EXPLAINED: The rules and deadlines for filing German taxes in 2021
From an upcoming deadline to special tax breaks, here's what you need to know about filing taxes in 2021.
Who is required to file tax returns in 2021?
Generally, if your only source of income is your salary, you won’t need to file a tax return. But if you receive any further sources of income, totaling more than €410, you fall into the category of people required to file taxes.
As a result of the pandemic, more people than usual will have to file taxes. According to the tax rules, anyone who received €410 or more in wage replacement benefits - for example, in short-time work benefits (Kurzarbeit) - will need to file a tax return.
In April of 2020, over six million employees were receiving Kurzarbeit benefits, according to the Federal Agency for Employment.
READ ALSO: What you need to know about Germany's Kurzarbeit job support scheme
Other wage-replacement benefits which may need to be declared include parental and unemployment benefits.
Additionally, all self-employed people and freelancers must file tax returns. Unlike some other employees who can still use paper, all freelancers must file their taxes using the online platform, Elster.
And unlike workers whose taxes are paid automatically by their employers, freelancers must pay the relevant taxes directly to the German finance authority, which is possible through the Elster system.
What are the deadlines for filing this year?
This was extended - but is fast approaching. If you are someone who is required to file tax returns, you now have until October 31st 2021 to get your paper work off to the tax office. The deadline for filing taxes is usually July 31st of the following year.
Meanwhile, people who opt to enlist the help of a tax advisor will be given until May 31st next year to sort out their 2020 tax returns, as opposed to December 31st.
If you are not required to file a tax return, but would like to, you have four years to complete the process. That means that you don’t have to file your 2020 tax return until 2024 and, this year, you have until December 31st to file tax returns from 2017.
If you expect that you’ll need more time beyond these deadline, you should apply for an extension through your local tax office. If you miss the deadline, you can incur a fee of 0.25 percent of your owed taxes for every late month.
When do self-employed workers pay their taxes?
If you work for yourself, there are some other deadlines that you should keep in mind. Freelancers, small business owners, and self-employed workers are required to pay their taxes directly to the authorities.
Most freelancers have to pay upfront taxes for the upcoming year, on a quarterly basis. These advanced payments should be made by the 10th day of the following months: March, June, September, and December.
READ ALSO: Everything you need to know about becoming a freelancer in Germany
Are there any changes to the tax code for 2021?
Some temporary tax relief measures introduced during the Covid-19 pandemic - like the reduced value-added tax (VAT) rate on the restaurant industry - are coming to an end in 2021. However, there are also new benefits that most Germans can look forward to this year.
In response to the effects of the pandemic, which forced many to work from home, the German government introduced a home office flat rate. This tax benefit allows you to claim up to €5 for every day spent entirely working at home in order to reimburse you for additional costs, like a higher electricity bill. You can claim up to €600 total through this policy.
Another change concerns the basic tax allowance, the amount of money on which you don’t have to pay taxes. This year, the tax allowance increased slightly from €9,168 to €9,408.
The basic child tax credit also increased by just under €200 for the year.
READ ALSO: What you need to know about tax changes in Germany in 2021
One other interesting change is the introduction of tax benefits for property owners who pursue energy-efficient renovations.
One to thing to note for future tax returns is that in 2021, the German government cut the solidarity tax contribution (Solidaritätszuschlag or Soli, for short) for around 90 percent of all tax payers. Some of Germany’s highest earners and corporations will still need to pay the Soli for the time being.
The solidarity tax, which was introduced in 1991, was intended to pay for reconstructions efforts in the former East German states and promote German unity. In 2019, the German parliament voted to dismantle the tax requirement, a decision which went into effect this year.
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Who is required to file tax returns in 2021?
Generally, if your only source of income is your salary, you won’t need to file a tax return. But if you receive any further sources of income, totaling more than €410, you fall into the category of people required to file taxes.
As a result of the pandemic, more people than usual will have to file taxes. According to the tax rules, anyone who received €410 or more in wage replacement benefits - for example, in short-time work benefits (Kurzarbeit) - will need to file a tax return.
In April of 2020, over six million employees were receiving Kurzarbeit benefits, according to the Federal Agency for Employment.
READ ALSO: What you need to know about Germany's Kurzarbeit job support scheme
Other wage-replacement benefits which may need to be declared include parental and unemployment benefits.
Additionally, all self-employed people and freelancers must file tax returns. Unlike some other employees who can still use paper, all freelancers must file their taxes using the online platform, Elster.
And unlike workers whose taxes are paid automatically by their employers, freelancers must pay the relevant taxes directly to the German finance authority, which is possible through the Elster system.
What are the deadlines for filing this year?
This was extended - but is fast approaching. If you are someone who is required to file tax returns, you now have until October 31st 2021 to get your paper work off to the tax office. The deadline for filing taxes is usually July 31st of the following year.
Meanwhile, people who opt to enlist the help of a tax advisor will be given until May 31st next year to sort out their 2020 tax returns, as opposed to December 31st.
If you are not required to file a tax return, but would like to, you have four years to complete the process. That means that you don’t have to file your 2020 tax return until 2024 and, this year, you have until December 31st to file tax returns from 2017.
If you expect that you’ll need more time beyond these deadline, you should apply for an extension through your local tax office. If you miss the deadline, you can incur a fee of 0.25 percent of your owed taxes for every late month.
When do self-employed workers pay their taxes?
If you work for yourself, there are some other deadlines that you should keep in mind. Freelancers, small business owners, and self-employed workers are required to pay their taxes directly to the authorities.
Most freelancers have to pay upfront taxes for the upcoming year, on a quarterly basis. These advanced payments should be made by the 10th day of the following months: March, June, September, and December.
READ ALSO: Everything you need to know about becoming a freelancer in Germany
Are there any changes to the tax code for 2021?
Some temporary tax relief measures introduced during the Covid-19 pandemic - like the reduced value-added tax (VAT) rate on the restaurant industry - are coming to an end in 2021. However, there are also new benefits that most Germans can look forward to this year.
In response to the effects of the pandemic, which forced many to work from home, the German government introduced a home office flat rate. This tax benefit allows you to claim up to €5 for every day spent entirely working at home in order to reimburse you for additional costs, like a higher electricity bill. You can claim up to €600 total through this policy.
Another change concerns the basic tax allowance, the amount of money on which you don’t have to pay taxes. This year, the tax allowance increased slightly from €9,168 to €9,408.
The basic child tax credit also increased by just under €200 for the year.
READ ALSO: What you need to know about tax changes in Germany in 2021
One other interesting change is the introduction of tax benefits for property owners who pursue energy-efficient renovations.
One to thing to note for future tax returns is that in 2021, the German government cut the solidarity tax contribution (Solidaritätszuschlag or Soli, for short) for around 90 percent of all tax payers. Some of Germany’s highest earners and corporations will still need to pay the Soli for the time being.
The solidarity tax, which was introduced in 1991, was intended to pay for reconstructions efforts in the former East German states and promote German unity. In 2019, the German parliament voted to dismantle the tax requirement, a decision which went into effect this year.
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