Who needs to file a tax return in Germany?

Who needs to file a tax return in Germany?

A lot is said about tax law in Germany – most often the fact that it is too difficult. There is no exaggeration in this – even the usual obligation to settle tax returns from Germany raises doubts among many people and means that in such cases we often reach for the help of a tax advisor. Have you worked in Germany? Have you ever wondered if you need to file a German tax return? When is the declaration to the tax office obligatory and when voluntary? Later in the post, you will learn the most important information about German tax return. We encourage you to read the article and dispel all your doubts.

Filing a tax return in Germany – not everyone has to do it

Filing a tax return in Germany is a tedious activity that can cause stress (especially for people who are just starting to pay taxes). However, it is worth knowing that many people are not subject to this obligation. The current Income Tax Act (EStG) clearly distinguishes between situations in which a tax return must be submitted to the tax office and when the declaration is completely voluntary.

Not everyone does not mean all, i.e. the obligation to submit a tax declaration for some taxpayers

Are you legally employed in Germany? Do you receive income from an employment relationship? Your employer must then withhold tax from your wages every month, which is then transferred to the German tax office. What does this mean in practice? But from a tax point of view, everything is done automatically for you, so you would not have to file a tax return.

Hence, many employees believe that the tax settlement with the tax office is not necessary. In reality, however, there are cases where the German tax authorities suspect that the tax contributions paid were too low. In connection with the above, the tax office may demand a refund of income tax.

Filing a tax return to a German tax office – when do you have to do it?

You must be aware that the German tax office may but does not have to send a request for a refund, so it is worth finding out for yourself when there is an obligation to submit a tax declaration. Are you wondering if you need to settle tax with the tax office? The list below will for sure be helpful. All cases in which an employee is required to file a tax return in Germany are governed by the aforementioned Income Tax Act (§ 46 EStG). So when do you have to submit the declaration?

  • If you have received more than € 410 in additional income or an allowance that replaces your wages (e.g. sickness, homelessness, parental or short-term work benefits).
  • If you receive several salaries at the same time (from several employers for whom you worked at the same time) – according to the VI income tax class.
  • You and your spouse have received a salary and have a combination of tax classes (III/V or IV/IV with a registered factor).
  • You took advantage of the tax deduction and in 2020 received a salary exceeding € 11,900 (for married couples it is € 22,600).
  • You have received a severance payment from your previous employer for many years of activity in a company for which the favourable ‘one-fifth’ rule was applied to tax deductions.
  • You are self-employed.
  • You have carried over loss from previous years.
  • If your partner died or you divorced and one of you got married later that year.
  • If your spouse lives in another EU country or is listed on the income tax card.
  • You live outside of Germany and have applied for unlimited tax liability in Germany.
  • You have income from an investment on which no tax has been paid.

Moreover, pensioners whose earnings exceed € 11,900 (for singles) and € 22,600 during the year are also required to submit a tax return for 2020. 

The obligation to settle the tax with the tax office in Germany also applies to civil servants for whom the flat-rate remuneration reserve was higher by the previously awarded insurance premiums.

Self-employed persons, traders and farmers must always settle with the German tax office by submitting a tax declaration.

Obligation to settle the tax from Germany – do it when the office requests it

There are situations where the German tax office asks you to submit a return even if none of the above conditions apply to you. What to do then? Above all, do not disregard such an appeal. Pursuant to art. 149 of the Income Tax Act, the submission of the declaration is mandatory when the tax office requires it.

Voluntary submission of a tax return to the tax office – who does it apply to and when is it worth to do it?

As we have already mentioned, the current tax system in Germany provides for situations in which the submission of a declaration is not compulsory. Who does not have to submit a return to the tax office? If:

  • a person belongs to tax class I and received income from one employer,
  • a person is married or registered in a partnership and belongs to the IV/IV tax class combination with his/her partner; the income received may only be employee income.

Are you not required to file a German tax return? You need to know that it can still be profitable. This is especially the case if you can expect a German tax refund due to special circumstances. These include, among others:

  • paid donations, church tax or childcare costs,
  • expenses for household services,
  • high costs of self-treatment,
  • domestic help expenses,
  • if child benefits are not deducted from the salary,
  • in a situation where people want to apply for an employee savings allowance

Filing a tax return to the tax office in Germany – deadlines

Every person who is obliged to settle accounts with the German tax office must keep the deadlines for submitting the declaration. The documents should be delivered to the tax authority by July 31 of the following year. This year, the deadline falls on the weekend, therefore the dates have slightly changed, therefore the deadline for submitting tax returns in Germany for 2020 is August 2, 2021.

You can’t remember the deadlines for submitting declarations? Or maybe you are still not sure if you need to submit a tax return to the tax office? Use the help of our tax advisor from Germany in the Taxando app and do not worry about the formalities – please contact us.