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Seven ways to pay less tax in Germany

Doing your tax return in Germany can be a famously complex process. The German tax authorities don't always make things easy for English speakers either.

Seven ways to pay less tax in Germany
Photo: Getty Images

However, forewarned is forearmed. Not only can knowing what can be claimed help you to prepare, it can also lead to a substantially lower tax bill. Together with tax expert Lars Weber, from Taxfix, The Local investigates some of the costs you can claim in Germany that you might not know about as an international resident.

Make the process of filing your German taxes a breeze with Taxfix and receive a 50 percent discount by using the code ‘TX_TheLocal50’

1. Childcare

If you’ve got young children, you’re able to claim their childcare costs as a deductible on your tax return. As Weber tells us: “Many expats don’t know that you can claim these childcare fees, you simply need to have a record of payment somewhere safe, that you can show if your local tax office wants to see your records.”  

2. Home office 

Starting in late 2020, the Jahressteuergesetz 2020  (Annual Tax Act 2020) allows employees to claim up to €600 for both last year, and the following tax year, as home office expenses. This is known as the Home Office Pauschale  (‘Home Office Flatrate’). If you’ve been forced to set up a desk and laptop in a corner of your living room to work over the past year or so, you should be sure to claim this expense. 

3. Job education and training 

“If you need further training for your job, and that training is conducted in German, you should claim any associated costs on your tax return,” says Weber. So, if you’ve been sent off to another city to do a course, especially overnight, be sure to keep your receipts, whether they be for hotels, petrol, or any other reasonable costs. If you’re paying for this training out of your own pocket, you should be especially sure to keep your receipts for tax time. 

On the web, iOS or Android – Taxfix is the fast, simple way to claim an average of €1,051. Use the code ‘TX_TheLocal50’ for a 50 percent discount


Photo: LinkedIn/Lars Weber

4. Professional memberships 

Similarly, if you’re obliged to be a member of a German professional organization as part of your work, membership costs and other costs associated with maintaining your membership can and should be claimed. This is not solely restricted to those who require a licence or certification to do their job – if it’s an expectation that you should be a member of an organisation in your professional field, then you should consider these a deduction. 

5. School fees

If you have a family, it’s not just childcare costs you should consider. “If you’ve got school-aged children who are attending a private or international school, then their school fees can be claimed as a deduction,” Weber says. As always, be sure to keep full records, as if the Finanzamt  (‘Finance Office’ for your region) come calling, they’ll want to see them in their entirety, for the year in question. 

6. Workroom 

While everyone who has been forced to work from home by the pandemic can claim the Home Office Pauschale of €600, those who have an entire room in their home dedicated to work can claim up to €1,200 in outfitting costs. “You can even claim the cost of curtains, if you can provide the receipts.” Having a room solely dedicated to work can also lead to further deductions, such as power and internet costs, if you can prove that those costs were incurred in the course of your job.

Be careful however. As Weber warns: “Your local Finanzamt can be very strict in what is considered a workroom, and may come asking questions. Be sure that it is a distinct and separate room to your living area, and somewhere you’re not spending a lot of time outside work.”

7. The simple, fast tax solution

“If you’re using Taxfix to lodge your return, you shouldn’t worry about claiming things on your tax return”, says Weber. This is because Taxfix is specifically designed with a question flow that guides you to answer only the questions that are required for your unique personal circumstances.

Everything is in simple, clear English, and your return can be completed in roughly 22 minutes. If your return is under €50, there is no cost, and if it’s over, you play a flat rate of €39.99. Best of all, users usually receive around €1,051 back – more money to enjoy Germany with! 

Wherever you are, use Taxfix to lodge your return in just 22 minutes. Use the code ‘TX_TheLocal50’ to receive a 50 percent discount

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PROPERTY

EXPLAINED: The German property tax declaration owners need to know about

Property owners in Germany will have to send the tax office an updated declaration of their property values this year, to help calculate a new amount they’ll have to pay in tax. We explain what they’ll have to do.

EXPLAINED: The German property tax declaration owners need to know about

People owning property in Germany, from individuals who might own their home to commercial landlords, may have recently come across advisories from tax consultants or media stories, telling them they’ll have to submit a new declaration to the tax office as to their property’s value.

Interactions with German bureaucracy – especially the tax office – can be intimidating, but there’s a few easy steps to follow if you have to declare.

Who has to declare, when – and why?

In 2018, Germany’s highest court declared the country’s current laws on property tax (known as Grundsteuer) unconstitutional, partly because the property values currently used to calculate what an owner owes are seriously out of date.

West German properties were last assessed for tax purposes in 1964, and East German ones in 1935.

The constitutional court gave the government until the end of 2019 to come up with a new way of calculating the tax for Germany’s 36 million properties.

That’s why owners are being asked to send in new declarations, based on values as of January 1st 2022.

The tax office will then use those declarations to determine what new tax rates owners will have to pay for their properties. Although they may end up having to bear some of costs of higher property tax later, tenants don’t have to declare anything – just owners.

Owners have between July 1st and October 31st of this year to send in updated information electronically to the tax office.

READ ALSO: Update: What you need to know about the German property tax reform that affects us all

What information do I need?

Each of Germany’s 16 federal states are allowed to have slightly different regulations in the property tax reform, so be sure to check what specific regulation governs you. That said, a few key documents will help you to provide an updated property value to submit.

Extract from the land register (Grundbuchauszug): For people who purchased their property prior to January 1st 2022, this may be the best option to get the most up to date valuation possible that the tax office will accept. The federal government’s dedicated website on the updated property tax declaration also strongly recommends you have this document in particular. You can get this record by making an appointment with your land registry office, or Grundbuchamt. Each individual district, or Bezirk, will have one. You often have to make appointments with them beforehand to request documents, so call them up or email them to request a time.

Last assessment notice (Einheitswertbescheid), purchase contract, or construction documents: A few other documents, particularly for more recent purchases, will help you fill in the declaration. Construction documents may have been included with your purchase contract, and your local tax office will have sent you an assessment notice after you took possession of your property.

These documents will help you answer a few key questions on the electronic declaration, including what year the property was built, its size, number of parking spaces or renovation year. All of these will end up being relevant for the final declaration.

When will the new rate come into effect?

Tax experts say it may take until late 2024 for the new rates to be calculated. The federal government will decide on a base before each individual state may adjust their rate slightly through state law. That’s why it might take some time to tell owners what their new rates will be, with them expected to come into effect on 1 January 2025.

Until that date, owners can continue paying what they are currently paying with no changes.

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