Who is legally obliged to file a tax return?
The cases in which someone is obliged to file a tax return are stated in the German income tax law. To put it simply: issues not taxed at source have to be declared to the tax office to enable the tax office to check this issue and assess taxes.
The following examples (fragmentary list!) should give you an overview of when a tax return definitely has to be filed:
- Self-employment income or business income
- Rental income in Germany
- Equity sourced income (e.g. investments in ships, rented out properties, wind turbines, solar parks)
- Compensatory payments (e.g. unemployment benefits, sick pay or parental allowance) exceeding 410 EUR
- Capital income realized on accounts outside of Germany (capital income up to 801 EUR for single / 1.601 EUR for married people is tax free, exceeding amount is taxable with 25 per cent flat) – interest received from the tax office within a tax assessment of previous year is capital income, too!)
- Married taxpayers both working as employees and tax class combination III / V
- Non-German source income (e.g. [employment] income before arrival to / after departure from Germany; rental income in non-EU-countries but also Spain and Finland)
- Retirement benefits whose taxable portion together with potential other sources of income exceed the basic tax free amount (Attention: company pensions and statutory pension payments are taxable differently!)
Please note: The German tax year is similar to the calendar year. Irrespective of whether you have been a German tax resident the entire year or not, you have to file a tax return including figures from 1 January through 31 December!
For whom does it make sense to file a tax return?
If you are not legally obliged to file a tax return, you are allowed to do so anyway. If you find yourself in one of the examples below, we definitely should discuss your tax case:
- Employment related expenses: the definition of what belongs to those expenses is quite wide-ranged in German tax law. A lump sum deduction of 1.000 EUR is automatically included. However, distance between home and place of work of more than 16 km will result in a positive tax effect as well as having a double household situation (family residence different to residence you live during the week) and moving to Germany or removal within Germany for business reasons.
- Private health insurance (For employees paying their contributions into the German statutory health insurance, the tax benefit should already be included in the payroll calculation.)
– calculation as to the question whether the tax benefit via child allowance or child cash benefit [Kindergeld] is more favourable– school fees
– maintenance fees [kindergarten, after school care center, nanny]
– children older than 18 but still in education
- Retirement benefit plan „Riester“ (calculation whether deduction of contributions or received allowance is more favourable)
- Retirement benefit plan „Rürup“
- Member of a church? (Catholic and Protestant church members have to pay church tax which is deductible within the tax return.)
- Alimony payments to a divorced former spouse
- Household related services or expenses for craftsmen within the property / apartment (e.g. within the annual statement of your landlord and for gardening, painting, cleaning the flat / windows etc.)
- Change of employer during the year (2 different wage and tax statements) or inception / cancellation during the year
- extraordinary special expenses (e.g. medical expenses not reimbursed by health insurance; depending on income situation and family status a certain part is not deductible / does not have a positive tax effect)