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TAXES

Why people in Germany have longer for their tax return this year

MPs in the German Bundestag voted through a number of tax relief measures on Thursday, as well as extending the deadlines for filing the 2021 tax return. Here's what you need to know.

Man opens letter from tax office
A man opens a letter from the tax office. Photo: picture alliance/dpa/dpa-tmn | Christin Klose picture alliance/dpa/dpa-tmn | Christin Klose

Wait, we have longer to file our tax returns?

Yes, that’s right. Due to the Covid pandemic, the German government has extended the deadline for submitting the 2021 tax return.

Those who have a tax advisor help them with their tax return now do not have to submit the return for 2021 until the end of August 2023, while those who do the tax return themselves will be given until the end of October.

In ordinary times, people with a tax consultant are given until the end of the next year to file their return, while people who file it themselves are given until July 31st the following year. 

However, people have been given extra leeway to file their tax returns since the start of the pandemic in 2020.

The law was voted through on Thursday with a large majority of MPs from the traffic coalition of the Social Democrats (SPD), Greens and Free Democrats (FDP) and also had the support of the opposition CDU/CSU.

The far-left Die Linke and the far-right Alternative for Germany (AfD) parties both abstained.

READ ALSO:

What else is new?

On Thursday, the Bundestag also voted through a number of tax relief measures, which are intended to support households and businesses who were hit hard by the Covid crisis in 2021. 

They include a €5 per day allowance for those who had to work from home and new ways for companies to write off profits from 2021 against losses they suffered the year before. 

Health and care workers are also set to benefit from the tax relief measures. Any bonuses received for working through the pandemic will be tax-free up to €4,500. 

READ ALSO: German government to extend ‘working from home’ allowance

This is the second round of tax relief measures that the government has pushed through in as many weeks. 

On May 12th, parliamentarians voted to retrospectively raise the tax-free allowance for 2022 to €10,347 per year – an increase of €363 compared to the previous year’s tax-free amount of €9,984.

They also voted to increase the amount of expenses automatically written off by the Finanzamt in 2022. This has gone up by €200 to €1,200. 

Meanwhile, people who commute long distances to work will now be able to write off an extra three cents per kilometre in their tax return. Under the revised commuter allowance, people who travel more than 21km to work can write off 38 cents for every kilometre over this distance. 

The government expects tax losses of €235 million this year as a result of the latest tax relief measures alone – and it estimates that, by 2026, the treasury will be down more than €11 billion. 

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MONEY

Germany reaches agreement on Bürgergeld – with a couple of catches

Members of Germany’s traffic light coalition government and the opposition Christian Democratic Union party have reached an agreement in the dispute over plans for a new citizens‘ income. There will be tougher sanctions against benefit recipients and fewer discretionary assets.

Germany reaches agreement on Bürgergeld - with a couple of catches

Last week, the German government’s plans to reform unemployment benefits with its new “Bürgergeld”, or citizens’ income, proposals were blocked in the Bundesrat.

The legislation was held up mostly by members of the Christian Democratic Union (CDU/CSU) which had been strongly opposed to the proposals for a six-month Vertrauenszeit (trust period) in which benefits claimants would not incur sanctions, as well as to the amount of assets recipients would be able to hold on to.

READ ALSO: EXPLAINED: Will Germany’s controversial Bürgergeld still come into force?

On Tuesday, politicians from the traffic light coalition parties and the CDU/CSU reached a compromise on the proposed reforms which means that some of the key measures will be scrapped.

No trust period

The CDU/CSU was able to push through its demand for more sanctions for recipients and the six-month trust period will now be scrapped completely.

Instead, it will be possible to enforce benefit sanctions from the first day of an unemployment benefits claim if recipients don’t apply for a job, or fail to turn up for appointments at the job centre, for example.

The CDU and CSU also demanded that unemployment benefits recipients be allowed to keep less of their own assets when they receive state benefits. The original plan had been for assets worth up to €60,000 to be protected for the first two years, but the compromise reached has knocked this down to €40,000 for one year – during which time benefits recipients will not have to use up their savings.

Following the announcement of the agreement, Green Party later Britta Haßelmann said “I regret it very much”. According to Haßelmann, the trust period was the core of the reform designed to stop people from having to take up “just any job”.

READ ALSO: Bürgergeld: What to know about Germany’s unemployment benefits shake-up

Other traffic light colleagues were more optimistic, however. Katja Mast from the SDP spoke of a “workable compromise in the spirit of the matter,” while FDP Parliamentary Secretary Johannes Vogel said that it had succeeded in “making a good law even better”.

CDU/CSU leader Friedrich Merz, meanwhile, sees the compromise as a great success for his party, though he also praised the willingness of the parties in the government to reach an agreement.

“The coalition was very quick and – to my surprise – very largely willing to make compromises here,” Merz said. 

What happens next?

Tomorrow, the Mediation Committee of the Bundestag and Bundesrat will meet to discuss the proposals. If the agreement is confirmed, the welfare reform could clear the final hurdle when it is voted on Bundesrat again at the end of the week. According to the federal government’s plans, if it’s approved, Bürgergeld will come into force in January and replace the current Hartz IV system. 

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