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Five simple steps to getting your German tax refund

It can’t be avoided – wherever you live, taxes are a certainty. However, the taxes we pay provide an enormous benefit to society, in that they provide a social safety net.

Published: 17 November 2020 08:00 CET

Five simple steps to getting your German tax refund

Photo: Getty Images

Nowhere is this more evident than in Germany, where the wealthiest can expect to pay up to 45% in 'Lohnsteuer', or income tax. Unemployment benefits, pension payments and ‘Kindergeld' (literally ‘child money') for parents are all significant benefits paid for by German taxpayers.

Filing a tax return in Germany is not compulsory (unless you fit into a few select categories). You'd be crazy not to however! With the tax-filing app Taxfix, a return typically takes under half an hour to complete – and the average person gets back more than €1,000. If you're an expat and unfamiliar with how German tax deductions work, you could easily be paying more than your fair share of tax. Here are five simple steps to help you make sure you get your return in on time – and get back all the money you're entitled to.

Could you be due a tax refund of over €1,000? Find out the fast way with Taxfix

1. Gather your paperwork – and keep it in order

Germans prize organisation and good record keeping as a virtue, and if you follow them in this respect, you'll be well-prepared for tax season. Firstly, do you know the final deadlines for filing a tax return? The last chance to file for 2016 comes on December 31st this year, as part of a four-year rolling cycle.

Using a single folder for each tax year and a hole punch will often suffice to keep your receipts and invoices in order, with dividers for different categories, such as fuel receipts, energy bills, food expenses during business trips, and software.

If you're intent on reducing your paper waste, there are a number of apps, such as Simple Scan and Microsoft Office Lens, that allow you to photograph your paperwork, turning them into readable PDF files that you can store somewhere on the cloud. This can be handy and a major timesaver at tax time, when you're hunting down figures – new technology means that figures can often be copied and pasted from these files directly.

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2. Keep up to date on what you can claim.

The federal government in Germany often updates legislation regarding what people can claim as deductions against their tax. There are always attempts to close loopholes and maintain tax revenues. Generally, your everyday, regular travel costs to work can be claimed, as can a percentage of home office costs such as internet and power bills.

Other common tax deductions for employees include business literature and work equipment. Personal deductions can be made for a variety of things, including health insurance premiums, childcare expenses up to the age of 14, and charity contributions.

Depending on what you do, professional insurance that you may have taken out can also be claimed. However, it pays to check websites such as the official federal government Make It In Germany site for updates in the lead up to tax season. If you're genuinely confused about what you can claim, any tax adviser should be able to help you for a minimal fee.

Think you could have overpaid? Find out how to get your tax refund with Taxfix

3. Get the help you need in an app (in English!)

Paradoxically, Germany's complex tax system has given rise to a number of apps, websites and services that streamline the process of lodging a tax return. Multiple popular services, including Taxfix, use a series of guided conversational questions to lodge your return, calculating your estimated return based on the answers and data that you provide.

The apps work with Elster, the German government's tax return software, to process your return speedily. While you can also file a paper return, and some prefer this method, electronic services save not only time, but a significant amount of paperwork.

Each of these electronic tax services have different strengths – Taxfix especially has been designed with the needs of expats in mind. All questions are in simple, direct English and have been drawn up to make sure you get back all the money you're due under German law. The app aims to make it simple for everyone to claim their full tax refund, even with no prior tax knowledge – so you won't be confronted with confusing jargon!

Photo: Taxfix

4. Don't rush it – time really is money

You can easily feel overwhelmed or confused by the rules of the German tax system. While the temptation may be to click through each question in an app as quickly as possible, you can save potentially hundreds of euros by reading each question carefully, and ensuring you can justify each answer with your records. Even doing so, it won't take anymore than an hour at the most – and isn't that worth a chunk of money landing in your account?

5. Avoid hidden costs with a transparent service

The amount tax accountants charge can vary wildly. With Taxfix, all costs are set and transparent. If your estimated return is under €50 and you're not obligated to make a return, submitting via Taxfix is free.

If your estimated refund is over €50 (or you're obligated to file), there's a single fee of €39.99. That's it. Furthermore, this fee can be claimed against your next return, as tax consulting fees.

Ready to find out if you're due a tax refund? Taxfix is available via their website and their app, which can be downloaded from both Google Play and the Apple App Store. Try it out today to see how much money you could get back.

COMPARED: Germany’s Chancenkarte vs. Austria's Red-White-Red card for skilled non-EU workers

The skills shortages in Germany and Austria have become recent and urgent priorities for both governments. At least 124,000 jobs need filling in Austria and the government estimates the actual need could be double that number. Germany’s Labour Ministry estimates it currently needs to recruit around 400,000 foreign workers a year – just to keep up.

As two German-speaking countries, Germany and Austria are competing for a lot of the same skilled talent. So aside from the other aspects of living in either country – which one is offering a better visa regime?

Here, it depends a lot on your situation and priorities. As an example, each country’s EU Blue Card scheme works a little bit differently. Germany’s generally requires a higher minimum salary than Austria’s. But Germany’s also makes getting permanent residence later a little bit easier – so potential applicants have to consider some trade-offs.

The new German Chancenkarte, or ‘opportunity card’ – how it’s set to make looking for work in Germany easier

For those who aren’t necessarily eligible for an EU Blue Card in Germany or Austria, other types of work or jobseeker visas exist.

Foreign specialists looking for a job in Germany typically need a job offer related to their professional qualification, and the German employment agency must approve the job offer. Applicants older than 45 must also have an annual salary of at least €46,530 (2023 values) – if they are coming to Germany for the first time. Even this minimum salary is lower than the threshold needed for an EU Blue Card in Germany.

But what if you don’t have a formal job offer?

The current traffic light government of the Social Democrats (SPD), Greens, and liberal Free Democrats (FDP) wants skilled people to also be able to come to Germany to look for work. The Chancenkarte – set to pass the Bundestag in the next few months – is designed to help non-EU nationals do this on a points basis.

German Bundestag

The German Bundestag is set to pass the new “opportunity card” or Chancenkarte – in the next few months, allowing some skilled workers to come to Germany to look for work even without a job offer. Photo: Felix Mittermeier/Pixabay

To be eligible for it, applicants have to broadly fulfill three out of these four conditions – meaning that applicants could still be considered for the Chancenkarte if they don’t have a formal job offer and are still missing one of these:

A university degree or professional qualification
Professional experience of at least three years
German language skills or previous residence in Germany (higher language skills give more points)
Under 35 years-old

The Chancenkarte thus differs from the current jobseeker visa, which lets people come to Germany to look for work if they have:

a qualification recognised in Germany and a practice permit for a regulated profession
proof a German language skills (typically to B1 level)
proof of ability to pay living costs

Designed to be more flexible, in the right circumstances, a future Chancenkarte holder could end up including a young person who has no university degree but both language skills and work experience. The German employer may be able to then hire this person, if they can work out a plan that allows the employee to upgrade their qualifications accordingly for the German job market.

Other future Chancenkarte holders might also include someone who doesn’t yet speak German but who is young with both a university degree and job experience, or a recent graduate with no experience but has appropriate language skills.

The government is looking to give Chancenkarte holders the ability to look for a job in Germany for one year. That’s longer than the current jobseeker visa’s six-month term. Holders are also allowed to engage in part-time or trial employment, allowing the employer to get to know the potential employee before hiring them on full-time.

Austria’s “Red-White-Red” card – the advantages for certain professions

Because Germany’s Chancenkarte is still in the draft law phase – even if expected to be approved soon – we know a lot more about the specifics of Austria’s Red-White-Red card.

Firstly, Germany’s Chancenkarte is designed for flexibility and is intended to allow potential skilled workers to come to the country even if they don’t have a job offer. By contrast, most applicants for an Austrian Red-White-Red card must have a job offer. Austria’s Red-White-Red card is also more specifically targeted, maintaining different points schemes for different types of skilled workers.

Furthermore, Austria’s point system for the Red-White-Red card gives additional advantages to graduates in STEM subjects like math, engineering, natural sciences or technology – if they are applying under the “Very Highly Qualified Workers” scheme of the Red-White-Red card.

At the same time, a Red-White-Red applicant in a “shortage occupation,” may find it slightly easier than other applicants to get enough points to qualify for a Red-White-Red card. Shortage occupations include many types of experts who will have had a high level of academic advanced education – like engineers or physicians. But many shortage occupations in Austria also include skilled workers with vocational training, such as roofers, masseuses, bakers, and carpenters. Some shortage occupations are Austria-wide, while others are region-specific. You can find the full list at the available links.

Most non-EU applicants for Austria’s points-based Red-White-Red card will need to secure a job offer before getting the card, unlike with Germany’s planned Chancenkarte. Photo by Tima Miroshnichenko from Pexels

Certain “Other Key Workers” may also be able to apply for a Red-White-Red card, provided they have enough points, no equally qualified registered jobseeker at the Public Employment Service can be placed, and they are paid a minimum monthly salary of €2,925. Certain seasonal workers can also apply if they’ve worked for at least seven months of the last two years in that occupation and have at least A2 level German. These people also need job offers.

The only potential Red-White-Red applicants who don’t need job offers are self-employed key workers and start-up founders. Both of these applicants though, need to prove a minimum level of capital, amongst other requirements.

Successful applicants for a Red-White-Red card may then work in Austria for up to two years, at which point they may apply to extend their work permission through a Red-White-Red Plus card, which gives the holder unlimited access to the Austrian labour market that isn’t bound to any specific employer.

German – and English – language skills: How the Chancenkarte and Red-White-Red value languages

The other big difference between the German Chancenkarte and the Austrian Red-White-Red revolves around the points awarded for German or English skills.

In general, Austria’s Red-White-Red tends to require a lower level of German language skills in order to achieve points in an applicant’s favour. For example, applicants in shortage occupations will get five points for the most basic level of German – A1. That increases to 10 points for A2 and 15 points for B1 – to a maximum possible 15 points from German language skills.

By contrast, the current draft plans for the German Chancenkarte would require an applicant to have C1 German – the second-highest possible level – to get maximum points under language skills. Even B2 German – an upper intermediate level where speakers can begin to make advanced arguments – only yields a Chancenkarte hopeful partial points.

A German for Dummies language book sits atop a desk next to a pen and a cup of coffee. Photo by Jan Antonin Kolar on Unsplash

Getting points for language skills is generally easier under Austria’s Red-White-Red card system than Germany’s proposed Chancenkarte. Photo by Jan Antonin Kolar on Unsplash

Furthermore, Austria places English language skills on a mostly equal footing with German language skills – with basic A1 English being enough to get some workers partial points under the Austrian Red-White-Red scheme. A skilled worker looking to apply under Red-White-Red who can speak both English and German at a B1 level would already achieve the maximum number of points an applicant can get from languages under the Austrian Red-White-Red system.

By comparison, the German government has not announced plans to give out points under the Chancenkarte system specifically for English language skills, even if some applicants will be able to get enough points to get one even without speaking German at a high level. We should stress though, that the German Chancenkarte legislation is still in the draft phase and could change in some ways before it’s passed.

Flexibility and language trade-offs

The German Chancenkarte may ultimately end up being a more flexible option for skilled workers who want to come to Germany first before they commit to any one particular employer. It may also end up being more favourable for people who don’t come from the shortage professions that Austria is specifically targeting, for example. By contrast, getting a Red-White-Red card in Austria almost always requires a specific job offer.

Yet some applicants who snag a job offer may find it easier to qualify for Austria’s Red-White-Red card if they have a lower level of German language skills – particularly if they can speak English – which Austria’s points system values in a way that Germany isn’t considering.

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