Earning income in Germany obliges you to file a tax return here – Steuererklärung. Exceptions happen. For example, those who have the first or second classes, under certain conditions, may not apply. By contrast, grades three through six are often required to report to the IRS.
Residents of Germany prefer to file the tax return annually. Because it is beneficial. The German taxation system is complex and multifaceted. With a certain skill, preferences are fished out of the Talmud of financial laws. For example, taxes for the year in which a migrant moved to Germany can often be reimbursed in significant amounts. The IRS willingly shares information on exemptions and publishes explanatory brochures. And for consultants to return to the client a part of the state’s bins paid back is the main job.
How salary is taxed in Germany
The process of paying taxes in Germany is simple and straightforward. When concluding a contract, the employee signs up for a certain annual income. The employer calculates the tax on a scale from the Finanzamt and divides it into 12, 13 or even 14 parts, according to the number of salaries. As a result, every month the payroll tax is automatically transferred to the account of the tax department and nothing else needs to be done. The employer sends a salary slip , which lists how much and where the money was paid.
At the end of the year, the employer will issue another sheet – Lohnsteuerbeschinigung, which indicates the actual annual salary of the employee, as well as the amount of fees, including Lohnsteuer – payroll tax in Germany. Upon receipt of the sheet, you can start filling out tax returns. In each firm, annual leaflets are sent at different times, depending on the efficiency of the accountants.
In parallel, people have other incomes. For example, interest on savings in savings accounts , payments for rented housing, running a business. In addition, certain types of expenses are allowed to be deducted from income. For example, private pension insurance or the cost of washing work clothes.
In the declaration, the items of expenses and income, roughly speaking, add up, and the result is obtained, from which income tax is withdrawn. The higher the profit, the more tax you have to pay. Usually, due to the deduction of expenses, the taxable amount becomes less than that on which the payroll tax was paid. There is a recalculation and the tax returns the “extra” part of the money to the employee. According to statistics, 9 out of 10 applicants receive back an average of 800 € per person. The amount of money returned depends on the size of the annual salary and taxes paid during the year. Those who earn a little pay less tax and there is simply nowhere to return hundreds of euros.
Submitting a declaration in Germany is required by a certain deadline , otherwise the taxpayer will face fines. If there are no prescriptions for filing, and the employee is trying to get some of the taxes back, it is allowed to file a return for the next four years.
How other income is taxed
Investment income tax in Germany is withheld by the bank and transferred to the tax office. If the taxpayer agrees with the withholding tax, nothing needs to be done. Otherwise, you need to file a tax return to get the overpaid tax back.
For other types of income, the declaration is mandatory. Additional earnings of entrepreneurs at the end of the year are declared together with the salary.
Residents of Germany must declare their foreign earnings. Whether foreign income is taxed in Germany depends on the rules of the Double Taxation Treaty with the country in which the money is received. Declaring foreign profits is required in any case. Foreign income affects the tax rate even if it is not taxed in Germany.
How to fill out the declaration
There are three options for filing a tax return.
For the first time in Germany, it is better to contact a Steuerberater consultant or a specialized lawyer Fachanwalt für Steuerrecht. The corresponding word, name and city index are entered into the search engine. There are many tax specialists in Germany, and the result is a long list. Call consultants and explain the situation.
The cost of a tax specialist’s work depends on the declared amounts. The higher the annual income, the more expensive the filling is. But it is possible to agree that assistance in filling out the declaration is paid as a percentage of the money that was returned, but not less than a certain amount. Different consultants have different ways. On average, it costs 150-300 € to prepare an annual tax return. The consultant tries to squeeze out the maximum. In case of disputes with the financial department, the specialist will draw up the correct letter with links to paragraphs of German laws.
The second option is to fill it out yourself using a special program or on the Internet. If you know German at an intermediate level and know how to use online dictionaries, give it a try. This is not beneficial at first. Migrants simply do not understand and do not know many things. As a result, the return will be subject to a surcharge. Experience and megabytes of read text on forums helps. It was only by the time I was five in Germany that I learned to consistently receive substantial money back.
The third option is to go and get the forms, or download from the service website . Then fill it in by hand, sign it and send it to the tax office. Suitable if there is nothing to return due to low salaries, but according to the law, the declaration must be submitted. Or if you are too lazy to take a steam bath because of some taxes. Then you can enter contact information into the declaration, add information from the annual salary slip – and that’s it. There will be virtually no money back guarantee. Not the best choice for a foreigner, because, again, in the early years, it is really possible to write off a lot.
The German declaration is a green form. For employees, there is a simplified form – ESt 1 V. A regular questionnaire consists of the main form Est 1 A, which must be completed. Separate sheets with thematic forms are added to it. For example, to write off expenses spent on a private school for a child, you must complete the Anlage Kind. And Anlage N is filled in by employees in Germany. Renting an apartment – Anlage V.
I hasten to please that the program for filling out the declaration itself is aware of which form to enter which data. All you need to do is answer the questions, enter the required information and print the completed forms at the end.
The write-off of expenses from the tax base is confirmed by invoices or checks. Since 2018, the department has asked not to attach a ton of paper. But if you need to write off significant costs from the tax base, checks will be required later. Keep invoices you receive in stores or in the mail. Keep your monthly account statements. At first, it is impossible to predict what will be useful for the declaration and what will not. However, you should still throw out the confirmation of the expenses for the purchase of food, if we are not talking about meals during a business trip.
What to do after filling out the declaration
After the declaration is completed, a signature is required. If the spouses submit a joint Zusammenveranlagung declaration, both must sign.
The printout is then placed in an envelope and sent to the Finanzamt to which the place of residence is assigned. Information on linking German cities to the tax office is easy to find on the Internet, as is the postal address.
If the Finanzamt is nearby, throw the envelope into the mailbox yourself. This will eliminate the possibility of loss.
The modern option is to send reports using the program directly to the tax authorities’ server via ELSTER . This saves paper and processing time.
When the official receives the declaration, a cursory check of the forms is performed. If something is missing, a letter is sent with a request to send the required papers within a certain period. Usually, the reaction is given two to three weeks. If you do not keep within, expenses depending on the missing documents are not deducted from taxes.
Then you need to wait until the official checks the declaration and sends an opinion – Steuerbescheid. It indicates which items are deducted from the tax base and cases of refusals. The reasons for refusal are given with reference to the laws that served as the basis for such a decision. In the conclusion, the amount to be paid or received back is indicated.
After the issuance of the opinion, the tax authority gives a month to file a protest. If something is to be returned, the money is immediately transferred to the current account specified in the declaration.
If it is clear what the reason was for the refusal to write off, you can file a complaint with Einspruch, send it to the tax office and wait for the reaction. Consultants can bicker with Finanzamt for a couple of years, seeking to expand the tax-free amount, if they see the prospect of achieving a return of something substantial. Lack of response to the opinion means agreement with the decisions of the tax service.