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Annual German tax return (Einkommensteuererklärung)

Annual German tax return (Einkommensteuererklärung)

A large proportion of taxpayers in Germany, both expats and German citizens, choose to submit an annual income tax return (Einkommensteuererklärung) to the Federal Central Tax Office. By submitting a tax declaration, you check that you have paid the correct amount of tax for the previous financial year. On average, nine out of 10 people who submit a tax return receive a refund.

You can complete your declaration on paper or online using software designed by the Federal Central Tax Office. The tax return is used by the tax office to balance out the amount of income tax you have paid with other financial aspects, such as:

  • Your spouse’s income
  • Any additional income you might have
  • Tax deductions, for instance, statutory insurance contributions, expenses for daycare or charitable donations

Do I need to do a German tax return?

Although many people choose to submit one in the hope of receiving a refund, generally if you are a waged employee subject to payroll tax it is not compulsory to submit a German income tax return. You are, however, obliged to submit a tax declaration if any of the following apply to you:

Completing the German tax return

If your financial situation is fairly simple (i.e. you are a waged employee with a few deductions to declare, such as work-related expenses and statutory insurance contributions), you can fairly easily complete and submit the correct tax declaration forms on your own. You will need a basic understanding of German (or a German-speaking friend who can help you) and to have prepared all the information and supporting documentation in advance.

If you want to keep things simple, there are also several online tax services, offered in both English and other languages, which can quickly and easily fill out the forms for you. If your case is more complex - for instance, if you run your own business or have multiple sources of income both in- and outside Germany - you may consider seeking help and guidance from a tax advisor.

ELSTER

Although it is still possible to download all the necessary forms, fill them out and then submit them to your local tax office, you can also complete your tax declaration online. This is done using the online tax office system ELSTER (Elektronische Steuererklärung), designed by the Federal Central Tax Office.

Details needed for German tax declaration forms

In order to correctly fill out your income tax return forms, you will need to prepare some information in advance. Most people will need to supply the following details in their forms:

  • Your tax ID / tax number (if you have one)
  • The details of your local tax office (Finanzamt)
  • The IBAN of your German bank account
  • Your employment tax statement (Lohnsteuerbescheinigung) - usually issued automatically by your employer at the end of the financial year
  • Receipts or proof of payments for tax deductions (if applicable; see below)

Which tax return forms do I need?

No matter what your financial situation is, everyone completing the tax return will need to fill out a general tax form (Mantelbogen or Hauptvordruck). Depending on what kinds of income you have, you will also need to complete a varying number of additional tax forms (Anlagen).

General tax forms

There are three different kinds of general tax forms, which are all used to submit your basic personal details, such as your name, tax ID and job title. Which form you fill out depends on your personal situation:

You can usually use the simplified tax return for employees (Vereinfachte Einkoimmensteuererklärung für Arbeitnehmer - Mantelbogen ESt 1V) if any of the following apply to you:

  • You receive income from employment in Germany.
  • You receive a state pension.
  • You receive welfare benefit payments.

For more complicated cases, however, you will need to fill out the tax return for individuals with unlimited tax liability form (Einkommensteuererklärung für unbeschränkt steuerpflichtige Personen - Mantelbogen ESt 1A). This is the correct form if any of the following apply to you:

  • You have additional sources of income.
  • You receive foreign income.
  • You receive capital gains income above 801 euros (1.602 euros for married couples).
  • You are paying alimony or maintenance payments to a divorced spouse.
  • You wish to declare deductions not covered by the simplified tax return.

If any of the above apply to you but your normal place of residence is not in Germany (defined as spending 185 out of 365 days outside Germany), you will need to fill out a tax return for individuals with limited tax liability (Einkommensteuererklärung für beschränkt steuerpflichtige Personen - Mantelbogen Est 1C)

Additional tax forms (Anlagen)

There are many different additional tax forms. You need to fill out a separate form for each of the different kinds of income and expenditure that apply to you:

Form Used to declare
AUS

Foreign income (self-employed)

AV Contributions to a Riester pension
G Income from business enterprises
KAP

Income from capital (above tax-free allowance of 801 euros per person and 1.602 euros for married couples)

Kind

Dependent children, to claim child benefit

L Income from agriculture and forestry
N

Income from paid employment; gross annual salary; work-related tax deductions (i.e. expenses or commuting costs)

N-AUS

Foreign income (employee)

R

Additional income, gross annual retirement benefits

S

Income from self-employed work

SO

Other income (e.g. income from property sales, alimony or child maintenance, compensation or damages)

U

Alimony or child maintenance payments

Unterhalt

Payments to dependent persons

V

Income from renting or leasing

Vorsorgeaufwand

Payments to health, pension, unemployment and care insurance schemes

What is my tax class?

Filling out your tax declaration form will also require you to know your tax class (Steuerklasse). This is usually assigned to you by the tax office when you first register in Germany and is largely determined by your marital status. Your tax class will also be printed on the employment tax statement (Lohnsteuerbescheinigung) you receive from your employer. The six different taxation classes in Germany are:

Tax Class Marital Status
Class 1 Single, widowed, divorced or long-term separated
Class 2 Single parent
Class 3 Married with a higher income (than partner in class 5)
Class 4 Married with an equal income
Class 5 Married with a lower income (than partner in class 3)
Class 6 Second job or tax deduction without proper employee information

The tax classes are most important for married couples, as tax classes 3 and 5 represent a way for couples with unequal salaries to save money on their overall tax bill. It is possible to change your tax class (for instance if you were automatically placed in tax class 4 by the tax office and you earn significantly more than your partner). To do this, you will need to obtain a request a tax class change form from your local tax office.

Tax deductions in Germany

Most people submitting a tax return will take advantage of tax deductions in order to reduce their overall tax liability and increase the likelihood that they will receive a refund. Under the German tax system, it is possible to claim many different types of payments as tax-exempt. You can declare the following kinds of expenses in your tax return:

Employment expenses

It is possible to deduct various income-related expenses, as long as they are properly documented and haven’t already been reimbursed by your employer. This includes expenses incurred in the following circumstances:

  • Moving house for professional reasons, such as relocating to Germany
  • Applying to jobs
  • Travelling or commuting to and from work
  • Further training such as work-related literature or training courses
  • Equipment such as computers
  • Running two households, for instance, if you are a weekend commuter

For the years 2020 and 2021, employees who switch to working remotely are allowed to deduct 5 euros for each full day worked from home - up to a maximum of 120 days or 600 euros per year. 

Each employee in Germany is entitled to an allowance of 1.000 euros in business deductions per year. If you can prove that your employment expenses exceeded this lump sum, they can still be deducted.

Insurance contributions deductions

Any contributions you make during the course of the year to compulsory insurance schemes are deductible, up to certain limits:

Personal deductions

You can also make deductions for any costs resulting from the following:

  • Alimony payments to a divorced partner (up to 13.805 euros per year)
  • Charitable contributions to German charities (up to 20% of gross income)
  • Church tax
  • Interest on a mortgage (on buy-to-let properties, and only deductible against income made from the property)

Child allowances

If you have children, you are entitled to deductions and benefits to mitigate the cost of raising children. This includes:

  • Education expenses, if the child is attending a private school in Germany or Europe (30% of tuition fees up to a maximum of 5.000 euros per year per child)
  • Costs for childcare for children under 14 (up to 4.000 euros per year per child)

Be aware that many of these categories have limits and strict rules. If you are unsure, a tax advisor can help you understand how to make use of exemptions, deductions and allowances to reduce your tax bill.

What is the deadline for the tax return in Germany?

The German tax year runs from January to December. If you are obligated to submit a tax return, you can submit it any time between January 1 and July 31 the following year (i.e. July 31, 2022, for your 2021 tax return). If you need, you can also apply to your local tax office for an extension, which is usually granted automatically. If you use the services of a tax advisor, the tax office automatically extends the deadline to the end of the following February.

If you are submitting a tax return voluntarily, you can apply for refunds for up to the four previous years (i.e. in 2022 you can submit tax returns for 2021, 2020, 2019 and 2018).

Between two and six months after submitting your return, you will receive a tax assessment (Steuerbescheid) from the tax office. This document informs you whether you can expect a refund (which will be paid directly into your bank account), or if you owe tax. If you owe tax you will be given around four weeks to pay.

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