Are services in the private household tax-deductible?
Income tax is paid by employees on a monthly basis at the source through a withholding mechanism.
Self employed individuals need to make a projection of their income for the tax year. Based on this projected figure, the tax office will work out a preliminary tax bill. This tax bill is then paid in four quarterly installments throughout the year. The payment dates are fixed (10th March, 10th June, 10th September and 10th December). The income projections are typically not accurate and therefore the year end tax return will show the real figures and will produce the final tax bill. If you have overpaid during the year, the balance is refunded to you.
If you have other sources of income outside of a regular salary (business, investments, capital gains, rental, etc.) the same concept of advance payments applies.
We recommend that you set up a direct debit with the tax office, so that your tax payments can be paid automatically. This is totally reliable, you will be informed upfront about dates and amounts, and you will only need to make sure that sufficient funds are in your account. A late payment of 1 day or more incurs penalties and this can easily be avoided by the direct debit.
It can happen for various reasons that you have underpaid your taxes throughout the year and end up paying extra as a result of filing your year end tax return. After you have submitted your annual tax return, the tax office will always get back to you in writing (Bescheid) to confirm your submission and work out your final tax payment. From the date of such a tax statement you have one month to pay the outstanding amount. The only form of payment accepted, is an electronic bank transfer directly to the tax office or a direct debit mandate. All tax statements show the relevant banking details for national and international (IBAN and SWIFT code) bank transfers at the bottom of page one.
Contact us to find out how we can prepare an optimized German tax return for you as an expat.
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