Webinar notes
Notes from the Webinar on August 25th
Disclaimer: These notes were taken, interpreted, and written by Taxsense and should not be taken as the speaker's exact words. Furthermore, many topics that Anja discussed could be found somewhere on our website. However, the Q&A section was exciting and can be found below.
Anja mentioned that there are different types of income in Germany, including profit income, surplus income, capital investment, rents and royalties, and other income. However, she focused on "employed work" as one of the categories of income and mentioned that most foreign students working in Germany might have particular regulations regarding the number of hours they can work per week. These regulations are likely related to civil rights and might involve limitations, such as a maximum of 20 hours of work per week.
The main idea conveyed is that if someone works in Germany and earns income above a certain threshold (9200 euros as of 2022), they are likely to be subject to taxation, similar to other residents in Germany.
Anja touched on topics such as:
Filing a Tax Return and Requirements: She talked about whether individuals are required to file a tax return and discussed the conditions under which it would be advisable to do so. She emphasized the importance of correctly assessing whether one has actually paid income tax or if the deductions were related to social contributions. More info can be found under the tax structure section.
Mini Jobs: The concept of a "mini job" was explained as a type of employment where individuals earn up to 520 euros. She noted that taxes for mini jobs are typically around 2%, covered by the employer, along with social contributions of around 30%. There are limitations on having multiple mini jobs without exceeding the monthly earning limit.
Tax Classes: She delved into the different tax classes in Germany, which are historically tied to marital status. Tax classes one and two were mentioned, as well as the benefit for single parents in tax class two. She highlighted that tax class three is often combined with tax class five for couples, which might lead to differing tax liabilities and might require a mandatory tax declaration. Tax class six is for individuals with a second job, which might involve higher taxation. However, Anja advised that married couples should aim for tax class four. (More about tax classes under the Tax Structure tab.)
Tax ID (Steueridentifikationsnummer): The tax ID is a unique number assigned to individuals that remains constant throughout their life. It consists of 11 numbers and is used as an identification for tax purposes. When individuals come to Germany or reside there, they are issued a tax ID, known as "Steuer ID." This number is crucial for various administrative purposes and serves as a link to personal information such as residence certification and birth records. The tax ID is often used for interactions with the revenue office, including proof of attorney and tax declarations. Anja emphasized that the tax ID is as important as a birth certificate.
Tax Number: The tax number is also a unique identifier issued by the revenue office. It has a different format from the tax ID. The tax number provides specific information, such as which revenue office an individual is associated with and whether they are employed or self-employed. The middle numbers in the tax number indicate employment status. The last four digits might identify the specific area or clerk within the revenue office responsible for an individual's case. The tax number is used for internal administrative purposes, such as routing cases to the appropriate personnel for handling.
Filing the Tax Return: Individuals have the option to do their own tax return using online apps or tools like Elster, the electronic tax declaration system. It's essential to ensure accurate input in the tax return to avoid discrepancies later. The tax office may point out errors that could lead to underpayment of taxes but may not correct errors that result in overpayment.
Employee Benefits: Certain employee benefits are tax-free, which can significantly affect net income. Non-cash benefits, such as company cars, are subject to taxation for private use.
Tax Deductions
Income-Related Expenses (Werbungskosten):
These are professional expenses that can be deducted from your income for tax purposes.
Examples of income-related expenses include:
Commuting costs by car or public transport.
Job application costs.
Costs for business trips (excluding amounts reimbursed by the employer).
Expenses for further education, studies, or apprenticeships not paid by the employer.
Work equipment, such as computers, laptops, and office supplies.
Professional insurances like liability insurance.
Costs related to a second study or apprenticeship.
Extraordinary Expenses (Außergewöhnliche Belastungen):
Extraordinary expenses are private costs that are not normally deductible but can be under certain circumstances.
Examples of extraordinary expenses include:
High medical expenses not covered by health insurance.
Nursing costs.
Disability-related expenses for assessments and accommodations.
Funeral expenses if no inheritance is received.
Alimony costs for a disabled child or relative.
Special Expenses (Sonderausgaben):
Special expenses can be divided into provident expenses and other special expenses.
Provident expenses include contributions to pension and health insurance.
Other special expenses encompass various categories such as:
Contributions to health insurance beyond the mandatory amount.
Additional health insurance (e.g., dental or hospital insurance).
Pension insurance contributions.
Contributions to long-term care insurance.
Expenses for a second pension insurance.
Donations to charitable organizations.
Costs related to care and education (e.g., private school fees).
Contributions to church or religious organizations.
Q&A
Q: I heard once you file a tax return you always have to do it. Is it correct?
A: No, that's not correct, because if you file a tax return. The revenue office will probably send you a reminder message. This time you don't have to file. Especially if you're not mandatory to do one, you can just tell them you don't want to, because it's like when you pay payroll taxes. And it's only if you have a certain combination of tax classes, or for example you had a period where you were ill and you received sick-leave-pay, then it's mandatory to file. But normally you can tell them no this year I don't want to.
Q: If I'm getting a salary without an employment contract for my master thesis will that be taxed?
A: It depends on how much it will be. If you have like a lump sum of around 9200 euro a year, where there are no taxes at all so in the end you won’t be taxed because the salary is low.
Q: If I file a tax return, can it be corrected next year with more information on deductions I hadn't before?
A: If you file a tax return. And the revenue office sends you an assessment you have a month to correct it. There is possibility that an assessment can be kept open. But you have to have a valid reason, and request that the revenue office to keep the assessment open. That's important. You have to do that within the 30 days. And the deductions can only apply during the year the year filed. So if you are filing for 2022, the deductions have to be in the year 2022. If you have them in the year 2023, they automatically belong to 2023 so you have to put that into your next tax return.
Q: When you are married, why is class 4 better than 3&5? And if Steuererklärung is mandatory when you decide for 3&5 doesn’t the partner with class 5 have a good chance to get paid back?
A: That's a good question actually. Class four is in my opinion better from a psychological point of view, because you are entitled to this spouse splitting when you are married in Germany, and that means that the whole income of men and of husband and wife is taken together, and divided by 50% and then it's taxed. Yeah, it's a family income that has a historical thing behind it. And the problem is when you have three and five in this combination that it was supposed to be like three was the one who had the higher income and five was the one who has the little income, so that the higher income is taxed less so that the family has more income during the year.
With four, most of the time people are taxed by the amount they earn. In my opinion it's when you are in a job and earn something like 2000. You are taxed nearly 1000 euro, and you just receive 1000 euro as your net income. It's sometimes hard to understand why you have to work so much. When you get so less income whereas the other person is taxed so little. So this is why, in my opinion, when your payment is nearly identical it's always better to have four, because when you put in the tax declaration then you receive a lot of money back.
So Yeah, and it's absolutely fine, but this is a decision you'll have to take for yourself.
Q: I did Airbnb to afford accommodation in Munich, how should I tax that in my 2020 text report. So Airbnb is just accommodation. And if you.
A: If you did Airbnb as a way you live in, because you couldn't afford accommodation, that would be accommodation costs and you can put that into your text declaration as accommodation.
Q: Can we "save" the semester fees of a master degree (while which we haven't worked) for the future when we start working.
A: Yes, you can do that and that is also something which was a big topic for a long time. And that is that you can do a text declaration without income so that you create a kind of negative income. But the problem with that is, it has to be a second study or you did an apprenticeship before your first study. It's called a special expense and the amount that you’re entitled to is just 6000 a year. And you can do that up to a certain amount I think for seven years, and then when you when you do your first job, it's going to be put together so you have this amount, and then you have the, the actual income in the first year and then this amount you saved for the last years is deducted like every year, unless it's done.
(A Master degree is considered a second degree)
Q: As a master's student can I claim back a portion of my German language course costs via tax deduction.
A: I would say yes, because you need to have the language, and that is in my opinion an expense you can deduct.
Q: In which case you have to pay more taxes than already kept?
A: Most of the time in cases that when you have this three to five combination, and the person that in class three the a has low tax deduction or the the amount he receives is too high and that is something you'll have to figure out that is really difficult to say. In general, that is always a case study, honestly, and that's the problem in the tax law.
Q: So it’s not mandatory to submit one if you’re over the freibetrag? It depends on the income expenses only?
A: No, it's not mandatory to do when you over the freibetrag. It's mandatory when you have income expenses, or when you have, for example, and sick leave pay or something like or you have tax class five.
Q: Is the 200 Euro energy relief that students received considered as a taxable income ?
A: Yes, the 200-euro energy relief is a taxable income, unfortunately.
Q: Where can we find the tax formula and/or the tables that shows tax dues for income (not the tax calculators)?
A:Yeah, well I have the formulas in my computer but I think when you go to the financial ministry or when you go to the finance and they have sections where you can download the formula, or when you go in the apps the formulas are all in there. And show tax dues for income here. You find all these formulas at the revenue office or on the homepages for your revenue office and they have sections there where you can find all the forms.
There were many questions about Mini-jobs, so the answers were consolidated below:
Mini-jobs
"Mini-jobs" should not be taxed!
A mini job shouldn't actually be in tax classes. The mini job should be just tax-free because the employer pays the taxes. And if you have one in tax class one and one in text class three depends on how much you earned. So, if you are underneath the 520 euro limit, then it shouldn't be taxed at all. But if you have two 520-euro mini-jobs, one is going to be turned into a normal job and then it's going to be taxed. But the question is still how much did you earn the whole year because you always look at it as an annual figure, and as I said before it is tax-free if it is below 9200 euro (I think in 2022).
There is a difference between a mini job and a job in class six. So class six is a second normal job, a mini job is always a special job. When you apply for a mini job, the employer will make a special contract with you, because it's all about lump sums and a lump sum of 2% for the revenue office.
Example: there is one job for 2000 and the other one for 1000 but with another employer. There is only the chance to go into that job with a second tax class, which is tax class six, and even if you had a third or fourth job, it will always be tax class six. So, if you work in a normal job where you have a tax class in and your second job is not a mini job, the next jobs will always have tax class six and will get a higher tax.