How to file your German tax return

Posting of workers to work in the European Union is a topic that is attracting more and more interest both among Poles looking for work abroad and foreign entrepreneurs. As the latest report of the European Commission shows, in 2015 Poland posted as many as 463,174 employees to work abroad. Invariably, for several years we have been the leader in the European Union in terms of the volume of posting. On the other hand, the country that accepted the largest number of employees in 2015, i.e. 418,908 people, was Germany. It is assumed that among all countries in the world, our western neighbors have the most complicated procedure for preparing tax returns. This is due to the complexity of some legal acts and declarations. The CPC Consulting expert explains the rules for preparing tax returns for people who have worked in Germany.

Rules for settling taxes in Germany

Both the companies posting workers and the workers themselves are obliged to comply with the employment regulations in force in the host country, i.e. the country where the person is to work. An employee employed by a Polish employment agency who goes to work abroad must know that from the first day of work, the agency is obliged to tax his remuneration in the host country. In the case of Germany, tax contributions are deducted from the employee’s salary to the German tax office, i.e. the Finanzamt. If the contract, and thus the length of the work performed, exceeds 183 days, the employee is obliged to settle the tax in Germany.

The tax return should be submitted to the tax office in Germany by 31 May of each subsequent year following the tax year at the latest. According to the German Tax Ordinance, a person permanently registered in Poland must indicate his tax representative in Germany, who will not only prepare a tax return for the taxpayer, but will also be responsible to the tax office for its quality. A tax representative can be a natural person with permanent residence in Germany. It can be a friend or family member who, on the basis of an authorization, will make a tax settlement for the taxpayer. It is worth noting that the tax representative must know the accounting rules in force in Germany, which are quite complicated. For this reason, people who have worked in Germany often prefer to entrust the settlement to certified accounting or tax offices, which can also be a tax representative. The tax office, acting on the basis of an authorization, is responsible for completing the necessary documents, settling the tax as well as correspondence with the tax office. There are also many tax offices in Poland that specialize in tax settlements in Germany and in conducting full correspondence with the German tax office. Before starting cooperation with a tax office, it is worth making sure that it is a certified office, with authorizations, knowledge and experience in preparing tax returns in Germany.

CPC Consulting informs employees on an ongoing basis, whom it delegates to work in Germany, about the obligations that they should fulfill in connection with the performance of work in Germany. This also applies to the obligation to settle taxes. We are always at the employee’s disposal if they ask us for support in finding a reliable tax office, both in Polish and in Germany – says Agnieszka Nocuń, Key Account Manager at CPC Consulting.

If the employee has not yet settled the tax paid in Germany, he has up to 4 years to do so. This means that if you worked in Germany in 2015 and in 2017 you remembered that you had not yet filed your tax return, you can still do so because less than 4 years have passed. Failure to submit the tax return on time is associated with the need to pay high financial penalties imposed by the German tax office on the taxpayer. Failure to pay them, on the other hand, may prevent the employee from performing further work in Germany.

How to settle correctly?

The basis for making a proper settlement is to obtain two documents from the employer, i.e. in this case the employment agency. The first is the Lohnsteuerbescheinigung, which summarizes the period of employment of the employee, the amount of gross remuneration and the amount of taxes paid. The second document is a certificate of the amount of social security contributions paid. It should also be remembered that immediately after arriving in Germany, the employee should register at the appropriate City Hall/Municipal Office. In this way, the Finanzamt records the date from which the employee in question stays and works in Germany. It also gives it an individual tax number, i.e. Identifikationsnummer, necessary for later settlement with the tax office. Regardless of whether a given employee has already been assigned an Identifikationsnummer, whenever he changes his place of residence, he is obliged to register again at the Town or Commune Office appropriate for his place of accommodation and deregister from the previous place.

Any employment agency that is aware of the rights and obligations related to living and working in Germany should also support employees in matters for which they are not directly responsible. CPC Consulting informs employees about the documents they will receive as part of the summary of their employment in a given tax year, necessary for later tax settlement in Germany – comments Agnieszka Nocuń from CPC Consulting.

What can be deducted from tax?

Proper documentation of the tax return consists of a number of statements by the employee regarding his or her individual professional, family, tax or religious situation. Examples of statements may concern the taxpayer’s family status, costs of travel to the place of work, costs of accommodation, income earned in the settled tax year, costs of work clothes, bank account, residence in Germany or change of place of employment. The taxpayer himself or a tax representative appointed by him is responsible for completing the statements concerning the individual situation of the taxpayer. In order to obtain a tax refund, the employee should take care of certain documents during the employment and stay in Germany. Therefore, he should remember to collect receipts confirming running two households, in Poland and in Germany. These can be bills for commuting to work, car repairs, phone calls or renting a room or apartment. In the tax return in Germany, you can also include the costs of travel to the family, e.g. a ticket to Polish or the cost of fuel calculated on the basis of the number of kilometers traveled.

Tax settlement in Germany and the obligation to file a tax return in Poland

Under the double tax treaty between Poland and Germany, work performed in Germany is not subject to the obligation to file a tax return in Poland. It is also not necessary to report income from work abroad in the return if the employee did not earn any other taxable income in Poland in a given year. If the employee generated income during the year, both from work in Polish and Germany, he is obliged to settle the tax in Polish. In this return, the employee settles the income earned in Poland, and the income obtained from work abroad is only indicated.

Timely settlement with the tax office in Germany may be a more complicated task for the employee than settling the tax in Poland. All the more so, even before starting work in Germany, it is worth considering employment in a professional employment agency. Thanks to its support, throughout the entire period of employment, the employee will be kept informed about the most important issues, including those related to tax settlement in Germany.