All you need to know about taxation in Germany.
One of the daunting challenges for internationals in Germany is to understand the bureaucracy and work with it. Especially when it comes to the topic of taxation. Once you start earning money in a full time or a part-time job and you earn more than € 450.00 per month, you must pay taxes which are deducted directly from your salary. If you have earned more than a certain amount in a year, you will be refunded a part of the taxes paid when you file your tax return. In 2019, this was € 9,168.00 for singles and € 18,336.00 for married or registered partners.
How to file your tax return in Germany
However, since filing your (first) tax return in Germany may require some assistance, the purpose of this article is to provide you with tips and hints on how to submit your tax return and to point out the benefits that this entails.
In general, you could file tax all by yourself (for example with a software or an online application) or with the help of a tax accountant (“Steuerberater”) or an “income tax assistance union” (Lohnsteuerhilfeverein). If your income situation is not very complex, i.e. you do not have property holdings or different sources of income, are a freelancer or self-employed, you can easily do your tax return yourself and save money.
In any case, you will require the following documents.
Proof of Documents:
An important part of learning how to file taxes is to start the tax-filing process early through the year. The first step would be to gather all the following information, which the tax office needs in order to process your tax return.
- Your employment tax statement (Lohnsteuerbescheinigung)
A document summarising all your income and the taxes you have paid during the year, issued by your employer either at the end of your employment or at the end of the tax year.
- Your tax identification number (TIN, Steuer-Identifikationsnummer or Steuer-ID)
A unique 11-digit number which you will receive via mail after you have registered in the city registration office (Bürgeramt) in your city here in Germany
- Your tax number (Steuernummer)
A number that is assigned to you by the tax office. If you do not have a tax number on your first tax return, that is not too bad, because you can submit it without giving the number. Once it has been checked and you have received your income tax assessment (Einkommensteuerbescheid), you will find the tax number in the top right-hand corner of this document. If you do not have the income tax assessment, you can also simply contact the tax office. If you and your spouse file a joint tax return, you also have a joint tax number.
- Your German bank account details (IBAN, BIC)
Your bank details are needed for the refund
- Proof of any income received outside Germany for the year of the tax return
This is needed to determine your tax rate as there will be no double taxation.
- Documents relating to certain deductions
For example, income-related expenses (Werbungskosten), special expenses (Sonderausgaben) or exceptional expenses (außergewöhnliche Belastungen) – you can find more information on this below.
In case you have children, you need to indicate the following:
Date of birth
The amount and period for which child benefits (Kindergeld) were received (if an application for child benefit was rejected, the rejection letter is required)
Expenses for childcare or education, e.g. Kindergarten, Kita or afterschool care
- Any other income or government benefit
This includes for example parental benefits (Elterngeld) or maternity benefit (Mutterschaftsgeld)
Mode of tax filling and the right tax forms
Once you have gathered all this information, you will need to decide on the method of filing your taxes. One option would be to process your tax return offline. To do this, you can either download all the necessary tax return documents and fill them in yourself, or you can hire a tax consultant. However, another, less costly and time-consuming option is to use online services. The official tax return software is called ELSTER (ELektronische STeuerERklärung). However, as this tool is only available in (bureaucratic) German, we would recommend using other tax applications available on the market.
There is a variety of online tools available in English to help you fill out your tax return in Germany, which will guide you through the process step by step and provide you with hints and tips on what you can deduct from your taxes. It usually takes you less than an hour to complete your tax return on your own. The nice thing about such a software is that it calculates in advance how much you will be refunded based on your information. On average, you can expect to get back approx. 1.000 € when handing in your tax return.
In the following, you will find a selection of online tax return providers:
Educational Expenses that can be accounted
As a student, it is possible to deduct a variety of educational expenses from your taxable income, which will reduce your tax burden and increase your refund. Some of the expenses you can declare on your tax return are listed below:
- Tuition fees (if applicable)
- Semester ticket (train ticket)
- Purchase of electronic devices such as laptop, computer, smartphone, printers, memory card etc.
- Books, Journals, Journal Subscriptions (digital and paperback versions)
- Printouts, Scans, copies costs.
- Development and enhancement training cost
- Costs incurred during a semester abroad, exchange programs, and field trips (accommodation, travel expenses, catering)
Essentially all expenses incurred during your education in Germany can be submitted for tax returns up to certain limits.
The German tax year runs from January to December. If you want to file a tax return, you can submit it any time between January 1 and July 31 of the following year (i.e. until July 31, 2020, for your 2019 tax return).
If it is your first tax return, it is also possible to file your tax return retroactively for up to four years. This means that in 2020 you can still submit your tax returns for 2019, 2018, 2017 and 2016 if you have not already done so.
What happens after submitting my tax return
After about two to six months after you have submitted your tax return, you will receive a tax assessment via mail which lists all refunds. By the time you receive the notice, the refund should already have been transferred to your account.
This content does not contain any tax advice and all information is without guarantee. For personal tax questions please refer to your tax advisor.