Taxes

How to submit a tax declaration in Germany

We all know we have to do it, but submitting your German tax declaration (Steuererklärung) can be a daunting prospect for some. Others just find it a bit of a chore, while many are simply confused by the financial terms used and don’t know where to start. That said, it’s not compulsory for everyone to submit a tax return in Germany, but it can be beneficial if you do.

The first step is to make sure you keep good accounts, and Penta can help by linking your business account to online accounting software. This integration means that your invoices and receipts are automatically shown in your accounting software and you can even attach copies of your receipts and invoices in your Penta account transactions.

Is it compulsory to file a tax declaration?

If you are an employee in Germany and don’t earn an income from anywhere else, then you are not obliged to make a tax declaration. If you are self-employed or have other undeclared earnings, then you will have to declare your income to the tax authorities by submitting an annual tax declaration.

Extra income can take many forms, such as capital gains, income from a rental property, or maybe you work freelance to earn a little extra on the side. In these cases, you are most likely going to have to declare your income to the tax authorities, but there are exceptions. If your second income is tiny, then speak to the tax authorities first.

Self-employed individuals will definitely need to submit a tax declaration because the income does not have tax deducted at source, unlike employees. 

Should you submit a tax declaration in Germany?

As discussed above, only people with additional income or the self-employed are required to submit a tax return. However, it may be beneficial for you to do it anyway, even as an employee where your income tax is deducted automatically from your salary. If you are self-employed, you may be able to open a Penta account and simplify your tax declaration.

It is surprisingly common for people to receive a tax refund when they submit a German tax return. The main reason for this is that many allowable expenses that can reduce your taxable income have not been taken into account.

For example;

  • If you have only worked part of the year
  • The cost of your daily commute could be tax deductible
  • Weekend commuters that use an additional property near their place of work may be able to claim back the rent or mortgage costs
  • Professional development and course fees

So regardless of whether it is compulsory for you to submit a tax return, it may well be financially beneficial to do so. 

What information do you need to declare?

The key to submitting your tax return on time and with the minimum of fuss is to be prepared. Make sure all your invoices and receipts are organised. If you are self-employed it would make sense to use a software accounting solution. There are many available, from paid solutions to freeware.

If you open a Penta Business Account, you can integrate your accounting software and synchronize transactions automatically. Penta currently integrates with lexoffice and debitoor, but more are being developed.

You will also need the following;

  • Steuernummer (Tax number): this number is issued when submitting a tax return for the first time if you don’t already have one.
  • Steuer-Identifikationsnummer (Tax identification number): this is issued to you when you register at the local registration office (Bürgeramt).
  • Lohnsteuerbescheinigung (Wage and tax statement): this is the statement of income and tax paid, issued to all employees

How do I submit the tax declaration?

Your tax declaration is submitted electronically using the ELSTER system. This is the online tax portal, and you will need to register. Make sure you register on ELSTER in plenty of time, as it will take a few days to receive the access code that is sent by post to the address you supply.

Once you have registered, follow the instructions and enter all your income, expenses and any deductions you are entitled to. The system is in German only, so if your German language skills are not good, you’ll either need someone to help you or perhaps use one of the online tax submission websites that are in English.

Everyone making a tax declaration will need to complete the main income tax declaration form, ESt 1, and the health and pension insurance form. There are additional forms to complete depending on whether you are a freelancer or self-employed. 

Freelancer

  • Freelancer Income – Anlage S
  • Revenue Statement – Anlage EUR. Only if your yearly profit is greater than €17,500.

Self-employed

  • Self-employed Income – Anlage G
  • Revenue Statement – Anlage EUR. Only if your yearly profit is greater than €17,500.

Alternative methods for submitting your tax declaration in Germany

If the thought of completing a tax return fills you with dread, don’t panic! There are alternatives.

If your tax declaration is relatively straightforward, then you could use one of the online tax submissions companies. For a small fee, from as little as €25, these online tools will take you through completing the tax forms step-by-step. They are perfect for employees that want to claim tax reductions such as commuting to work, or they only have a small second income. 

Self-employed can also use online services, but depending on how complicated your finances are, it may be more beneficial to employ the services of a Steuerberater (tax advisor). Using a Steuerberater is more expensive, but could save you both stress and money. 

The cost of using a Steuerberater is based on your income, before deductions, so basically, the more you earn, the more you’ll pay. The actual charging scheme is highly regulated and quite complicated, so it’s advisable to ask for an estimate, but expect the charge to be several hundred Euros.

What happens after you have submitted your tax declaration?

Your tax declaration will normally take a few months to be assessed, and you will then receive your Bescheid (tax assessment). This will tell you if you are entitled to a refund and for self-employed, it will detail any pre-payments you need to make in the following tax year.

If you owe tax, then you have four weeks to pay the outstanding amount.

Open a Penta bank business account today, connect your accounting software and simplify your tax declaration.

Tax declaration quick facts

When is the German tax declaration due?

If required, you must make a tax declaration by the 31st of July. If you use a Steuerberater (a licenced tax advisor in Germany), the Finanzamt (tax office) allows you 3 extra months, and the deadline is 30th of September.

The good news for employees is that you have up to four years to submit your tax declaration and potentially claim a refund. This means that if you have never declared your income in the past, you could still reclaim any overpaid tax for the past four years.

Is a tax declaration compulsory?

Self-employed people must submit an annual tax declaration in Germany. If you are employed and have a second income, it may be compulsory, depending on how much extra you earn. Check the limits with the tax office.

Can I get assistance?

If you speak German or have someone that can translate for you, then your local tax office will be able to advise you. 

In your local town, there may be a tax advice association (Lohnsteuerverein) that can help you. For an annual membership fee, you get access to the members, who are mostly retired tax advisors or accountants. You need to speak German and they will not give advice to freelancers or the self-employed.

Disclaimer:

Penta is not qualified to provide tax advice, except for general information. You are strongly advised to consult a professional tax advisor if you are not confident in submitting your tax declaration correctly.