Which kind of documents do you recommend people get in order if they haven't thought about their 2018 taxes?

You need to make sure you can prove everything you've earned, and also show your expenses. That comes in the form of invoices and receipts, such as for items you bought that you use for work. Accountants might also ask to check bank accounts for anything else that can be claimed back.

“A tax return is a report in which you show your income and the expenses you want to claim,” said Zitzelsberger. “The figures you enter on the forms don’t fall out of the sky.

This means that every entry made needs to be backed up with documentation. 

Do you have any advice for someone who is submitting a tax return for the first time? Can they receive help?

If you are new to the country and your German isn't so good, Zitzesberger recommends setting up an appointment with an accountant. 

“I am not saying that you need to use an accountant every single year, but in year one, it makes sense in my experience,” he said. “Why? First of all, it takes out the pain of dealing with forms. Second, you will have the comfort to know that you are not losing out on a claim that you are entitled to.

“Third, you can ask your questions and get a better understanding of how things work and if you watch carefully and your German gets better, you may be able to do it yourself in year two. Provided your situation does not change too much, you can copy and paste a lot from the work the accountant had put in for you in the previous year.”

Is it possible to get any of the forms in English (or another language)?

Unfortunately not from the Finanzamt.

“The forms and all communication with the tax office is in Germany only,” said Zitzelsberger. “Of course a lot of tax officers have some level of English, but don’t expect that. You should at least try and make an effort with German – this is how you make friends even in the tax office. Not guaranteed, but with a bit of luck, they will even try to understand some English correspondence.”

What kind of things can employees include on their tax return to receive money back?

“The main things for tax claims are so called 'work related expenses' (Werbungskosten),” said Zitzelsberger.

“These are expenses which are exclusively related to your work and your income,” he added. “The list is almost endless and the definition is very broad. Is this a problem? No, this is great news. Why? Because of two main reasons: you just need to convince the tax office that your expense is exclusively related to work – apply common sense – this will work, not in all cases, but in most.”

Zitzelsberger says as long as you “explain your claim” and make it fully transparent in your tax return you cannot go wrong.

“So, if you attempt this yourself and have no experience with German taxes at all, you can make a claim and explain it well.

If you do this, the tax office will either accept your claim, ask for more information or explain why it's not being accepted.

All of this is part of the learning experience and “tax advice for free”, said Zitzelsberger.

“What will not happen? Repercussions for a false claim,” he said. “So, off you go and good luck!  Can you claim expenses for a piano? Well, if you are a professional pianist, of course you can. Can you claim expenses for your dog? Well, if you are a professional dog trainer, of course you can.”

What's your advice to anyone submitting tax returns in Germany?

Zitzelsberger has this valuable tip: “When it comes to your taxes, you are never dealing with 'The German State', you are never dealing with 'The German Government'; you are always dealing with one human being behind a desk in some tax office.

“Treat them as such and your life will be good. Treat them with respect, don’t ignore them, try to make their life easy, be on time, communicate, show your good intentions – and this is how they will treat you. From what I have seen over the last 20 years in terms of 'German tax horror stories' – a huge portion of it was self inflicted.”

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For members

MONEY

EXPLAINED: 10 ways to save money on your groceries in Germany

With inflation at its highest level in 70 years, consumers in Germany are really feeling the pinch, particularly in the supermarket. Here are some simple tips on how you can save money on your grocery shopping.

EXPLAINED: 10 ways to save money on your groceries in Germany

1. Buy seasonal products

Fruit and vegetables are less expensive when they are in season in Germany, as they don’t have to be kept in cold storage which – thanks to high energy prices – incurs high costs which are passed onto the customer. So going for produce that is naturally abundant at the time of year can really pay off. 

At the moment, vegetables such as kale, squashes, leaks and cabbages are currently in season, but you can refer to an online Saisonkalendar (season calendar), such as this one, to keep an eye on which fruits and veggies are in season at different times of the year.

Regional organic vegetables on sale in Brandenburg. Photo: picture alliance/dpa/dpa-Zentralbild | Bernd Settnik

2. Go easy on butter 

The price of butter in Germany has increased by over 40 percent in the last year – in some cases, a 250-gram packet of butter now costs €3. 

READ ALSO: Energy crisis: Which everyday German products are increasing the most in price?

As a substitute for butter in cooking, go for vegetable oils such as olive oil, linseed or soybean oil or certain types of margarine and, for spreadable treats, consider alternatives such as quark or cheese spreads. 

3. Have a meal plan and a shopping list

One golden rule for saving money in the supermarket – wherever you live – is to plan your meals and write down the ingredients in a list. Having a shopping list often helps avoid expensive spontaneous purchases and helps you to really only buy the things you will definitely use.

A woman writes a shopping list. Photo: picture alliance/dpa/dpa-tmn | Christin Klose

4. Buy less meat

The prices of meat products, such as sausages and fish have also risen by 19.3 percent since last October. As a result, German consumer advocate groups advise shoppers to replace some of their meat products with plant-based foods, pulses or legumes instead, such as lentils, peas, beans, chickpeas, and soybeans.

READ ALSO: Thousands protest in Berlin over price rises

5. Visit markets

Consumer advice groups also advise shoppers in Germany to visit their local fruit and vegetable markets, as fresh produce can often go for a lot cheaper than in the supermarkets.

6. Compare prices by weight 

Another good tip for buying groceries on the cheap is to compare prices by weight, not simply by the retail price on display. In addition to the retail price, you will usually see how much 100 grams of each product costs and you should use this number as a basis for comparison.

A customer stands at the scales for fruit and vegetables in the Eisenstein village store in Bavaria. Photo: picture alliance/dpa | Armin Weigel

For example, if you want to buy Parmesan cheese and there are two different varieties marked at €4 and €6, the €4 package may seem cheaper. But if you then look at the price by weight, you may find that the €6 Parmesan comes to €1 per 100 grams, while the €4 package comes to €2 per 100 grams.

7. Use apps to find deals 

The price for the same product can sometimes vary greatly between supermarkets in Germany, so it can pay to shop around.

But, if you don’t have time to go from store to store hunting down the cheapest products, there are several apps – including Smhaggle, Marktguru and KaufDA – available which you can use to find and compare deals in local supermarkets. 

Another great app for those looking to make serious savings on their foodstuffs is Too Good to Go – an app which connects people to local restaurants, bakeries and food shops which are looking to get rid of surplus food. 

8. Get an advantage card

With an advantage card such as the Payback Card or DeutschlandCard, you can collect points every time you shop in a variety of stores, and then ultimately transform these points into monetary discounts. 

A customer uses their Payback app at the supermarket checkout. Photo: picture alliance/dpa/PAYBACK GmbH | PAYBACK GmbH

These cards are free to get and just require registration. Using them regularly, along with extra point-collecting coupons, can amount to quite a savings. 

9. Check out the bottom shelf

The bottom shelves in German supermarkets are often where you will find the most economically-priced products, including the supermarkets’ own-brand products. If you reach for the private labels “Rewe”, “Ja”, “Gut & Günstig”, “Edeka”, “Penny”, “Grandessa” or “Maribel”, you can get almost the identical product as the branded variety for half the price. 

10. Shopping just before closing time

If you shop just before closing time, you can often find great deals in German supermarkets – especially at the vegetable, fruit, meat and yoghurt counters. 

READ ALSO: KEY POINTS: Germany’s inflation relief measures to support people in cost of living crisis

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