Many Germans and foreigners working in Germany choose to submit an annual income tax declaration (Einkommensteuererklärung). Generally speaking, if you are employed and subject to payroll tax, it is not necessary to submit a tax return. However, by doing so could prove lucrative as 9 out of 10 people who submit a tax return receive an average refund of 1,027 EUR.
By submitting an income tax return you check that you have paid the correct amount of taxes the previous financial year. It also allows you to add expenses that can be subtracted from, and thus provide you, with a refund. Aspects such as statutory insurance contributions, childcare or charitable donations can be offset against the tax paid.
Who Needs To Submit An Income Tax Return?
If any of the below applies to you, or if the tax office specifically requests you to do so, it is compulsory to submit an income tax return in Germany.
- If you are self-employed (i.e. a freelancer or running your own business);
- If you have additional sources of income which needs to be declared;
- If you receive any income from abroad;
- If you are married and have opted for tax classes 3 or 5;
- If you have received welfare benefits of over 410 EUR (child, sickness, maternity or unemployment benefits);
- If you divorce and remarry within the same financial year;
- If you receive extraordinary income such as severance payments; and
- If you want to apply for deductions/tax refund.
How To Complete The German Tax Return
There are a few ways to how you can submit your German tax return – depending on how complex your financial situation is.
Completing and Posting Forms Manually
If you are employed with monthly tax contributions automatically deducted by your place of work, you can quite easily download and fill out the applicable forms. Here you can declare the usual deductions such as work-related expenses and statutory insurance contributions. You need a basic understanding of German or have a friend who helps you with filling out the forms correctly (since they are all in German).
Online Tax Service Providers
You can also use one of the online tax services available. These companies fill out the forms for you and usually provide their services in English and other languages. They will generally also be able to provide basic information about what can be deducted and not.
If you are freelancing or own your own business, you might want to consider paying for a tax advisor to provide proper guidance. Especially if you have multiple income sources locally and abroad, things might end up more complex and a tax advisor will be able to optimize your tax situation.
Online Via ELSTER
The Federal Tax Office has designed the online tax system called ELSTER (Elektronische Steuererklärung). You can download this and submit your annual returns electronically. Once you have downloaded the software, you can create an account and receive a unique password via post.
Documents to Fill Out For Your Tax Return
When preparing and submitting your income tax return, there are a few general details and specific forms required depending on your situation.
If you choose to fill out the forms yourself, there are a few general details you need to supply:
- Your tax ID/tax number;
- The details of your local tax office (Finanzamt);
- The details of your German bank account;
- Your employment tax statement (Lohnsteuerbescheinigung) if you are employed; and
- Proof of payments for any deductions claimed
The General Tax Forms
Everyone needs to fill out a general tax form (Mantelbogen or Hauptvordruck). Depending on your financial situation, you would need to submit additional taxation forms called “Anslagen”.
If any of the below applies to you, you can usually use the simplified tax return (Vereinfachte Einkoimmensteuererklärung für Arbeitnehmer – Mantelbogen ESt 1V):
- You receive income from employment in Germany;
- You receive a state pension; and/or
- You receive welfare benefit payments.
In case your financial situation is slightly more complicated, you would probably need to fill out the tax return for individuals by using the unlimited liability tax form (Einkommensteuererklärung für unbeschränkt steuerpflichtige Personen – Mantelbogen ESt 1A). Use this if any of the below applies to you:
- You have additional sources of income, locally for foreign;
- You receive capital gains income above 801 EUR (1,602 EUR for married couples);
- You are paying alimony or maintenance to a previous spouse; and/or
- You need to declare deductions not covered by the simplified tax return.
Additional Income Tax Return Forms (Anslagen)
For any cases which do not apply to the general tax form, you would need to submit a specific additional tax form (Anslagen) for each case applicable. The moms available are as following:
|Form name||Used for declaring|
|AUS||Foreign income (self-employed)|
|AV||Contributions to a Riester pension|
|G||Income from business enterprises|
|KAP||Income from capital (above tax-free allowance of 801 euros per person and 1.602 euros for married couples)|
|Kind||Dependent children, to claim child benefit|
|L||Income from agriculture and forestry|
|N||Income from paid employment; gross annual salary; work-related tax deductions (i.e. expenses or commuting costs)|
|N-AUS||Foreign income (employee)|
|R||Additional income, gross annual retirement benefits|
|S||Income from self-employed work|
|SO||Other income (e.g. income from property sales, alimony or child maintenance, compensation or damages)|
|U||Alimony or child maintenance payments|
|Unterhalt||Payments to dependent persons|
|V||Income from renting or leasing|
|Vorsorgeaufwand||Payments to health, pension, unemployment, and care insurance schemes|
When Can The Income Tax Return Be Submitted?
The financial year in Germany runs from January to December, and can be submitted anytime from January to 31st July the following year. If you need more time, you can apply for an extension at your local tax office, which is usually granted automatically.
If you are submitting the income tax return voluntarily in order to get a refund, you can do for up to the previous four (4) years.
After two (2) to six (6) months after submitting the income tax return, the tax office will send you a tax assessment (Steuerbescheid). If you are eligible for a refund, this will be paid directly into your bank account. If you own money to the tax authorities, you will generally have four (4) weeks to pay the outstanding balance.
Protesting The Result From The Tax Office (Einspruch)
If you have submitted your income tax return and the result from it is not as you expected, you are able to protest and open a case (Einspruch). Here you can explain the situation again within one month from receiving the result (Steuerbescheid).
Expenses Eligible For Tax Deductions
Apart from having to declare your income correctly, a lot of people submit tax returns in order to make use of the various tax deductibles available in Germany. By deduction these various payments, you will reduce your overall tax liability and possibly receive a refund for the difference already paid (in case you are employed).
Unless you have already been reimbursed by your company for employment-related expenses, you can claim these for an amount of up to 1,000 EUR. The following expenses are eligible to be deducted from your income:
- Moving Property for work reasons, such as relocating to Germany
- Applying for work
- Traveling and commuting to your workplace or certain expenses by running two households in case of weekend commuting;
- Equipment needed to carry out your job, such as IT equipment;
- Further training needs such as courses;
Deductible Insurance Contributions
Compulsory insurance contributions made during the course of the financial year can be deducted up to certain limits:
- Statutory and private health insurance for primary health care is 100% deductible;
- Long-term care insurance contributions are 100% deductible;
- Unemployment insurance contributions of up to 2,800 EUR (1,900 EUR for employees and pensioners); and
- Pension scheme contributions of up to 25,046 EUR.
Personal Expenses You Can Deduct
As mentioned earlier in this article, there are a few personal expenses which are deductible from your income:
- Alimony payments to a divorced partner of up to 13,805 EUR annum;
- Contributions to German charities of up to 20% of gross income; and
- Interest charged on a mortgage for buy-to-let properties (only deductible against the income made from the property).
Child Expense Allowances
If you have children, there are certain expenses you can deduct in order to minimize the cost of raising children. These expenses include:
- Private school expenses in Germany or Europe of 30% of the tuition fee up to 5,000 EUR per child).
- Child allowance of 3.906 EUR per child annually (children registered in Germany); and
- Childcare costs for children under 14 years of age, up to 4,000 EUR per child per annum.
German Tax Classes
In order to submit your tax declaration you also need to know your tax class (Steuerklasse). This is assigned to you when you first registered in Germany and is generally dependant on your marital status and income level. If you are employed, you will also find this on the employment tax statement.
There are in total six (6) different tax classes in Germany:
|Class 1||Single, widowed, divorced or long-term separated|
|Class 2||Single parent|
|Class 3||Married with a higher income (than a partner in class 5)|
|Class 4||Married with an equal income|
|Class 5||Married with a lower income (than a partner in class 3)|
|Class 6||Second job or tax deduction without proper employee information|
If you are in the wrong tax class, you can request to change your tax class via a form obtained from your local tax office.
Guidelines and Professional Assistance
We would just like to point out that although we did our best to inform you about the various deductions available and provided a guideline on how to submit your income tax return and apply for a refund, it is still best to seek advice from a tax advisor.
There are various limits and strict rules for what can and can not be claimed. There may be other deductions and allowances to reduce your tax bill which we have not included here. This is just for general informational purposes and helps you understand how you can move forward with your income tax return.