Tax Return in Germany – Guide for Expats

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Are you stressed about filing your tax return in Germany? How does it work and what if you do not know German? In this post, you will find an overview of the tax return in Germany including different ways to submit your tax return and how you can get help if you do not speak German.

Moving to Germany or new in Germany? Check out our Support Page for all the resources you need!

Tax return in Germany

Tax is not a fun topic, especially when you are in a foreign country. I did an internship during my master studies in Germany and later on, I realized that I had to submit a tax return (Steuererklärung). Honestly, I had no idea how I could do it. I went to the local tax office and was given a lot of tax forms which I couldn’t read as everything was only in German. Welcome to Germany!

Even though it can be stressful and annoying, in many cases, it is worthwhile to submit a tax return in Germany. As you probably know, Germany has a high income tax rate. You can possibly claim back quite some tax back by filing a tax return in Germany. Actually, people who work in Germany on average get back around 1,000 EUR tax refund. It sounds interesting, isn’t it?

The tax year in Germany starts on the first of January and runs until the end of December. You can either submit your tax return in Germany on paper or online.

Read also: Salary in Germany: Are you getting paid enough?

The income tax rate in Germany

The income tax rate in Germany is progressive. It means that the more you earn, the more income tax you will have to pay. To give you some feelings, you can have a look at the table below. 

Income tax rates for single persons in Germany for 2020

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Income tax is directly deducted from your payslip. Besides, solidarity tax, health insurance, social security, pension cost, and any church tax may also be deducted directly from your salary. This is the main reason driving the difference between your gross and net salary. If you are curious, you can use this unofficial tax calculator to have a feeling around how much tax you would need to pay based on your gross salary.

For more info about the tax cost in Germany and how you can save money, you can refer to this post: Cost of Living in Germany – How to save money?

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Tax class (Steuerklasse) in Germany

When you first registered in Germany, you will be assigned a tax class. A tax class defines the amount of tax to be deducted from your salary. There are six tax classes in total. If you are not sure about which tax class you are in, you can have a look at your annual wage and tax statement “Lohnsteuerbescheinigung” provided by your employer. 

Below is a brief description of the different tax classes.

Tax Class Family Status
1 Single, divorced or separated, widowed
2 Single parent
3 Married with a higher income than the partner. The partner will be in tax class 5.
4 Married couples with similar income
5 Married with a lower income than the partner. The partner will be in tax class 3.
6 People who have more than one employment
The tax class is important especially for married people 

For example, if you earn significantly more than your partner, you can choose to be in tax class 3, where a lower rate will be taxed on your income. This implies that your partner needs to have tax class 5, where a higher rate will apply. If both of you have a similar income, you can both choose to be in tax class 4.

The choice of your tax class impacts your free cash flow. The total amount of tax you have to pay in the end as a married couple will be the same no matter which tax class you choose.

your tax class may also affect the social benefits that you may get

For example, a tip would be to use tax class 3 once you know that you are pregnant. Your net salary will be higher because of the lower rate in tax class 3. Therefore, you may get a higher parental allowance (Elterngeld) later on, since the calculation of this allowance is based on your net salary.

Note that you need to be in tax class 3 very early during your pregnancy because the amount of parental allowance is based on your net salary seven months before your maternity leave. The best would be to use tax class 3 once you know you are pregnant, or even better, when you are planning to be pregnant.

If you want to change your tax class, you can request the change at your local tax office.

Read also: Having a baby in Germany – From pregnancy to postnatal care

Tax deductions in Germany

Even though the tax rate in Germany is very high, the good news is that you can also claim a lot of different payments as tax-exempt. I am sometimes surprised about the types of expenses I can claim as tax-exempt. For example, I invited my parents to come to visit me for a month in August last year as the nursery was closed. They took care of our kid while we were at work. I paid for their flight cost from Hong Kong to Germany and I could actually claim this cost as tax-exempt.

Below are some other examples which you may claim as tax-exempt:

  • Medical expenses when they exceed a certain proportion of your income. For example: 
  • Laser surgery cost for your eyes which is not covered by your insurance
  • Cost of prescribed medications
  • Traveling from and to the doctors
  • Insurance-related expenses like:
  • Health insurance
  • Pension
  • Other insurance contributions like unemployment and long term nursing care
  • Income-related expenses like:
  • Traveling from and to your workplace
  • Job application
  • Work-related training or literature
  • Job relocation cost
  • Manual labor cost stated in your annual service charge statement (Abrechnung):
  • This statement is provided by your landlord
  • Manual labor expense from the property management company like gardening or cleaning expenses
  • Childcare cost like:
  • Expenses of attending a private school
  • Babysitting costs
  • Other tax deductions, for example:
  • Donation to charity
  • Financial support to immediate family members abroad
  • Mortgage interest for investment properties
  • Repair and maintenance on your rental apartment
  • Rental payment for two households

Please note that many of the above deductions have limits and may only apply according to certain rules. For more details on whether an expense can be tax-exempt or not, you should check with a tax advisor. 

As you probably know, German people love paperwork. Make sure you keep all your receipts as proof when applying for the tax reduction. Every data you enter in your tax return should be backed up with documentation.

Read also: Buying a House in Germany – As a Foreigner

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Who needs to file a tax return in Germany?

Not everyone is obliged to submit a tax return in Germany. Especially if you are an employee and do not have any other source of income, it is usually not compulsory to file a tax return in Germany. This is because, for employees, the tax is already deducted directly from the payslip. 

If one of the below applies to you, it is compulsory to file a tax return in Germany:

Self-employed or freelancer

If you are self-employed or freelancer, then you must file a tax return. It is because the tax is not deducted directly when the income is generated. Therefore, the tax office needs to know how much tax they should charge based on your income.

More than one source of income

Even if you are an employee, you must submit a tax return in Germany if you work for more than one employer in the year, or if you have more than one source of income, e.g. income from a side job or foreign income.

Receive social benefits

You must also submit a tax return in Germany if you receive any social benefits of more than 410 EUR, e.g. child benefit.

Family status

In Germany, even your family status has an impact on whether you must submit your tax return or not. If you are divorced and remarried in the same year, you will have to submit your tax return. Besides, it is also compulsory for you if you are married and in tax class 3 or 5.

Tax deductions

If you want to apply for tax deductions, you must also submit a tax return in Germany. 

Per request

Besides, you must also submit a tax return if the tax office requires you to do so. You will receive a letter from them in this case.

Read also: Decoding your Reference Letter in Germany (Arbeitszeugnis)

You may still want to file a tax return in Germany even when it is not compulsory

However, even if it may not be compulsory for you to file a tax return in Germany, you may still want to do it. As mentioned before, you may get back quite a lot of tax refund depending on your situation. In general, it is worth submitting your tax return if your annual income is under the tax-free allowance, e.g. if you work a part-time job or temporary job in Germany.

You can still file a tax return after you left Germany

Even if you have already left Germany, you can still submit a tax return. If you get a tax refund, the tax office can transfer the money to your foreign bank account. So, if you expect a tax refund, you are highly recommended to still file a tax return after leaving Germany.

Read also: Filing US Tax When Living Abroad In Germany – An Overview For US Expats

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Filling a tax return in Germany: Employee vs. Freelancer or Self-employed

When you file your first tax return in Germany, your local tax office will issue you a tax number (Steuernummer). This number can change based on the district you are registered.

Another important data is your tax identification number (Steuer-Identifikationsnummer). You will get this number when you register your address at your local Citizens Registration Office (Bürgeramt). This number will stay with you and will never change.

Tax return in Germany: Employee

To file your tax return in Germany, you will need to fill in several forms. You can find the forms on this website. As an employee, you will need to fill in a general tax form (Mantelbogen), plus some additional tax forms (Anlagen) depending on the income you have. Note that there are many different additional tax forms. You will need to fill in those if the income or expenditure of those forms applies to you.

In general, if you are an employee, the below forms will apply to you:

 

ESt 1 V(Mantelbogen): Your basic personal details, e.g. name, tax ID, etc.

Anlage N: Your employee income

Anlage Vorsorgeaufwand: Your insurance details

You can fill in these forms based on the annual wage and tax statement (Lohnsteuerbescheinigung) from your employer. You will normally get this document at the beginning of the year, showing you important information like the total amount you have earned in the last year, the different taxes you have paid, etc. You can then enter these data in the above forms for your tax return.

Tax return in Germany: Freelancer or self-employed

In this case, you will need to fill in different forms than as an employee.

In general, below are the forms you will need if you are a freelancer or self-employed:

 

ESt 1 A (Mantelbogen) – Your basic personal details, e.g. name, tax ID, etc.

Anlage G – if you are self-employed tradesperson (Gewerbetreibende)

Anlage S – if you are a freelancer (Freiberufler)

Anlage EÜR – if your revenue exceeds 17,500 EUR per year

Gewerbesteuererklärung – trade tax return for a self-employed tradesperson

Umsatzsteuererklärung – if you charge VAT

After filling in all the necessary forms, you will need to sign and post them to your local tax office.

Note that the forms you need to fill in greatly depend on your situation. You may need to fill in more forms than what is stated above. If you are not completely sure which forms you need exactly, you should check with the tax office or your tax advisor.

Read also: Private vs Public Health Insurance: What is Better for Expats in Germany?

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How to submit a tax return in Germany?

There are different ways to submit a tax return in Germany. The old way is to get the forms from your local tax office and fill in them manually. However, there are other more convenient ways nowadays to submit your tax return.

Submit a tax return in Germany with ELSTER

Instead of getting your forms from the local tax office, you can also download them online. There is an official tool called ELSTER (ELektronische STeuerERklärung) which allows you to submit your tax return electronically online. If you plan to file your tax return by yourself in Germany, I would highly recommend you to use ELSTER to do so. You can find more info about ELSTER on this official website.

Submit a tax return in Germany with other software or online platform

Using commercial software

Another option is to file your tax return in Germany using commercial software. After buying and installing the software, it will give you tips and guide you through the tax return process. When you finished entering your data in the software, it will forward your tax return to your local tax office. For example, you can buy this software at an affordable price at Amazon.

Using an online platform

The biggest challenge for an expat in Germany is that all the tax forms and communication with the tax offices are in German only. Even if you know German, the tax language is not something easy to understand (sometimes even for native German people). If you have limited German language skills, I would really recommend you to use an online platform like Steuergo.

The best thing about Steuergo is that you can complete your tax return in Germany fully in English. This online platform will guide you through your tax return process step-by-step. They even have a hotline for you in case of any questions. And with this level of services, you are only paying 29.95 EUR!

This online platform will also estimate how much tax refund you can get back, so that you know if it is worth submitting your tax return at all. You don’t need to pay anything until you ask them to submit your tax return to the tax office.

With this online platform, it really makes filing tax return in Germany so much easier. I believe that this is the cheapest option to file your tax return in Germany especially if you want to get help in English. 

Click here now to register for a free account!

Submit a tax return in Germany with a tax advisor

If you do not feel comfortable filing your tax return by yourself, you can also choose to get professional help from a tax advisor in Germany. A tax advisor is a qualified accountant who can prepare and file your tax return on your behalf. 

The cost of a tax advisor is based on the tax advisor tariff (Steuerberatergebührenordnung). The more money you earn, the more you will have to pay. Normally, you should expect to pay a few hundred Euros. Yes, it is not cheap. But it makes sense especially for people who have a complex tax situation. For example: 

  • you are freelancer or self-employed
  • you have different sources of income
  • you have foreign income or if you are subjected to double taxation from another country
  • it is the year you first moved to Germany (as you may be eligible for many different tax deductions)
  • Other complex situations like you bought your own properties, or you have a family with kids, etc.

To reduce your stress, you can choose to use a tax advisor for your first year in Germany. You can consider later on if you still need one in the following years.

How to find a tax advisor online?

If you have a specific tax question, you can use Yourxpert to get a free online initial assessment from a tax advisor. Simply write your question in the below question box. The initial assessment or recommendation is free of charge. If further actions are needed, you will get a non-binding offer with the price and you can decide if you want to take the offer.

If you prefer to contact a tax advisor directly by writing a message, by phone or by chat, you can find the prices for different tax advisors here.

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Submit a tax return in Germany with Lohnsteuerhilfeverein

If you are not comfortable filing the tax return by yourself and you do not want to pay so much for a tax advisor in Germany, you may want to consider getting help from the Lohnsteuerhilfeverein. Lohnsteuerhilfeverein is an Income Tax Assistance Union which often consists of retired accountants or tax specialists. You can usually find the Lohnsteuerhilfeverein in big cities.

With the Lohnsteuerhilfeverein, you can usually get help and tax advice at a lower price than to hire a tax advisor. To use the service, you will have to be a member of the union and pay a flat membership fee. It is normally between 100 to 300 EUR per year, depending on your income.

A drawback of using Lohnsteuerhilfeverein is that they only support employees, but not freelancers or self-employed people. Besides, the services will be in German. So, it can be difficult for expats who have limited German language skills.

Read also: 9 ways to earn money in Germany as a student

By when a tax return has to be submitted in Germany?

If you must submit your tax return in Germany, the deadline will be on 31st July. It means that by the end of July 2020, you will have to file your tax return for 2019. If you really cannot make it before the deadline, you can try to apply to the tax office for an extension. 

An advantage of using a tax advisor is that your deadline will be extended until the end of February. It means that you have until the end of February 2021, to submit your tax return for 2019. In case you are late for the tax return submission, you may need to pay a penalty and interest on the amount owed.

The good news is that for people who are not obliged to submit a tax return in Germany, they will have four years to file their tax returns. It means that in 2020, you can still submit your tax return for 2019, 2018, 2017 and 2016.

Read also: Invest In Germany To Make Money – Expat Guide

Result of tax assessment

You will usually receive your tax assessment (Steuerbescheid) from the tax office two to six months after you file your tax return. The processing time depends greatly on the individual tax office.

On the tax assessment, it will state how much refund you will get, or how much you have to pay in case you owe tax. If you get a refund, the money is normally transferred to your bank account a few days after you receive your tax assessment. If you have to pay tax, you will have four weeks to settle your bill.

In case you do not agree with the tax assessment, you can also file a protest (Einspruch) to provide additional explanation within one month after receiving your tax assessment.

Read also: Water in Germany: Dealing with hard water

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Please be aware that this article is intended to provide you a brief overview of the German tax return. My Life In Germany is not qualified to give you any tax advice according to German law. If you need more details and specific advice on your personal situation, we would highly recommend you to consult a tax advisor.

Have you filed your tax return in Germany? Did you do it on your own, or use a tax advisor? Leave a comment below and share your experience!

 

Moving to Germany or new in Germany? Check out our Support Page for all the resources you need!

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