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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

ENERGY

KEY POINTS: Everything Germany is doing to help relieve rising energy costs

It can be hard to keep track of all the relief announcements Germany has made to help people with rising costs. That’s why we’ve gathered all the info you need in one place.

KEY POINTS: Everything Germany is doing to help relieve rising energy costs

The German federal traffic light government of Chancellor Olaf Scholz’s Social Democrats, the Greens, and the liberal Free Democrats have passed €100 billion worth of relief bills to help tackle rising inflation and higher energy costs.

But a lot of that money hasn’t been spent yet. The last package – totalling €65 billion – was only agreed about two weeks ago.

Meanwhile, Germany spent the first few months of this year registering inflation rates not seen since WWII. In August, the country recorded 7.9 percent inflation. Electricity prices have doubled.

As winter approaches, here’s the relief that’s already planned – as well as a few things some politicians have suggested in addition.

Direct One-Off Payments

In perhaps the simplest measure, the German government is giving certain groups of people direct money transfers.

German Chancellor Olaf Scholz and Finance Minister and Free Democrats Party (FDP) leader Christian Lindner address a press conference on the government coalition’s relief plan to cope with soaring energy costs, on September 4, 2022 at the Chancellery in Berlin. (Photo by Tobias SCHWARZ / AFP)

For starters, everyone employed in Germany will get up to €300 (the payment is taxed) added to either their September or October wages, depending on how often their companies pay wage taxes. Employees at companies that pay monthly will get the extra cash in September, while those who pay quarterly will get it in October. For more information, read the linked piece below:

READ ALSO: What you need to know about Germany’s €300 energy relief payout

People who are employed do not have to apply for this. They’ll simply get it added to their payslip that month. The one-off is adjusted for income, so those who make less will get more. Those who make more will get less of an addition.

People who are unemployed can still receive the payment if they worked sometime in 2022. Like the self-employed, they can claim this on their tax return. People on sick pay and parental leave are also entitled to receive the payment. For more details on this, read the linked piece below.

READ ALSO: Reader question: Do I get Germany’s €300 energy relief payment if I’m out of work?

Once again, employees do not have to apply for the energy relief and the unemployed and freelancers can simply deduct it from the tax they pay the government.

Several scams are currently making the rounds claiming that you must apply and provide personal information to receive the payment. We’ve detailed some of them in the linked piece below:

READ ALSO: EXPLAINED: The €300 energy relief payment scams to watch out for in Germany

From this month through December, the number of people eligible for housing benefits in Germany will increase to two million. These people will receive a one-off top-up to their existing benefit payments, specifically to pay for the higher cost of heating. After that, the amount of benefit they receive will be increased to reflect higher energy costs.

A €200 one-off payment is also planned for students, although each federal state may end up paying the amount slightly differently in a process that’s still being defined.

Pensioners will receive a €300 payment on December 1st. They do not have to apply for this, it’ll simply be added to the payments they receive from their pension insurance funds.

Finally, parents will see an increase in the amount of child benefit (Kindergeld) they receive, up to €237 per month, per child, up to and including the third child.

READ ALSO: Germany to raise child benefits for families with up to three children

Cheaper public transport

Perhaps the most famous government measure passed in the last support package was Germany’s hugely successful €9 monthly ticket for all regional public transport everywhere in the country.

Given the ticket’s popularity, the federal traffic light government has set aside €1.5 billion aside for a successor ticket to begin in January 2023.

Designed to incentivise public transport to reduce energy demand, lower people’s transport costs, and even spur summer tourism, many economists credit the €9 ticket for having prevented German inflation from getting even worse.

After the ticket expired at the end of August though, federal and state governments argued about what to bring in as a successor.

Berlin has already gone ahead with a successor of its own starting in October and lasting until the end of the year. People with an “AB zone” subscription—which covers everything within Berlin city limits – will pay just €29 a month. That’s less than half the regular cost.

A person buys the €9 ticket in Frankfurt.

A person buys the €9 ticket in Frankfurt. Photo: picture alliance/dpa | Boris Roessler

READ ALSO: What we know about Berlin’s follow-up to the €9 ticket

Although the federal and state governments have been arguing about what the nationwide successor ticket should look like, they intend to present a plan after a meeting together on October 12th. Word is a new nationwide ticket would be around €49.

READ ALSO: Germany to set out plans for €49 transport ticket in October

Saving money through tax credits

Apart from subsidising public transport and giving certain money to people directly, the federal government’s measures are also designed to help people save more of the money they earn through tax credits.

The ‘Home Office’ tax credit, for example, has been made permanent in order to help alleviate the higher energy demands of working from home, up to a maximum claim of €600 per year.

And while the price of gas itself keeps going up, the government has cut the VAT on gas consumption to 7 percent.

Depending on the size of a person’s home, that cut could help save anywhere from €140 to €650 per year, according to one projection. But keep in mind that gas bills are rising and there is a gas levy coming in too (more on that below).

READ ALSO:

The government is also planning to allow employees to deduct pension insurance contributions from their taxes, leaving them with more money leftover each month.

Finance Minister Christian Lindner is also working on proposals to increase the tax-free exemption, or the amount that a person earns annually that is exempt from tax. Under current proposals that amount would go up from €10,348 to €10,633 next year and then to €10,933 in 2024.

Meanwhile, so-called ‘midi-jobbers,’ or people who work certain part-time jobs, will now see the first €1,600 they earn a month exempt from taxes, rather than the current €1,300.

READ ALSO: How Germany’s Finance Minister wants to ease inflation with tax relief measures

Energy price caps, brakes, or profit clampdowns?

The government has so far ruled out a cap on the price of gas, and has approved a gas levy that passes on some of the increased costs to consumers starting in October. That levy will add 2.419 cents per kilowatt hour to the price of gas, which around half of all German households use for heating. We’ve broken down what kind of cost increase that might mean in the linked piece below.

READ ALSO: EXPLAINED: How much will Germany’s gas levy cost you?

However, Chancellor Olaf Scholz noted that some energy companies that don’t primarily use gas, including those that might generate electricity through wind, solar, or coal – are taking advantage of the higher energy costs caused by gas shortages.

electricity pylons at sunset

Energy prices have soared in Europe as Russia has slashed natural gas supplies to the continent. Photo by Matthew Henry on Unsplash

He has vowed to introduce a windfall tax that will skim excess profits, likely through action at the European level. The coalition also wants a price brake for a basic level of electricity consumption. Anything consumed above that level though, would be more expensive.

Although there’s details still to be worked out, Finance Minister Christian Lindner said last week the government expects to be able to get €10 billion in windfall tax revenues from these excess profits.

READ ALSO: What’s in Germany’s support package for rising energy bills

What else is planned?

In addition to the above, German politicians have made a few more pledges for ways to help out both individuals and businesses. That said, many of these measures are only now being discussed, so we’re a long way from knowing precisely what they would look like.

Following criticism from the Federation of German Industries (BDI), Economics and Climate Minister Robert Habeck pledged to provide support to small and medium-sized businesses coping with rising costs during a meeting last week.

READ ALSO: Germany pledges to help small businesses with high energy costs

Meanwhile, the Social Democrats are preparing a measure to suspend the requirement for bankrupt firms to apply for insolvency proceedings, giving them additional time to apply for government relief programs.

READ ALSO: How Germany wants to help small businesses stay afloat

Finally, Germany is planning to increase its natural gas imports from countries other than Russia through the construction of five liquefied natural gas (LNG) terminals, with the first temporary facilities coming online at the end of this year.

It is hoped that this will help relieve the overall energy supply situation and bring down bills to a more stable level.

READ ALSO: Germany plans more LNG capacity as Russian gas dwindles

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