Income tax deductible expenses in Germany

Claims for travel, computer, office rental, etc.

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I normally get a tax adviser to complete my income tax returns, but he seems to have vanished off the face of the earth, so I thought I'd give it crack myself. My tax claim will be very simple, I claim mileage to and from work, books I buy, home office space, days when I'm working abroad etc. I have previous letters my old tax advisor used to send with my claims but I'm unsure of which form I should send or do I need to use Elster?

Can someone point me in the right direction.

Sounds like you need a tax advisor.

You can use Elster for personal returns, but you are not obliged to. Simply apply for the necessary paper forms form the Finanzamt. It's even easier if you use a tax software package, but you clearly need some knowlege of German. Many packages support Elster, so you enter you finances and claims into them, they calulate the numbers and prepare the Elster submission... There's a list of "Joe Public" packages that support ELSTER. Because it is known (and similar) in many other geographies, I've heard good things about Quicksteuer from Lexware/Intuit, the makers of Quicken.

"Elster" stands for elektronisches Steuererklärung - i.e. electronic tax return. It's now mandatory for submission of VAT and certain company tax declarations, and highly recommended for personal returns. It will also become manadatory for these too... There are many advantages including automatic calculation, priority attention, and of course, a paperless discourse with the taxman. There are a number of software packages, some free, which support ELSTER. You simply enter your details into them (like you wrote previously on the paper forms), it packages the information up, does all the calculation and submits the data to the authorities over the internet. Better packages make recommendations and suggestions to aid your completion of the form to maximise your returns.

I have also been somewhat slack with my 2004 declaration i.e. still not done and swimming in papers at my flat!

An English friend of mine that was over here previously mentioned the possibility of getting a "Pauschal" refund as some sort of a package for being a Brit and moving over here... Does anybody know any more details about this i.e. whether an extra form needs to be filled out, what proof would need to be provided etc.

I too am unfortunately currently living off ketchup sarnies due to an eventful couple of years where friends have chosen to rather inconveniently marry and leave me out of pocket due to travel expenses/ostentacious wedding lists... Hence am also too tight to pull a tax advisor on board!
Just saw on the tele that the Bavarian ministry of finance has published a large guide on tips for claiming tax back. It's supposed to cover things like Pendlerpauschale, Berufskleidung etc for the year 2005. It should be available for download here (hopefully, the page has frames).

Niemand soll mehr Steuern zahlen, als er dem Gesetz nach schuldet. Gerade für Arbeitnehmer gibt es eine Reihe von Steuervergünstigungen, die eine Steuerbelastung so niedrig wie möglich halten. Diese Informationsschrift gibt Auskunft über die steuerlichen Pflichten aber auch über die Abzugsmöglichkeiten und Vergünstigungen bei der Lohn- und Einkommensteuer sowie bei der Vermögensbildung und bei der Bausparförderung und berücksichtigt in Grundzügen auch die steuerliche Förderung der Altersvorsorge nach dem Altersvermögensgesetz.
I've tried reading through that Steuertipps page but my Buerokratisch Deutsch is not all that great. Can anyone tell me if I am able to deduct the cost of a 2 week German course taken as Bildungsurlaub and if so, what would I need to provide? I have the original receipt from the language school and the approval letter from my HR office.
Diabla, I think so(you can claim back the cost of the German course) because I did it myself in 2001. Unless the law has changed since then. I just gave them the receipt for the class.
No need for any approval letter. The formal receipt for the school should be enough. You can also claim daily travel expenses too.
I did my 2004 tax returns last month, and got the results back the other day. Seeing as I didn't really understand them, other than the fact that I was getting some money back, I went into the Finanzamt ServiceZentrum and asked what it was all about.

She explained that I was automatically given a Sonderausgaben-pauschbetrag of €36. You get this automatically if you can't claim a higher figure for the expenses for working (e.g. books needed, protective work clothes needed etc). I was also automatically given an Arbeitnehmer-Pauschbetrag of €920. I think this is just a tax credit that every employee is entitled to. I was also automatically given a Vorsorgepauschale of €2,491 which is an automatic allowance you get for pension provisions - even if you haven't paid into any private pension fund. I may have got the exact details a bit mixed up, but basically all employees are entitled to certain tax credits which don't seem to be considered when your employer is deducting taxes from your wages

Note, I didn't get this money back, just the amount of my income that was to be taxed was reduced by this amount, so in practice you get about 25% of this amount back, which is still €850 or so.

Seeing as I only started (officially) working here in 2004, I also got some tax back based on split year treatment. Not sure what % it is, still need to work it out.

So the moral of the story is: Do a tax return. Use ELSTER or something to help you. Even if you've no particular expenses that you think you can claim for, you are at least due the tax back that you would have paid on the various allowances.

Hope this helps.
OK, so I've sat down and worked out the split year treatment as well. This may be of interest to others as there are often questions like "I'm leaving Germany next May, can I claim back taxes?"

Well the short answer is "yes", but it's not that simple, nor as generous as you might hope. See my previous post above for general allowances. This post is just concerned with tax back if leaving in the middle of a year.

As an example, lets say you're single and were on a salary of €60,000 per year. You leave Germany on 30 June, so actually only earned 30,000 that year. I'll ignore allowances to make it simple and assume that this sum is your "taxable income" (zu versteuendes Einkommen - zvE). Now according to the Grundtabelle 2004, someone on €60,000 should pay €18,555 tax, or 30.9%. Someone who earned €30,000 should pay €6,059 tax, or 20.2%.

So, you're probably thinking that you were taxed at 30.1% on the basis that you would be earning for the whole year, but seeing as you've only earned for half the year, you should have only be taxed at 20.2% and were charged 9.9% too much tax on €30,000. I.e. tax back of €2,970.

However, the Finanzamt uses something called "Progressionsvorbehalt" to work out what percentage to tax your German income at. This is dependant on your foreign income for the year. So let's presume you are going back to a country which Germany has a double taxation agreement with (I imagine this includes all english speaking countries). So you take a few months holidays, and start your new job there in September and earn €20,000 in the last quarter of the year. Based on the double taxation agreement, you can't be taxed on this income in Germany as it was already taxed in your home country.

So the Finanzamt instead adds your foreign income to your German income to work out what percentage tax you should have paid on your German income. So in this case, your total income is €50,000. According to the Grundtabelle, you should have paid €13,667 or 27.3% tax on this income, had it all been in Germany. The Finanzamt then uses this figure of 27.3% to calculate the tax you should have paid on your German income. So you were really only charged 2.8% too much tax, rather than the 9.9% that you assumed. So your tax back would only be €840, not €2,970. This is Progressionsvorbehalt.

Now if your monthly income abroad was actually higher than your German monthly income, you may find that the Finanzamt claims that you owe them money !!! In our example, say you start work straight away in your new country and earn €40,000 from July to December, you may find that the Finanzamt is looking for more money for you as taxes.

Note that I'm not sure if they include all your foreign income, or just the part of your foreign income that is also taxable in that country (i.e. they take your tax free allowances in your home country into account). Also they will give you allowances for the standard stuff as mentioned in the previous post. But I would say that if you earn proportionally significantly more in your home country after leaving Germany, don't bother claiming tax back. You may be presented with a bill !!!

The Bundesfinanzhof (BHF) has ruled that Progressionsvorbehalt is legal even if it is not explicitly mentioned in the double taxation agreement between the two countries involved - Urteil vom 19.12.2001 (I R 63/00, BFH/NV 2002, S. 584). The case involved a German who moved to the US during a calander year. It's not clear if this ruling is valid if you move within the EU, though the Finanzamt is already using it (they used it in my case when I moved from Ireland to Germany). There are open cases in Europe concerning this, so it may be possible to appeal your Steuerbescheid once these cases are decided. See here for details.

Now I guess you could tell the Finanzamt that you're leaving Germany to study, or go on holidays, and have no foreign income for the remainder of the year. In that case you should get much more tax back. But I've no idea whether the Finanzamt would ask for further proof of this, or could otherwise check whether this claim was true.

Pretty long winded and complicated, but hopefully it will help.
I'm leaving Germany next May, can I claim back taxes?
I have asked around amongst tax ppl re. claiming a tax return after leaving Germany in the middle of the tax year and the general consensus was that you only have to put your German income for January to June on the tax return forms and the German taxman doesn't give a monkey's what you've earned e.g. July to December in the UK, as long as you don't have any furthert income in Germany.
Yes and no. The tax form asks you to declare all foreign income. So if you "forget" to declare your UK income, or tell them that you were away on a round the world trip, then you are technically committing a crime. In practice the Finanzamt is probably so busy that they will just process the paperwork as you submit it. So if you tell them you're going back to the UK to study and not to work, you'll probably get away with it.

You can tell I've been thinking about this
Quick follow up on the previous post. I noticed the following in Anlage N for the 2005 tax returns.

28: Angaben über Zeiten und Gründe der Nichtbeschäftigung (bitte Nachweise beifügen)
Which roughly translates as "line 28: Details of periods of, and reasons for, not being in employment (please include documenatry proof)"

So, you have to state what you were doing when you were not in full time employment, and you also have to submit some sort of documentary proof to back up your statements - though what sort of proof is acceptable is not stated. Therefore you would have to state (in theory) that you were in employment outside of Germany, if that was the case.

However if you submit your tax return electronically via Elster, then you do not need to submit receipts etc. However the Finanzamt may ask you to send in receipts etc when they examine your tax return.

Bei einer Abgabe der Einkommensteuererklärung über ELSTER wird auf die Einreichung von Belegen, soweit sie nicht aufgrund gesetzlicher Vorschriften verpflichtend einzureichen sind, grundsätzlich verzichtet. Gesetzlich vorgeschriebene Belege sind z.B. Spendenbescheinigungen, übrige Steuerabzugsbescheinigungen, Unterlagen zur Steuererklärung nach § 60 EStDV. Die Belege müssen aber dennoch aufbewahrt werden und sind dem Finanzamt auf Verlangen nachträglich vorzulegen.
Taken from here.
I don't know about for full time employee's, but if you are freelance and you have a room specifically setup for working, you should have no trouble claiming this back on tax as a percentage of your rent..
Just doing my own tax return, so here are a few pointers:

  • "Claiming tax back" usually just means that you file an income tax return - you are not obliged if all your income was under the payroll tax ("Lohnsteuer"). The payroll tax is only an advance on your tax based on monthly pay; the correct amount is calculated when you file a return based on your yearly income.

  • The main reason why you might get some tax back is either because the monthly deduction from your wages did not match your income over the year, e.g. because it changed or because you did not have income for some months. If you are married, tax is calculated based on your joint income, so there is usually some difference if you have two earners, and you'll want to file. In this case it is also easy as you only have to submit information that's already on your tax card.

  • or because you can claim deductions for expenses related to your profession ("Werbungskosten"), special hardship ("Außergewöhnliche Belastungen" - e.g. being handicapped, or having to care for someone), or some other categories.

  • You must also declare capital income, e.g. interests, dividends, and proceeds from the sales of stock or real estate, over a limit of, I believe, a few hundred EUR.

  • You can submit a tax return up to two years after the end of the tax year, not longer. However, if you have income that was not covered by the payroll tax (contract work/income from interests or equity), you must file either by the end of May or the end of September (in case you use a tax consultant). However, these are not taken too seriously if you do not owe large amounts of money.

  • The professional expenses deduction includes the way to and from work (at 30 cents a day and kilometer of simple distance - independent of the mode of transportation), as well as expenses for work equipment (e.g. a computer you had to buy yourself) and business trips (if not reimbursed), and professional training. However, a flat minimum deduction (the Pauschale) of 920 Eur/yr is incorporated into the income tax, so you have to exceed this to claim anything back. This might be the biggest reason to file (except the two earners case). Note that moving expenses can usually be deducted (when your move is motivated by employment) including an agent's commission (of course, if not reimbursed).
The income tax form isn't worse than the US form 1040, and you can fill it online using the free ELSTER program, which also gives you an estimate of how much you would get back (if everything is accepted). However, if you have a significant amount on work-related expenses, you should better ask a professional.
Apparently, according to my German colleague, they are trying to get rid of the mileage allowance. Next year you will only be able to claim mileage over 20 km (simple distance).

eg. I live in Munich but work in Starnberg (30 km), so I can only claim the 10km over.

Watch out for it.

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