The tax year is the calendar year.
Married couples file joint returns unless they are legally separated or one spouse requests otherwise. Annual returns must be filed by 31 July of the year following the tax year. The filing deadline expires on 28 (29) February of the second year following the tax year if the income tax return is prepared by a certified tax adviser. The filing deadline for 2021 income tax returns was extended until 31 August 2023 for those taxpayers assisted by a professional tax adviser.
There is no self-assessment. The tax office issues a final assessment notice after having reviewed the income tax return.
A non-resident taxpayer will have to file a return and receive an assessment only if the German income is not subject to wage tax withholding. Where income is subject to wage tax withholding, the income tax liability is normally settled through the withholding system and no returns or assessments are required. However, as of 2020, there is a tax filing obligation with progression effect for non-resident taxpayers who benefited from the so-called 'one-fifth' rule in payroll on multi-year income (e.g. long-term incentive payments) or on severance payments.
Payment of tax
In general, taxes are payable within one month of the date that the final assessment is issued. Tax on wages and salaries is withheld at source. The same applies for capital investment income with domestic banks. The amounts withheld are treated as a payment on account of the final income tax liability. If taxpayers have additional income not subject to withholding, they will usually be asked to make quarterly instalments. Assessed quarterly instalments are due on 10 March, 10 June, 10 September, and 10 December.
A self-employed person must prepay income tax that will be offset on filing an annual return. The advance payment is determined on the basis of the return made for the previous year. In the event of a new business, the advance will be calculated on the basis of estimates made by the owner of the business. The advance payment is made on the dates mentioned above.
Tax audit process
The supreme tax authority in Germany is the Federal Ministry of Finance (Bundesministerium der Finanzen), whereas the taxpayer usually deals with the local tax offices. Employees are usually not audited as the annual income tax return is already subject to review (all income tax returns are subject to an internal review with the tax authorities prior to issuing the tax assessment). However, employees with income exceeding EUR 500,000 per year might be subject to additional audits.
Statute of limitations
The statute of limitation for income tax returns usually amounts to four years. An extension up to five years is possible in cases of tax evasion or up to ten years in cases of tax fraud, with even longer periods for criminal prosecution. Further prescriptions have to be considered regarding the start date and suspension of the statute of limitation.
Topics of focus for tax authorities
Tax authorities in the meanwhile focus on international mobile employees and assignees. Specific forms within the annual income tax return have to be filed to provide the tax office with more detailed information about the assignment.