Private clients

When you have to file — and when it pays to

Employees in Germany with no other income, in Germany or abroad, may file a voluntary income tax return to recover tax overpaid. Anyone with other sources of income — rental income, self-employed income, investment income not covered by withholding tax — must file.

The German tax system is complicated, with a progressive rate and a great many deductions. That complexity is also where the room for manoeuvre sits.

How we start

• We give you an initial assessment of your tax position, free of charge and without obligation.
• We estimate whether, and roughly how much, you can expect to get back.
• You receive our proposal for preparing the return.

You are then free to decide whether to accept it.

Employees

For employees, income tax is withheld by the employer as wage tax and paid directly to the tax office. Two routes lead to a lower burden:

• An allowance in advance: you apply to the tax office for a wage tax allowance that is taken into account during the year — for commuting costs or a second household, for example.
• A return at year end: you claim your deductible costs afterwards and are refunded the difference.

Contractors and freelancers

Contractors are treated as self-employed. No wage tax is withheld from their fees; instead, quarterly prepayments are due, based on the previous year's or the expected income. Preliminary VAT returns come on top.

Where the room for manoeuvre is

• Residence status: whether you are treated as resident or as only temporarily working in Germany changes the tax base considerably. Which is better depends on the individual case.
• Family circumstances: under certain conditions marriage and children reduce the tax — even where spouse and children do not live in Germany.
• Business expenses: a great deal is deductible and regularly overlooked.

Costs that can be deducted

• Rent or hotel costs at the project location
• Travel to Germany and home again
• Meal allowances
• Phone and internet costs
• Work-related insurance
• Costs of winning the project
• Office supplies, bank charges, travel within Germany

We look after a number of contractors with projects in Germany and also advise on the questions alongside: how to open a bank account, which insurance you really need, which authorities you have to register with and which deadlines apply to you.

Refund of German pension contributions

If you are a national of a non-EU country and were only temporarily employed in Germany, you may be entitled to a refund of the employee's share of your statutory pension insurance contributions. Three points decide it:

• You were in employment subject to German social security contributions.
• Your contribution period stayed under 5 years — that is the qualifying period from which a pension entitlement arises.
• 24 months have passed since your compulsory insurance ended (§ 210 SGB VI).
• You are not a national of an EU member state, and no social security agreement rules the refund out.

What is refunded is the employee's share — half of the contribution, calculated on pay up to the contribution ceiling. Both the rate and the ceiling are reset every year; what that comes to in your case we work out when we check the claim.

The contributions were not paid by you directly: your employer withheld them from your monthly salary and passed them to the German pension insurance (Deutsche Rentenversicherung).

How the procedure runs

• We check free of charge whether you have a claim.
• You receive a questionnaire covering the details the authority needs: personal data, your German assignment, your current residence status.
• We prepare the documents, including the confirmation of citizenship or residence that the authority requires.
• We file the application and follow it up until payment, staying in contact with you and with the authority.

The advantage of a German firm: you are reclaiming German contributions from a German authority. An intermediary abroad ends up passing the case to someone like us anyway.

Inheritance and gift tax

German assets — typically property — that are given away or inherited may be subject to German inheritance or gift tax. Whether the deceased, the donor or the recipient is a German national or resident in Germany is initially irrelevant.

The personal allowances

How much can pass tax-free depends on the relationship (§ 16 ErbStG):

The allowance becomes available again after 10 years. That is where the most effective planning comes from: transferring assets in steps rather than letting the whole estate pass at once.

Where neither the deceased nor the recipient is resident in Germany, the allowance is granted only pro rata — in the ratio of the German assets to the total acquisition. Almost every plan drawn up abroad misses this.

Where structuring helps

• Use personal allowances in full — they reset every 10 years
• Transfer assets during your lifetime (anticipated succession)
• Use legal structures such as a reserved usufruct
• Value the transferred assets properly, if necessary with an independent valuation report