Tax obligation in Germany: Who has to file a mandatory tax return?
Almost everyone in Germany pays taxes. They surround us in everyday life and often run in the background. When you go shopping, you pay sales tax or VAT. Do you have a car? Then you pay vehicle tax . Even a dog entails taxes!
If you earn money in Germany, you usually have to pay income tax. How much you have to pay depends on the income you earn over the year. It is only at the end of the year that you know what you have to pay in taxes and what you have to pay to the state. But the tax office doesn’t want to wait that long for its money.
Consequence: You already pay tax regularly throughout the year.
Are you employed? Then, your employer deducts income tax from your salary every month. The amount is shown as wage tax (Lohnsteuer) on your payslip. The wage tax is, therefore, nothing more than a regular advance payment for your income tax.
As an employee with one fixed employer, your taxes are taken care of, at least in most cases. Only when you have additional income or have certain combinations of income tax classes or other special circumstances, do you have to go dig deep into your taxes.
Optimized for Kurzarbeit and ALG I
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Does everyone have to file a tax return?
In principle, everyone with a taxable income must file an income tax return. Only in certain cases are you exempt from this obligation.
If you are an employee, however, there is a good chance that you will not have to file a tax return because your tax liability is settled by paying wage tax on a regular basis. This is calculated on the basis of your tax bracket so that you don’t pay too little tax, on this part of your income.
But even for employees, the wage tax alone is not always enough to cover the tax liability. We will describe such cases in a moment.
On the other hand, you can also use your tax return to get back money that the state is not entitled to. If you are one of those people who do not have to pay their taxes, you can still voluntarily file a tax return, for example for the year 2021. It’s a good idea to file your tax return because in many cases, you’re granted a refund.
Who has to file an obligatory tax return? This checklist holds the answer
Here it is again in full: Our checklist for compulsory tax returns explains whether you have to file a tax return:
* You can find details on short-time work benefits in our article.
Once more, let’s go over the checklist and confirm if you are obligated to submit a tax return.
- You received more than €410 in other income (e.g. self-employment or commercial activity, rental or pensions)
- You have received wage replacement benefits (e.g. unemployment benefits, sick pay or short-time work benefits
- You were employed by more than one employer at the same time and the income tax was not added up for both salaries
- You are married and you both received wages, one person was taxed in tax class V or VI, or you have tax class IV with a factor
- You have entered an allowance for travel expenses or children, for example, and you earn more than €12,250 (2021) as an employee or more than €23,350 for married couples who are assessed together
- You received a compensation payment (e.g. severance pay) or a one-off payment as remuneration for a multi-year activity that was taxed at a reduced rate
- There was a change of employer and the wage tax for another payment was calculated without the previous salary (“S” in the wage tax statement in the line “capital letters”)
- You have a loss carried forward from previous years
- You had capital gains on which no withholding tax was paid
- You have been asked by the tax office to submit a tax return
We explain the individual points in more detail below:
When you earn more than 410 euro as side-income
Do you have taxable additional income like income from renting or from self-employment? Or do you receive income from abroad (non-German income)? Then you have to state this in the income tax return if your total income from such sources exceeds 410 euros per year.
More than 410 euros in income-replacement benefits (e.g. unemployment or short-time work benefits)
Maybe you were or are affected by short-time work (Kurzarbeit) due to the corona pandemic. If you have received more than 410 euros in short-time work benefits (Kurzarbeitgeld) throughout the year, regardless of how long you worked as a short-term worker (Kurzarbeiter) you are subject to tax. The same applies to the other wage replacement benefits, such as unemployment benefit I, parental benefit or sick pay.
Two or more simultaneous employers
If you have several sources of income simultaneously, an employer will issue you an income tax certificate with tax class VI. You are then obligated to pay taxes.
Civil partnerships with tax class IV/IV with factor or III/V
If you and your spouse or registered life partner have chosen the combination of tax classes IV/IV with a factor or III/V, you are obliged to submit a tax return – but only if the partner in tax class V has received wages.
The same applies if you opt for individual assessment and you have not applied for half of the training allowance or half of the disability allowance for your child.
The compulsory assessment also applies to divorced or widowed persons who remarry in the same year.
Fixed Allowance (income tax reduction)
Have you submitted an application for an income tax reduction to your responsible tax office and entered a fixed deduction? Then you’re obligated to prove your actual income-related expenses or special expenses(Sonderausgaben)in the tax return.
There is no obligation only for these exceptions:
- In the case of lump sums for the disabled, survivors or the tax credit for single parents.
- If you earned less than EUR 12,250 (EUR 23,350 for married couples filing jointly) in 2021.
Change of employer ('S' in the annual payslip or 'Lohnsteuerbescheinigung')
Have you changed jobs within a year and received special payments such as a Christmas bonus? It’s possible that your new employer did not take the values of the previous employer into account when calculating your income tax. In this rare case, you will find the letter ‘S’ on your annual payslip (Lohnsteuerbescheinigung)Also known as “income tax certificate” or “wage tax certificate”, the annual payslip is a form your employer(s) will give you at the beginning of each year. It gives a …
Read more .
Loss carried forward (Verlustvortrag)
You also have to pay the tax if you have a tax loss from previous years. This minus is then offset against your taxable income.
Hitherto untaxed capital gains
If your investment income from the sale of securities (e.g. shares), interest or dividends was more than 801 euros and the bank has not yet taxed you for it, likely because it was generated in foreign accounts, you must state this for tax purposes.
Who is obligated to file a tax return?
You are not obligated to file an income tax return in these cases:
- You are in tax class I and only had income from one employer.
- You are married/in a registered civil partnership, have the combination of tax classes IV/IV and only income as an employee.
Hopefully, you now have all the information you need to file your tax declaration and claim your maximum refund. Remember, If you have questions about the filing process with Taxfix, we are always here to help. Get in touch under [email protected]