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Taxes – Deductibility of relocation expenses
17.11.2019
Hans-Guenter Dillenburg, Diplom-Finanzwirt, Steuerberater, Partner
Very interesting for expatriates who are working and living in or considering re-locating to Germany is the tax deductibility of work-related relocation expenses.
Relocation expenses are work-related if
- you are moving from abroad to Germany, starting a new job in Germany
- the distance between home and workplace is significantly reduced i.e. traveling time shortened by at least one hour
- the relocation is caused by working for a new employer or starting a new job
- a double household is set-up or terminated
Deductible are all removal/transport and travelling costs for the employee and his or her family. Deductible are also expenses for flights to search for a home in Germany. Additional expenses such as compensations for rental contracts, broker fees for procuring flat or home or in connection with childcare can be deducted.
In addition there are special lump-sum deductions for
- international relocation outside of the EU i.e. USA, Switzerland etc.
- international relocation within the EU
- relocation in connection with returning to Germany
The lump sum for relocation outside the EU is currently amounting to 943,38 EUR and within the EU to 853,53 EUR. These amounts will be further increased for relocating family members.
The employer may reimburse those expenses free of tax. However, if the employer does not reimburse all relocation expenses, the employee is entitled to deduct additional costs in his or her German income tax return. In this case, a single proof of the actual removal costs must be provided.
We would be happy to assist you with our professional tax advice.
Tax assessment and transmission deadline
17.06.2019
Hans-Guenter Dillenburg, Diplom-Finanzwirt, Steuerberater, Partner
The majority of the countries adopted a self-assessment regime for income taxation. US- or British citizens for example have to file their income tax return and calculate their tax burden. On this basis the income tax has to be paid.
In Germany the system is different. The taxpayer has to file an income tax return. The forms have to be transmitted electronically through a system called ELSTER (www.elster.de) to the German tax office. A tax calculation is also carried out in this system.
The due date for the transmission of your tax return is the 31st of July of the year following calendar year you are claiming for. If you decide to utilize the service of a tax adviser, the transmission period will be extended “automatically” until the end of February of the calendar year after next.
For example: For the calendar year 2018, you generally need to submit the tax return by 31st of July 2019. If you involve a tax adviser, the tax office generously gives you an extra 7 months until the 29th of February 2020 to submit your tax return.
The transmitted tax return is the basis for the tax assessment by the German tax office. The final tax amount payable / refundable is calculated by the tax office. Consequently every taxpayer receives a tax assessment note. Please be aware that this ugly looking printout on recycling paper is the most important document you receive from your tax office. Any mistake in this tax assessment note can only be challenged by a legal protest (Einspruch) within one month. If you miss the deadline you lose your legal position and possibly money. Therefore it is important to check the tax assessment note within the one month time frame.
If a German tax adviser has been involved and a power of attorney has been issued, the tax assessment will regularly go to him and will be checked immediately.
Especially in the year when you moved to Germany we highly recommend to consult a German tax adviser. This is because if you move mid-way through the calendar year your tax position become more complex due to taxable income earned abroad with relevance to your German tax return. In this respect we refer to our last newsletter.
Note: If you move to Germany in the course of a calendar year, make copies of your income earned and tax paid in your home country!
Taxes – when moving to Germany
Hans-Guenter Dillenburg, Diplom-Finanzwirt, Steuerberater, Partner
Most expatriates moving to Germany think that their foreign income is not subject to German income taxation. This is a grave misjudgement. Foreign income is either taxable in Germany or it effects the progressive German income tax rate. In both cases the income has to be declared in the German income tax return.
For example, if you move to Germany or leave Germany in the course of a calendar year, you must declare the income earned in that year abroad in the German tax return. In this case, it is important that you prove to the German tax authority that you have paid taxes on the foreign income.
If the proof of tax payments in your home country is provided, it merely increases the progressive German income tax rate. The foreign income itself remains tax-free. If the proof of tax payments in your home country can not be provided, this foreign income will be taxed by the German tax office. As a result this income will be taxed twice, in your home country and in Germany. This means a large part of your salary will be eaten up by tax payments.
