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.
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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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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