The tax terms that every expat in Germany needs to know
Tax time is confusing, and it can be even more confusing in Germany, when you have to deal with a foreign language and a bewilderingly complex tax system.
The Local sat down with tax expert Daniel Niessing from Taxfix to demystify and define some of the most common terms expats may come across when doing their taxes in a glossary.
‘Even many Germans can’t understand how the German tax system works - but you shouldn’t be afraid of it. If you make an honest mistake, tax authorities are more than willing to work with you’, he told us, continuing "Getting an understanding of the basics, and some of the most common terminology, can get you a long way there."
Your pay before tax is taken.
Germany’s tax return lodging portal. Often described as confusing even by Germans, as there’s very little guidance on what you may need. Taxfix circumvents this by asking tailored questions to make sure you can lodge your tax return and receive every euro you may be entitled to under the law.
Your local ‘finance office’. This is your local authority that deals with all matters in relation to finance, and who is responsible for taxation in your area. These are the only taxation authorities that any individual in Germany is likely to deal with.
Home Office Pauschale
The ‘home office lump sum’, was passed by the government last year in response to the coronavirus pandemic. It means that you can claim €5 a day for setting up a new home office in your home, to a maximum of €600. If you already had a room exclusively dedicated to work, you can’t deduct this expense, but there are other deductions you can make.
Literally, ‘short work’. This program, introduced during the Weimar Republic to keep people in work, reduces working hours for workers, while still maintaining a regular salary that is supplemented by the government. If you were, or are placed on ‘kurzarbeit’ during the pandemic, you need to do a tax return.
A document sent to you by your employer each year that tells you how much tax you’ve paid. If you change employers in the course of a year, you’ll receive more than one. You’ll need each of these when lodging your return.
Your pay after tax is taken.
This means ‘proviso safeguarding provision’ - not that it makes much more sense in English. What it means is that if you are placed on ‘kurzarbeit’, or you access social benefits, this non-taxable income is treated as taxable for working out your ‘steuersatz’ (see below). Most of the time, this is nothing to worry about, and you might even get a refund because of it. Sometimes, however, if your income increases, you may end up having to pay more tax.
The German term for a tax return.
Much like the British National insurance Number, or the American Social Security Number, this individually-assigned number is meant to be used across a range of government services. However, with the slow process of digitization in Germany, there is still a way to go with achieving this. You will need this number when you lodge your return.
This number is assigned to you by your local ‘finanzamt’ (see above) and is used in all your dealings with them. These numbers can often change however, for many more reasons than we can list here. Just make sure you have your most up to date ‘steuernummer’ handy when lodging your return.
This is the applicable tax rate for a worker. Depending on how much you’re earning, it can be anywhere from 15 to 45 percent of your earnings.
The German term for ‘professional costs’, that can be deducted when lodging a tax return. German tax law defines these costs as expenses accrued in getting, keeping or progressing in a job. One thousand euros are applied automatically, Deductions can also be made for those moving to Germany. This is €860 for every adult, and €573 for every subsequent dependent.
A lot to take in? We think so. However, there is an easy solution for those dreading doing their taxes. Using Taxfix can save expats time, and offers a flat rate for lodging a German tax return. For a return of under €50 euros, it is free, and €39,99 otherwise.
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