© 2025: Schlecht und Partner

FAQ on income tax and income tax return

BASIC INCOME TAX

Income tax is a tax on income. The taxable income in Germany is made up of the different income sources. Germany only has a federal income tax. Other countries (e.g. USA) have state, municipal and city income tax. This is not existent in Germany. Income tax is the same all across Germany, as this is a federal tax. Every individual who is subject to unlimited taxation in Germany has a tax free amount of currently 10.347 (2022), where no tax is levied. The initial marginal tax rate starts at 14 % and increases up to 42% with an income of approx.. 57 TEUR (and 45 % in cases of income of 260 TEUR).

Individuals resident in Germany are subject to German income tax within the framework of unlimited tax liability, as are non-resident taxpayers with (certain) domestic income (subject to limited tax liability).

Thus, income tax is paid by everyone whose income has not already been settled by wage tax or capital gains tax. Income tax is paid by doctors, insurance brokers, car dealers, landlords, tax consultants, lawyers and many other self-employed people and traders.

There are seven types of income in the Income Tax Act. These types of income are:

  • Income from agriculture and forestry § 13 EStG
  • Income from commercial operations § 15 EStG (sales representatives, restaurateurs, car dealers, retailers, etc.)
  • Income from self-employment § 18 (tax consultants, doctors, lawyers, authors, bloggers)
  • Income from non-self-employed work § 19 EStG (employees, wage earners)
  • Income from capital assets § 20 EStG (dividends, capital gains, interest from loans)
  • Income from renting and leasing § 21 EStG (renting a condominium)
  • other income § 22 (pensions, private sale, real estate sales)

As a resident of Germany, if you are subject to German income tax, all of your income is subject to taxation, regardless of where it originates. This means that foreign income is also initially subject to German taxation (the so-called world income principle).

If there is a double taxation agreement between Germany and the source country in the area of income taxes, the right to tax is usually attributed to the country of residence Germany or the foreign country of source, depending on the type of income.

Income-related expenses are the costs incurred to secure, maintain and acquire an activity, these are:

  • Travel expenses (daily trips to work, family trips home)
  • Bank fees
  • Work attire, Work wear (with restrictions, see Downloads)
  • Specialist literature
  • Training costs (courses, seminars etc.)

The income tax is paid by the taxpayer himself in the form of advance tax payments (typically on a quarterly basis) and, if necessary, an additional payment at the request of the tax office. This is the case, for example, with tradespeople, the self-employed or with the generation of rental income.

The income tax is deducted from the employee's salary and paid to the tax office by the employer. This is done monthly with the pay slip by the employer. The income tax is paid by the taxpayer himself to the tax office. The difference here is only present during the year. At the end of the year, the same percentages, laws and regulations apply to income tax and wage tax. The benefit of paying income tax is that advance payments can be adjusted throughout the year.

Normally, it is worthwhile for the employee to submit the income tax return, as this allows him to claim income-related expenses. These income-related expenses reduce the taxable income and lead to a lower tax burden.

Taxable supplementary income greater than 410 euros per calendar year without a tax deduction requires you to file a tax return. Taxable supplementary income includes pensions, royalties, rental income, and investment income on which no settlement tax (Abgeltungssteuer) was paid, such as foreign investments.

Territorial jurisdiction for personal income taxation is based on residence. In the case of multiple residences in Germany, the domicile where he or she mainly resides is decisive for single persons. In the case of taxpayers who are married or living in a civil partnership with multiple residences and do not live permanently apart, the residence where the family mainly resides is decisive.

If there is a change in local responsibility due to a change of address, the change in responsibility occurs at the point in time at which one of the two tax offices learns about it. The newly responsible tax office has to take over the taxation in full.

In order to get back the withheld capital gains tax, you still have to submit an income tax return together with Annex KAP, even if you are not otherwise obliged to submit an income tax return. You will then be reimbursed for the withholding tax you paid as part of the assessment process.

Being a tax resident in Germany and therefore subject to unlimited tax liability in Germany, you are obliged to provide information on your foreign incomes. This typically does not result in a double taxation, however the tax burden can increase to the German level. When filing your taxes we need information on all your income sources – domestic and foreign.

MANDATORY FILING, DEADLINES AND ADVANCE PAYMENTS

Income tax is an annual tax (=calendar year) and is therefore due at the end of the year. However, so that a large payment does not have to be made, advance income tax payments are made. The income tax prepayments are to be made quarterly on March 10th, June 10th, September 10th and December 10th due.

In order to fulfill its obligations, the German state depends on regular and timely income. The subsequent payment of the tax liability in one sum for the entire calendar year could lead to payment difficulties for the taxpayer, more than quarterly advance payments. Finally, quarterly advance payments also avoid disadvantages for employees who make their “advance payments” through the monthly income tax deduction.

In principle, the advance payments are based on the income tax of the last tax assessment, but less the tax deductions (employment tax).

If the actual circumstances change compared to the last tax assessment, the tax office can also adjust the advance payments. However, negative income from letting and leasing may not be taken into account when determining the advance payments for the year of acquisition or completion of the building.

In general the income tax return must be submitted by July 31st of the following year. The tax office grants an exception if the taxpayer is represented by a certified tax advisor. In these cases the deadline expires on 28 (29) February of the second year following the tax year.

Due to corona, the fling deadlines were further extended for the 2020 and 2021 filings until August of the second year following the tax year. Thus the 2020 tax filing is due no later than August 2022.

There are different deadlines for submitting the tax return. The question of whether there is a retrospective submission option usually arises in cases where a refund is in prospect.

In general, a distinction is made between an application and a mandatory assessment. In the first case, the period is 4 years, in the second case, the tax return can even be submitted up to 7 years retrospectively.

However, one must note that the obligation, or even the possibility, does not always expire after 7 years.

If additional payments are due, it is even possible to suddenly have the tax investigator in the house.

In the case of tax evasion, other limitation periods generally apply.

If the income tax return is submitted late, there is a risk of late penalties, fines and interest on the underlying tax liability. If the taxpayer still fails to comply with his obligation to declare, a tax estimate is threatened.

TAX IDENTIFICATION NUMBER
(„STEUERIDENTIFIKATIONSNUMMER“)

The allocation of the tax ID no. (=Steueridentifikationsnummer) carried out by the Federal Tax Agency. In contrast to the tax number, which can change when you move, get married or become self-employed, the tax ID no. permanently assigned to all citizens living in the Federal Republic for communication in tax matters. The identification number can be found in every letter from the tax office, for example tax assessments or other correspondence.

For people who live abroad and draw German pensions, the pension fund arranges an allocation. In the case of people who have moved from abroad, the registration authority informs the Federal Central Tax Office, which then issues the tax identification number. Allocation also takes place for newborn children as soon as the registration authority has forwarded the necessary data to the Federal Central Tax Office.

The electronic wage tax deduction characteristics are created for employees and changed if necessary. Employers can use the tax ID of their employees to call up the wage tax deduction characteristics so that they do not have to do it themselves. If this is not desired, employees can apply to the tax office for no or only partial electronic wage tax deduction features to be created. The employer can then only call up the data for which there is consent to be passed on

It can pay off for savers or investors to issue exemption orders. This prevents the bank from taking the withholding tax into account. If savers or investors want to set up or change exemption orders, the tax identification number is necessary. This may be necessary.

Certain providers of social benefits, such as pension insurance providers, employment offices, family benefits offices and health insurance funds, as well as employers and other bodies, are obliged to provide the tax office with data that is relevant for tax purposes. This transmission takes place electronically. The tax identification number is also required here so that the corresponding data can be forwarded and assigned correctly.

If you forget your own tax ID and do not have a letter from the tax office with the number, you can apply for the tax identification number again at the Federal Central Tax Office. The processing time can be up to four weeks, the number will ultimately be sent by post.

To the application

The Tax Identification Number is a significant, individual feature of each taxpayer. However, one is often unaware of their unique number. It becomes all the more urgent when one needs to act quickly and the original letter from the Federal Central Tax Office (BZSt) may not be readily available. But don't worry, the tax identification number can be found on a variety of official documents that you might find easier to locate:

  • Wage Tax Certificate: The Tax ID is located on the wage tax certificate under the section "Identification number".
  • Income Tax Assessment: The Tax ID is listed on the income tax assessment in the upper left corner, directly above the tax number.
  • Information letters from your tax office: Your Tax ID can also be found on information letters from your tax office next to the tax number.
  • Online request at the Federal Central Tax Office: If you can't find the above documents, you can request your tax identification number via the input form on the website of the Federal Central Tax Office.

 

 

Tax Identification Number on the Payroll

The Tax ID can be found on the wage tax certificate under the section "Identification number". This ensures that it is always clear who paid how much income tax.

 

 

Tax Identification Number on the Income Tax Assessment

The Tax ID is listed on the income tax assessment on the upper left corner, directly above the tax number.

Example of an Income Tax Assessment:

SuP_Steueridentifikationsnummer-Einkommensteuerbescheid

 

 

Tax Identification Number on Letters from Your Tax Office
Your Tax ID can also be found on information letters from your tax office, listed alongside your tax number.

SuP_Steueridentifikationsnummer-Informationsschreiben-Finanzamt

TAX CLASSES
(„STEUERKLASSEN“)

The tax class is often at the center of various questions. It is often not clear what the meaning of the tax class is. The income tax class (in short: tax class) determines the amount of tax deductions for employed work.
It is therefore relevant for every employee who pays taxes. The tax class regulates the income tax deduction, the solidarity surcharge and the church tax if the taxpayer belongs to a church. The monthly net salary of the employee thus depends on his tax class.
German tax law recognizes a total of six different income tax brackets, which are based in particular on the family situation (single/married) of the taxpayer. The following overview shows which tax class corresponds to which marital status:
The following overview shows which tax class belongs to which marital status.

  • Tax bracket 1: single, widowed, separated/divorced
  • Tax bracket 2: single parent living separately
  • Tax class 3: Married (higher income or sole earner)
  • Tax class 4: Married couples (both incomes are the same)
  • Tax class 5: Married (lower income)
  • Tax class 6: second and part-time job (regardless of marital status)

Choosing the wrong, disadvantageous tax class does not generally represent an irreversible problem. If you choose an unfavorable combination of tax classes, you won't pay a cent more in taxes, since the final statement will be made in the tax return after the end of the year.

In the tax return, the tax classes do not play a role in determining the amount of the tax assessed. If you choose an unfavorable tax class, you will pay too much wage tax during the year and thus forego liquidity and possible interest. You can then look forward to a tax refund next year when you submit your tax return.

The change in tax class always takes place when the marital status or income of a taxable person changes.

This occurs in the event of marriage, divorce, the death of a spouse, the birth or adoption of a child or possibly an additional income that exceeds a certain lower limit.

In principle, you can change your tax class once a year. Exceptions always exist when unforeseen events occur; for example in the case of unemployment or taking up a job, in the event of unemployment or in the event of the death of children and spouses.

If you have two employment relationships, the question arises as to how the tax brackets are to be distributed.

This is done as follows: The tax office assigns your first job to a tax class from I (1) to V (5), depending on your marital status.

For the second employment relationship, you automatically get tax class VI (6) if you earn more than the mini-job limit there - currently 520 euros per month.

Married couples have the option of choosing between the tax class combinations 3/5, 5/3, 4/4 and 4/4 with a factor.
We have presented the advantages and disadvantages of the tax class combinations for you below:

Tax class combination Advantageous if ...
4 and 4 both partners earn about the same (income should not differ by more than 10 percent)
3 and 5 a partner earns significantly more (income ratio of 40 to 60 percent or more)
4 and 4,
each with a factor		 the incomes are further apart (each partner only pays that part of the income tax that he also contributes to the joint income)

WORKING TOGEHTER

If there are no special circumstances, the work will be completed after the engagement is agreed and all relevant documents are received. In light of the COVID pandemic the filing process has been more complicated resulting in longer process times. We strive to promptly file your taxes.

If you require a rapid filing please let us now so that we can meet your request.

In order to distribute the work evenly throughout the year, we ask our clients to submit the documents from the previous year in the third and fourth quarter.

You will have a dedicated tax expert in our team dealing with your needs and requirements. At the beginning of the engagement, our team member will get in direct touch with you.

You can provide us with the documents required for preparing your tax return in a variety of ways. You are welcome to bring your documents to the office during normal opening hours (Monday to Friday between 8 a.m. and 5 p.m.).

You are also very welcome to send us the documents by post. As soon as we receive the documents, we will of course confirm this to you.

Of course, you can also provide us with the documents in digital form. Transmission by e-mail or via a secure data room is possible at any time.

Please read the bulletpoint "Note on the provision of receipts in digital format"!

Feel free to contact us if you have any questions.

You can reach us by phone, fax, email or by post.

Contact

In general fees for the filing of your tax return are deductible. However not all fees can be deducted as they must be associated with a specific income source. We are happy to advise on this in the specific case.

Basically, you should keep accounting documents, receipts, cash books and bank statements as well as annual financial statements, tax returns and tax assessments for 10 years.

We attach great importance to digitization and are receiving it with increasing frequency
Documents in digital format. Here, however, it is important that these are in PDF format
and basically one document per page. Image files or photos in Apple format
are unfortunately regularly illegible, bad or unusable and make it difficult
machining process.

We therefore ask you to send us the receipts, ideally in PDF format.

Tax checklist for download

You can download our tax checklist as a PDF here.

Do you have any questions about the tax documents?

We are happy to be there for you

If you have any questions or concerns, please do not hesitate to contact us.
We are at your disposal under the following contact details

By e-mail: einkommensteuer@schlecht-partner.de

Schlecht und Partner
Friedhofstraße 45/47
70191 Stuttgart
Tel.: +49 (0)711 40 05 40 50

Schlecht und Partner
Barer Straße 7
80333 Munich
Tel.: +49 (0)89 24 29 16 0

TOP