Taxes are complicated. That’s true wherever in the world you are, especially if you don’t speak the local language. To help break down the German tax system a little for you, here’s a quick guide to everything you need to know about your tax responsibilities and entitlements, local tax rates, how to file a tax return, claiming tax reductions, and more.
If you paid taxes in Germany, you may even be due a tax refund!
1. Am I considered a non-resident for tax purposes while I’m in Germany?
You will be considered a non-resident for tax purposes by the German tax authorities if you don’t own a permanent residence within the country and are not in Germany for more than 183 days in a given tax year.
The German tax year is the same as the calendar year. Foreign residents are required to pay the same taxes as German nationals, while there are agreements in place for people who are subject to double taxation in Germany and their native country.
2. What will I be taxed on as an expat in Germany?
Essentially, you will be taxed on any income earned from sources in Germany. This includes but is not limited to: income from employment, business profits, rental income, and any capital gains profit from the sale of a German real estate.
3. What is the rate of tax in Germany?
The rate at which you are taxed in Germany depends on the type of income you earn. Any employment income will be taxed at a rate of up to 42%. The rates for rental income are the same as for employment.
Profits from business are subject to a different tax depending on the city, starting from 7%, and capital gains are subject to a flat tax rate of 25%.
4. Do expats need to file a German tax return?
If you earned income that is subject to German taxes, you will need to file a German tax return (Einkommensteuererklärung). The filing deadline usually falls at the end of July (for taxes from the previous tax year). If you are filing your tax return with a tax agent, the deadline can be extended up to 4 years.
5. What documents will I need to file my German tax return?
You must provide documentation about your income and outgoings (especially if you are claiming deductions) when filing a tax return in Germany. The most important document that you need is your Annual Statement of Earnings (Lohnsteuerbescheinigung).
Depending on your personal situation other documents might be needed, including, but not limited to: rental agreements, bank statements, receipts for deductible expenses, payslips or other proof of additional income.
6. Are there any deductions available when filing taxes in Germany?
You may be able to claim certain deductions for expenses related to any income you earned in Germany. These include travel expenses, professional fees, double household expenses and depreciation of rental property costs. In some cases you can also include your spouse and children in your tax return even if they haven't lived with you in Germany. However, these deductions are subject to specific limitations and requirements.
7. Can I claim tax treaty benefits?
According to most tax treaties with Germany, your non-German income will not be taxed in Germany but you will have to report it, as it is used to determine the correct tax rate.
8. Is there a penalty for not filing a tax return in Germany?
Yes. If you are required to file a tax return with the German authorities, and you fail to file your return on time, you may be subject to penalties and fees. The penalty for a delayed tax return is 0,25% of the tax debt per month, but not less than 25 euros and no more than 25.000 euros.
9. Can I claim a tax refund in Germany?
Whether or not you are entitled to a tax refund in Germany will depend on a variety of factors. For instance, if you overpaid tax on your earnings, you will be able to claim a tax refund. That’s why so many people submit a tax return in Germany, even if they are not officially required to - it’s always beneficial to at least check and see what you are due - you may be surprised!
10. Who can help me with German tax?
While you can always deal with German taxes by yourself, it’s a good idea to seek advice from a tax professional, especially if you are new to the country or unfamiliar with the language. A tax advisor can help ensure that you are fully compliant with the German authorities and help you to maximise your refund by applying deductions you might not even be aware of!