Tax terms in Germany

Tax terms are often confusing. They can be more confusing, especially in Germany. The reason for this is that most immigrants in Germany have to deal with problems related to a foreign language on the one hand and a complicated tax system on the other hand. In this article from Wise Business Group, we will define some of the most common tax terms that any expat may encounter when paying their taxes in Germany.

Tax terms that every immigrant in Germany should know!

Even many Germans do not clearly understand how the German tax system works. However, this should not be a cause for concern. If you make mistakes in paying taxes in Germany and the tax authorities realize this mistake was unintentional, they will cooperate with you. However, it can help you in this direction if you correctly understand the basic principles and some typical tax terms.

Ordinary tax terms in Germany

Brutto 

Your gross salary. The salary before tax deduction in Germany.

Elster

It is a German portal for submitting, maintaining, and filing tax returns. This portal is often confusing for Germans, as it has little guidance on the topics you might need.

Our tax advisors at Wise Business Group will help you complete your tax return without any ambiguity and claim every Euro that is legally yours.

Finanzamt

Your local tax office. Local authorities can handle all financial matters. They are also responsible for levying taxes in your area. In all likelihood, everyone in Germany will somehow come across these tax authorities.

Home Office Pauschale

Lump sum amount for the home office. Paying this amount was approved by the German government in 2019 in response to the spread of the Corona pandemic.

Thus, you can claim 5 euros per day and up to 600 euros to set up your home office in Germany. You can no longer deduct these expenses if you already have a private room for your work. However, there are other deductions you can make.

Kurzarbeit

Literally, “short-term work.” The program was first introduced in the Weimar Republic to keep people at work. It reduces workers’ working hours without changing their monthly salaries, which the government supplements.

Lohnbescheinigung

“Certificate of salaries and wages”. It is a document the employer sends you annually and informs you of the tax amount you have paid. 

If you change your employer during the year, you will receive more than one DOCUMENT. Don’t forget that you will need all these documents when submitting your tax return in Germany.

Netto

Your net salary. In other words, your salary after tax deductions in Germany.

The most common tax terms in Germany

Progressionsvorbehalt

“Progressive tax”. It is what the Conditional Protection Act means. It means that if you have access to social benefits or are subject to short-term work, your income, which was not taxed before, will be considered taxable and have a specific tax rate.

In most cases, there is nothing to worry about. You may even receive a refund instead of the tax you paid. However, sometimes, if your income increases, you may need to pay more tax.

Steuererklärung

German term for the tax declaration.

Steueridentifikationsnummer

“Tax Identification Number”. This number is the same as the British National Insurance Number or the American Social Security Number assigned to each person individually and intended to be used in a wide range of government services. However, due to the slow digitization process in Germany, this goal has not yet been fully realized. You will need this number when you file your tax return in Germany.

Steuernummer

“Tax number”. It is assigned to you by the local tax office, and you should use it in all your transactions in Germany. The figures in your German tax number can change for many reasons. However, we will not mention the cases that change the tax number here. Suffice it to say that you should bring your most up-to-date “tax number” when filing your tax return in Germany.

Steuersatz

It is the “tax rate” applicable to a worker in Germany. The tax rate in Germany can vary from 15 to 45 percent, depending on your income.

Werbungskosten

A German term for “professional expenses”. They are deductible when filing a tax return. German tax law defines these expenses as expenses incurred to obtain, maintain, or advance in a job. A thousand euros is automatically deducted for each person. These expenses are also deductible for people who immigrate to Germany. The corresponding amount is 860 euros for each adult and 573 euros for each other dependent.

Understanding the tax terms to submit a tax return in Germany

As you can see, when submitting a tax return in Germany, you should pay attention to various things. However, we recommend seeking help from a specialist or tax adviser, especially for those afraid of doing their tax affairs in Germany. Thus, you can submit your tax return with the minimum errors to the tax office and save time. In addition, a tax advisor in Germany can help you minimize your tax costs. Our advisors at Wise Business Group can also help you in this regard.

An overview of the usual tax terms and the tax system in Germany

Tax terms are often difficult to understand. Since the German tax system is very complex, it becomes more difficult to understand these terms, especially for expats. Therefore, to avoid possible mistakes when paying taxes in Germany, you should familiarize yourself with some of the most common terms. The most important are:

• Tax Office: Finanzamt
• Gross salary: Brutto
• Net salary: Netto
• Salary certificate: Wohnbescheinigung
• Tax declaration: Steuererklärung
• Tax identification number: Steueridentificationsnummer
• Tax number: Steuernummer
• Tax rate: Steuersatz

If you are not thoroughly familiar with German tax terms and laws, we recommend seeking help from a tax advisor to fill out your tax return.

Wise Business Group tax consulting services

If you are having trouble completing your tax return or the German tax laws are causing you confusion, you can contact our tax advisors and ask them your questions. In addition, we will introduce you to different ways to reduce tax costs in Germany. For more information, you can contact us via email or WhatsApp.

You can also fill out the following form and send it to us to hold an online counseling session.