The tax terms that every expat in Germany needs to know

Tax time is confusing, and it can be even more confusing in Germany, when you have to deal with a foreign language and a bewilderingly complex tax system.

Redhead woman using computer laptop at home stressed with hand on head, shocked with shame and surprise face, angry and frustrated. Fear and upset for mistake.
Redhead woman using computer laptop at home stressed with hand on head, shocked with shame and surprise face, angry and frustrated. Fear and upset for mistake.

The Local sat down with tax expert Daniel Niessing from Taxfix to demystify and define some of the most common terms expats may come across when doing their taxes in a glossary.

‘Even many Germans can’t understand how the German tax system works – but you shouldn’t be afraid of it. If you make an honest mistake, tax authorities are more than willing to work with you’, he told us, continuing “Getting an understanding of the basics, and some of the most common terminology, can get you a long way there.”

Your pay before tax is taken.

Germany’s tax return lodging portal. Often described as confusing even by Germans, as there’s very little guidance on what you may need. Taxfix circumvents this by asking tailored questions to make sure you can lodge your tax return and receive every euro you may be entitled to under the law.

Your local ‘finance office’. This is your local authority that deals with all matters in relation to finance, and who is responsible for taxation in your area. These are the only taxation authorities that any individual in Germany is likely to deal with.

Take the confusion out of lodging your German tax return by using Taxfix – available on the web, iOS and Android apps. 

Home Office Pauschale
The ‘home office lump sum’, was passed by the government last year in response to the coronavirus pandemic. It means that you can claim €5 a day for setting up a new home office in your home, to a maximum of €600. If you already had a room exclusively dedicated to work, you can’t deduct this expense, but there are other deductions you can make.

Literally, ‘short work’. This program, introduced during the Weimar Republic to keep people in work, reduces working hours for workers, while still maintaining a regular salary that is supplemented by the government. If you were, or are placed on ‘kurzarbeit’ during the pandemic, you need to do a tax return.

A document sent to you by your employer each year that tells you how much tax you’ve paid. If you change employers in the course of a year, you’ll receive more than one. You’ll need each of these when lodging your return.

Taxes got you stumped? Get 15 percent off your tax return withTaxfix before July 31st with the code TX_TheLocal15

Your pay after tax is taken.

This means ‘proviso safeguarding provision’ – not that it makes much more sense in English. What it means is that if you are placed on ‘kurzarbeit’, or you access social benefits, this non-taxable income is treated as taxable for working out your ‘steuersatz’ (see below). Most of the time, this is nothing to worry about, and you might even get a refund because of it. Sometimes, however, if your income increases, you may end up having to pay more tax.

The German term for a tax return.

Much like the British National insurance Number, or the American Social Security Number, this individually-assigned number is meant to be used across a range of government services. However, with the slow process of digitization in Germany, there is still a way to go with achieving this. You will need this number when you lodge your return.

This number is assigned to you by your local ‘finanzamt’ (see above) and is used in all your dealings with them. These numbers can often change however, for many more reasons than we can list here. Just make sure you have your most up to date ‘steuernummer’ handy when lodging your return.

This is the applicable tax rate for a worker. Depending on how much you’re earning, it can be anywhere from 15 to 45 percent of your earnings.

The German term for ‘professional costs’, that can be deducted when lodging a tax return. German tax law defines these costs as expenses accrued in getting, keeping or progressing in a job. One thousand euros are applied automatically, Deductions can also be made for those moving to Germany. This is €860 for every adult, and €573 for every subsequent dependent.

A lot to take in? We think so. However, there is an easy solution for those dreading doing their taxes. Using Taxfix can save expats time, and offers a flat rate for lodging a German tax return. For a return of under €50 euros, it is free, and €39,99 otherwise.

Take control of your taxes and  starting using Taxfix today – recieve 15 percent off your return using the code TX_TheLocal15

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What freelancers in Norway need to know about tax

If you’re ready to venture out on your own as a freelancer, then it is essential to brush up on the tax rules and regulations in Norway.

People going over their taxes and finances.
Here's what freelancers in Norway need to know about taxes. Pictured are people going over their finances. Photo by Scott Graham on Unsplash

Are freelancing and being self-employed the same thing?

According to the Norwegian website for government dialogue, Altinn, “A freelancer receives payment for individual assignments without being a permanent or temporary employee of the organisation he or she is carrying out work for, but does not need to be self-employed.”

This is helpful to clarify. Because when you decide to work for yourself in Norway, you can do this in a matter of two ways. The two most common methods to register your freelance work or self-employed business is as an enkeltpersonforetak, or as an AS, which is an acronym for aksjeselskap. 

In English, an enkeltpersonforetak means “sole proprietorship”. And an aksjeselskap means “Private Limited Company”. 

Both enkeltpersonforetak and AS come with their own set of positives and negatives. Technically, you are NOT considered a freelancer if you have set up an AS. 

If you have set up an AS, then you are considered an employee of your own company. 

The two may often be compared to one another. But in the eyes of tax law and the rules that apply to your freelance work, they are very different. If you are setting up an AS, it is highly recommended that you hire an accountant as the tax rules are intricate and very specific to what type of business you run.

If you are a freelancer working as an enkeltpersonforetak 

For a sole proprietorship, you need to pay advance tax quarterly – or four times a year in Norway. This is done by the freelancer calculating how much profit they expect their work to earn within the taxing quarter. 

It may be difficult to predict, which is why you shouldn’t worry if you make more or less than your original registered claim.

For example: Let’s say freelancer Petter registered with skatteetaten, the Norwegian Tax Administration, that he would make 50,000 kroner in the first quarter of the year. Suddenly, Petter unexpectedly gets five new clients and happily makes double, earning 100,000 in the first quarter instead, all Petter has to do is log into his skatteetaten account and adjust his original tax claim so the amount he pays in taxes will be accurate. 

The Norwegian Tax Administration determines how much tax is to be paid based on the expected profit. 

In addition to quarterly registers, freelancers are responsible for sending invoices, keeping track of their accounts, and creating their own pension scheme. They are also responsible for the value-added services, or VAT.

What is VAT?

This is where it can get a little confusing with the terms. The Norwegian VAT officially uses the acronym MVA, for merverdiavgift. And if that wasn’t confusing enough, Norwegians have developed a slang word for this type of tax called moms

So, VAT = MVA = merverdiavgift = moms. All four terms refer to the same type of tax.

For freelancers that have earned more than 50,000 kroner over the course of a year, they need to register their VAT, which is the sales tax on goods and services.  

Again, this is when you should double-check to see if your line of work can be VAT exempt. Specific industries, such as education and arts and culture, are exempt from registering their VAT. This is because they don’t have to pay VAT. But most importantly, they are not allowed to charge their clients VAT for their services or goods.

However, freelancers who work in VAT exempt industries can electively register their VAT so they can both charge VAT and receive VAT deductibles. 

The VAT tax rate has held steady at approximately 25 percent over the past decade. When you have registered the tax on your goods and services, it is possible to request a VAT refund on purchases made up to three years back in time.

This is, again, a really good time to know what you can deduct or get back with VAT. 

For example: Let’s say Anna works as a freelance PR agent and takes a potential new client out for a “working lunch”. Unfortunately, she cannot register the lunch receipt as a work-related deductible as it is not allowed to apply for a VAT deductible on foods. 

However, let’s say Anna bought a printer that was necessary for her PR services. She could apply for a 25 percent VAT deduction on the printer’s costs as it is deemed necessary work equipment.

To register VAT for your goods and services, look here

Programmes and accountants can help with this.

Accounting programmes and actual accountants can help ensure you are managing the administration side of your business correctly. And even if you have both of these helpful options, you should still give yourself enough time each week, or month, to keep your accounts up to date if you are a freelancer. 

Managing your own accounts and taxes can be overwhelming. Luckily, there are some different options available.

Having an overview of your accounts with an accounting programme is cheaper than hiring an accountant and a great way to keep a 24/7 overview of your business.

If you are intimidated by the math side of things, or worse, making an honest tax mistake that is still illegal, don’t worry. The newest programmes have a reputation of being easy to learn and user friendly. 

Here is a list of the top accounting programmes recommended for small businesses in Norway. 

Remember, Google Docs and Word are not an option for creating your own invoices, as all invoices must be auto-numbered. 

There is peace of mind in letting a professional handle your accounts, but you will have to pay for it. The average price for an accountant in Norway is around 500 kroner per hour plus VAT (value-added tax). 

If you choose to hire an accountant to manage your firm’s books, here is a list of what the average accounting services can cost you. 

If you’re still unsure

Learning your adopted country’s tax laws is both time-consuming and filled with small intricacies and loopholes. If ever you come across a new billing or taxing situation you’re not completely sure about. You can reach out to the Norwegian Tax Authority for more clarity.