Editor in chief at IamExpat Media
Anyone who works from home in Germany can look forward to more tax relief next year, after the federal government opted to continue and expand its home office flat rate, along with various other tax improvements on pension contributions and energy.
As it does every year, the German federal government this week implemented its Annual Tax Act - a kind of “article law” that bundles together multiple different tax law regulations to change a large number of laws in one go, for instance in response to new requirements, EU initiatives and case law developments.
Alongside a lot of dense, complicated legal text, the Annual Tax Act 2022 contains some clauses that should interest expat workers in Germany.
For starters, the government has moved to continue and improve its 5-euro-per-day tax rebate, which was first introduced at the end of 2020 at the height of the coronavirus pandemic, and then extended through into 2022. Now, ministers have agreed that taxpayers can continue to deduct 5 euros per day worked exclusively at home on their annual tax returns. On top of this, the maximum deduction is being increased from 600 euros (120 home office days) in 2022, to 1.000 euros (200 home office days) in 2023.
The government also decided to give extra financial relief to workers by bringing forward its policy of making pension contributions fully tax-deductible. This policy is intended to prevent the double taxation of pensions by making contributions tax-deductible (saving workers money on their tax bill), while also gradually making pensions fully taxable once they start being drawn. This was originally supposed to happen from 2025, but this is being brought forward to 2023.
The rationale behind the policy is to ease the tax burden on people during the working stage of their life, and increasing it after retirement, when people tend to have a more financially secure situation - for instance, having paid off their mortgage and no longer having children who are financially dependent on them.
In the same session, the federal government also opted to temporarily reduce VAT on gas, from 19 to 7 percent. The reduction will apply from October 2022 to the end of March 2024, and companies will be expected to pass the savings on to their customers.