19 Oct Submitting a German Tax Return: Is it necessary or even worth the effort?
For newcomers or those who’ve never submitted a tax return here, we look at whether it’s necessary and examples of where the Finanzamt may give you some of your hard earned back. When was the last time you got paid up to €1,000 for a few hours’ work?
For employees who do not have any income from other sources such as self-employment or capital gains beyond a certain threshold, the simple answer to the question is that NO, it is not mandatory. However, it may very well be in your interests to complete one.
Whether or not it’s worth the effort though is a more complex topic, so let’s take a look at the essentials which you need to know.
Is it compulsory?
If you have other sources of income, then it is necessary in almost all cases except for small capital gains of less than €801 for singles (€1,602 for married couples). This usually is sufficient to cover interest from savings or dividends from modest stock portfolios.
The most common forms of income from other sources are capital gains (above the threshold in the last paragraph), rental property and self-employment as a source of extra income i.e. “side-hustles” such as coaching, teaching, any paid artistic pursuit, evening or weekend work, or any other business interests.
For the self-employed, which includes part-time work and freelancing, it is compulsory to submit an annual tax return. Why? Because the Finanzamt wants to know about any activity you have undertaken where tax is not deductible at source i.e. not deducted by your employer on your monthly payslip.
Is It Worth It?
- If you commute to the office more or less daily by car or by public transport (not including company cars or employer-financed public transport tickets)
- If you‘ve paid for tuition or reference material as part of your professional development
- If you‘ve only been engaged in employment for part of a fiscal year
- If you‘re paying rent or a mortgage on more than one residential property because your job is in one city but your life essentially is somewhere else. A classic example being the weekend commuter.
- If you are supporting immediate family members overseas or are travellng on a frequent basis to care for a sick parent or next of kin
- If you have had any maintenance or repair work done on your apartment for which you have received an invoice (yes, this also applies if you are a tenant and have carried out maintenance for which the landlord has not picked up the bill)
- Any manual labour which is listed separately on your annual service charge statement from your landlord. Tax law allows this to be deductible and as such, the property management company or your landlord should list these costs separately. Usually this will reference clause §35a EStG of German tax law next to the description or line on your statement. If you understand German, this article provides more info.
What Are The Rules?
HOWEVER…here comes the good part…
If you have never submitted a tax return since arriving in Germany, and your situation dictates that it is not compulsory for you to submit one, you can claim back up to 4 years of rebates.
Also, if you decide to utilise the services of a Steuerberater, the Finanzamt generously gives you an extra 4 months to submit your paperwork. The deadline then is 30th September.
Late submissions have been known to be tolerated with a reasonable justification and fined are not usually issued for a genuine, minor delay. It is highly dependent upon the tax office which processes it though and there is no hard and fast rule.
How does it work?
You will receive an acknowledgement confirming that your documents have been submitted successfully. Depending on the type of system or software you are using, you may have to send originals of your supplementary supporting documentation separately by post.
Some time later you get your statement (Steuerbescheid). This will tell you how much you owe or how much your rebate will be. The time taken from submission to receipt of your statement is highly dependent upon which Finanzamt is processing it.
If you owe taxes, you have 4 weeks to pay your bill. If you’re due a rebate, this is usually transferred within a few working days of you receiving your Steuerbescheid and paid into the bank account you specify on your tax return.
When does it make sense to consult a tax advisor?
However, with that said, it does depend on the complexity of your own tax situation. In these cases specifically, I would highly recommend you consult a tax advisor.
- Submitting a tax return for the year when you moved to Germany (usually this will be mid-way through the fiscal year and makes things more complex due to potential tax liabilities in the country you moved from).
- If you have significant income from a foreign source (usually this means business interests or rental property overseas). Double taxation is a whole other topic within itself.
- Definitely if you are a freelancer (Freiberufler) or you have your own business (Kleinunternehmer / Kleingewerbe).
What does a Steuerberater cost?
Be warned, they are not cheap! Tax advisors in Germany are highly qualified individuals who have gone through years of training and have passed a very tough exam. You are looking at a bill of several hundred Euro in most cases.
So is it difficult to do my own taxes?
Those who are more financially savvy should not feel too phased by it. I didn‘t feel too daunted when I completed mine for the first time. I paid a tax advisor first time around, and just asked him lots of questions so as I could then figure it out myself the following year using the previous year as an example.
I would say that anyone with above average intelligence, who has an orderly filing system and is generally a pretty organised person is capable of submitting their own tax return. This is assuming your situation is relatively straightforward.
Having a basic understanding of what can and can‘t be claimed or offset against one‘s taxable income in Germany also helps, for sure. But we already covered some of the main ones above!
Like most things in Germany, the biggest roadblocks are figuring out what the process is, and then actually completing the task in a foreign language (or finding an expert who can explain the process to you in English).
But this last part is actually no longer an issue. There are now options out there which will allow you to submit your taxes online with an interface completely in English.
Your cheapest solution to submit a tax return in English
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