by

May 2, 2012

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The deadline for filing your 2011 income tax declaration is May 31 – so get off your butt and do something about it. It could spell cash back.

For most people, May 31 is the deadline for submitting a 2011 tax declaration (Einkommensteuererklärung) to the Finanzamt – although if you get a tax accountant to file for you, you can get that deadline extended until December 31.

Do I have to file?

Most salaried employees (Arbeitnehmer) who have no other income are not legally required to file taxes, since Lohnsteuer (tax on wages) are automatically withheld from their pay. However if you’re a salaried employee and you’re able to make deductions (see below), you stand a good chance of getting some cash back from the Finanzamt. Freelancers and the self-employed must file but also have many opportunities to minimise their taxable income. The bottom line: almost everyone should do it.

Do I need professional help?

If you’re freelance, run a business or have income from more than one country, get a Steuerberater (tax accountant) or tax lawyer. Salaried employees with no other major sources of income can join a local Lohnsteuerhilfeverein, a self-help association which will help them fill out their forms, or just do it themselves.

German-speaking employees can do everything themselves with the help of German tax software: both WISO Sparbuch and Lexware’s Taxman offer similar semi-automated electronic forms that remind you of every possible tax deduction. You simply enter your data step by step, based on your profile; then you can either print out your Steuererklärung and send it in by post or transmit it to the Finanzamt electronically via the ELSTER system.

Everyone is entitled to a minimum tax-free income (Grundfreibetrag) of €8004. If you want to save on taxes, you should keep your taxable income as close as possible to this amount.

Tax accountant Ingeborg Hofer, who specialises in helping foreigners with their taxes, says it’s essential that you save every document on costs incurred, such as insurance invoices and bank statements for proof of payment. You never know how it might end up saving you taxes.

What’s the deal with deductions?

 Here are the main deductions you can claim to reduce your tax bill.

Kinderbetreuung (expenses for childcare): Kindergarten, after-school care (Hort) and au pairs are all largely tax-deductible. Submit copies of contracts, monthly bank transfers, etc.

Vorsorgeaufwand (insurance): Life insurance, accident insurance, liability insurance, private pension schemes can all be written off to some degree. Health insurance contributions, whether private or gesetzlich, are also tax deductible. Hold on to your annual Beitragsnachweis (proof of contributions)!

Werbungskosten (income-related expenses): Using your private phone and internet for work, special work clothes, job application costs, using a room at home as an Arbeitszimmer all fall under this umbrella, for which you’re automatically given a €1000 annual allowance. Expenses beyond this need to be documented.

Entfernungspauschale (commuter tax allowance): You can claim 30 cents in expenses per kilometre (one-way) for your commute to and from work – regardless of whether you drive, bike, walk or take the train.

For freelancers and the self-employed, most of the above apply. Also:

All income from self-employed sources must be declared – though the “Finanzamt isn’t going to rip your head off if you forgot to do it and you make less than the €8000 Existenzminimum,” says Hofer.

Remember to declare your health insurance costs (whether gesetzlich or private) and take advantage of the higher €2800 allowance for the self-employed.

Germany is quite generous when it comes to deductions for the self-employed. Save every receipt: phone bill (landline and mobile), every restaurant bill (make sure it’s a Bewirtungsbeleg with the proper form on it, then write the names of the people at the meal and for what business reason you entertained them on the back. Don’t bother submitting that €300 dinner exactly on your birthday – “the classic”, according to Hofer – which will always attract the Finanzamt’s attention), your bike or car repair bills, your U-Bahn receipts, taxi receipts, plane tickets, invoices for “work-related” books and magazines, computers, software etc.

Depending on your profession, you might be able to write your expenses off in a lump sum (i.e. no faffing around with receipts!). Journalists, for example, can write off a flat-rate (Pauschalabzug) of 30% of revenue up to a max of €2455.

Beware: once your self-employed revenue goes above €17,500 per year, you’ll have to start charging VAT (value-added tax, or here, Mehrwertsteuer) in the next tax year. According to Hofer, there are benefits from voluntarily signing up for VAT even if your income is less than €17,500, because then you will be able to get back VAT on your business-related purchases – like computers. VAT has to be declared and paid monthly or quarterly. Talk to a tax accountant about how this works – it can get quite complicated. 

US citizens

For American expats, things can be truly complicated. US law requires you file a US tax return by June 15 every year if your income exceeds the standard deduction (about $6000 for singles). It doesn’t matter if all income was earned in Germany, or if a German return was filed and German taxes paid.

Thankfully, unless you are really highly paid, it’s unlikely you’ll have to pay taxes to the IRS, thanks to the “foreign earned income exclusion”. But filing German and US taxes can be very complicated. Several accountants in Berlin specialise in US expat filings and can save you a lot of time and hassle.

The IRS has an office in the US Consulate in Frankfurt, which accepts tax returns and answers questions. They can be reached at: U.S. Consulate General Frankfurt, Internal Revenue Service, Gießener Str. 30, 60435 Frankfurt/Main. Tel 069 7535 3834. Or send an email to irs.frankfurt@irs.gov.

Show me the money

You will receive your Steuerbescheid (tax assessment) in four to eight weeks and, if you’re lucky, some cash back will follow shortly. First-time freelancers watch out: if you owe tax for the previous year, the Finanzamt will ask you to start paying quarterly advance income tax in the current year based on the amount of last year’s tax – so it’s good to set aside some money for this every month.

A final word of advice: don’t panic. Just gather all your documents together and talk to your German friends and colleagues. If you can’t get everything together by May 31, write a letter to the Finanzamt asking for a ”Fristverlängerung für die Einkommensteuererklärung” – a deadline extension for your tax declaration – or else hire a tax accountant and spare yourself the hassle.

by

May 2, 2012

Comments (11)

Comment Feed

good info for tax time!!

hi, just a note to say that i found this blog super useful and so i linked to it in my own blog post about being freelance as a foreigner in germany (http://www.englishyogaberlin.com/top10tipsforfreelancersinberlin-2/). anyway thanks very much, it was really helpful. cheers
meg

meg 68 days ago

website for tax forms?

Hi, this advice is helpful but it's missing the same information that I've as yet been unable to find on any website: where does one download tax return forms? The Finanzamt has weird opening times and staff there are generally not all that helpful... would be great if you could recommend a website, in German or English, where you can find out which forms you need and print them off without having to take a whole day off to do it.

My personal situation is that I worked part of the year in a mini job and the other part of the year self employed. Do you know where I could find anybody who gives advices about taxes for odd situations like this? Thanks!

Elain 137 days ago

tax forms

I believe you can find them hidden somewhere on any Finanzamt's page, but it's a tough cookie to crack. Anyway:
http://www.finanzamt.bayern.de/Informationen/Formulare/Steuererklaerung/Einkommensteuer/2013/
Hope it helps

Olda 78 days ago

Forms?

Hi, this advice is helpful but it's missing the same information that I've as yet been unable to find on any website: where does one download tax return forms? The Finanzamt has weird opening times and staff there are generally not all that helpful... would be great if you could recommend a website, in German or English, where you can find out which forms you need and print them off without having to take a whole day off to do it.

My personal situation is that I worked part of the year in a mini job and the other part of the year self employed. Do you know where I could find anybody who gives advices about taxes for odd situations like this? Thanks!

Elain 137 days ago

Rec for tax accountant

Any one have a recommendation for a good tax accountant? Especially one with experience with American freelancers in Germany? Thanks for this article by the way, very helpful.

Mmmsoymilk 145 days ago

accountant


http://www.americansincometaxservice.com/contact_en.html
(pls tell 'em Exberliner sent you)

Maurice T Frank 145 days ago

Germany Tax - FullTime Employed Foreigner % payment?

I am considering of relocating to Escborn for work and would like to know the % of tax I have to pay as a foreigner (I am from Australia) with a domestic partner (who have no income).

Let's say my gross income is EU$100,000.00. What is the minimium gap/cap and the % of tax?

Also, what is the average house/apartment leasing price there or anywhere near, within 1 hour of train travel?

Here's looking forward to your kind feedback.

Danke.
Phillippe

Phill H Lim more than 1 years ago

Non-resident

Does anyone know the cap on earnings for non-residents from other EU countries and if they must file for small amonts like €6000

Rico more than 1 years ago

AMERICANS GERMAN TAXES

THE FOREIGN TAX EXCLUSION DOES NOT APPLY TO FREE LANCE INCOME...YOU MUST PAY SELF EMPLOYMENT TAX IN THE U.S. ON THIS...EVERYONE GET'S THIS WRONG..AND THANKFULLY I DID'T ...ONLY BECAUSE SOMEONE TOLD ME YEARS AGO..AN AMERICAN TAX CONSULTANT IN THE STATES...GO TO WWW.IRS.GOV AND READ UP FOLKS...ALSO, IF YOU GO OVER THE $ TAX EXCLUSION, ABOUT $90,000 DOLLARS...YOU PAY FROM DOLLAR ONE, NOT BEGINNING AT THE 90K..SO LET US BE CAREFUL OUT THERE! BEST ADVISE. DON'T ASK GERMANS QUESTIONS ABOUT YOUR TAX STATUS AS A FOREIGNER....ASK THE IRS FIRST....AND UNLESS YOU HAVE A REALLY COMPLICATED TAX SITUATION..YOU CAN DO YOUR GERMAN TAXES WITHOUT HIRING ANYONE..IF IT'S JUST LOHN (INCOME)...BUT IF YOU OWN PROPERTY, EXPECIALLY RENTAL PROPERTY IN THE U.S., HAVE BANK ACCTS. THERE WITH INTEREST EARNING ACCTS, U.S. INCOME OF ANY SORT, ANY INCOME FROM ANYWHERE IN THE WORLD, AS A RESIDENT OF GERMANY, YOU MUST DECLARE THAT INFORMATION..AND YOU WILL BE TAXED BY THE GERMANS ON IT IN MANY CASES...THIS IS WHEN YOU REALLY NEED TO BE CAREFUL AND GET A US/GERMANY TAX CONSULTANT...LATER IS TOO LATE...WHO KNOWS HOW LONG YOU'LL REALLY STAY IN GERMANY...WHAT WILL BECOME OF YOUR TAX OBLIGATIONS IN BOTH COUNTRIES.....GOOGLE THIS SUBJECT TO DEATH AND GET IT RIGHT...GOOD LUCK

Alan Janssens more than 1 years ago

Steuerberater

Can anyone recommend a great Steuerberater?
I am specifically interested in figuring out the best way to setup a branch from a foreign company.

Many thanks!

Michael Bell more than 1 years ago

Tax time

Great article. I was so confused about the deadline being May 31st and December 31st. Both my friend and I are correct, we owe each other a beer!

Blair Dunn! more than 1 years ago

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