Expat-Taxation: Changes 2023

The year 2023 has brought with it changes in German income tax law which may be significant for expatriates living and working in Germany. Some changes are important for employees and their employers. Other changes pertain to all taxpayers.

Taxation of employments

Employment tax statement

Employers are obliged to provide their employees with employment tax statements. These statements serve as proof for withheld taxes, social security contributions and other tax relevant data. Until 2022 the employer could use the eTIN (electronic Taxpayer Identification Number). From 2023 on the employer is obliged to use the employee’s Tax Identification Number.

Every person who is registered with the residents’ registration office will have an individual tax identification number. Employees who are not registered must apply for this number at the employer’s tax office. The employer can apply for the number on behalf of its employee if the employee assigns the right so to do.

Deductible expenses for foreign travels

Employers can compensate or reimburse employees for business related travel expenses. Relevant expenses are predominantly for transport, accommodation, and meals. For accommodation and meals specific lump sums are deductible without proof. The Federal Ministry of Finance publishes every year a letter showing deductible or tax-free refundable lump sums. For various countries such as the USA or the UK the amounts have been amended.

Employee’s standard allowance

For job-related expenses an employee can deduct a standard allowance without any proof. This allowance has been increased from 1,200 to 1,230 Euro per year.

General changes of tax law

Old-age provision expenses

Old-age provision expenses can be deducted up to certain maximum amounts. Deductible are contributions to Germany’s social pension insurance and other basic retirement remunerations (see also https://scheller-international.com/blog-beitraege/german-income-taxation-of-us-pensions-and-similar-retirement-provisions.html). Under certain circumstances contributions to comparable foreign pension plans are deductible.

The maximum amount has been significantly increased for 2023.

Relief amount for single parents

The relief amount for single parents has been increased from 4,008 to 4,260 Euros per year.

Home office

Expenses for a home office from 2023 are only tax deductible if the home office is the center of the entire business or job related activities. Instead of proved expenses a general allowance of 1,260 Euros per year is deductible. A home office can be in a house or flat. It is irrelevant whether the home is owned or rented by the taxpayer. Expenses for work equipment and telecommunication are not covered by this provision and can be claimed separately.

Note: Self-employed persons who claim expenses for a home office in a house or flat which it owns may face a tax disadvantage at a later stage. The home office automatically becomes a business asset. If the house or flat will be sold at a later stage, in general the gain will not be taxed. This exclusion for self-used real estate does not apply to the part which is deemed to be a business asset. If the value of the property increases between the first use of the home office and the selling of the property, the gain attributable to the home office will be taxed as business income.

Work at home

If there is no home office an employee or a self-employed person can claim 6 Euro for every day he or she works at home. This applies only if

1. he or she carries out the work predominantly at home and
2. does not move on these days to another main working place.

The total amount is limited to 1,260 Euro per year. A documented record of respective working days is required. Home can be the main or a second home (e.g., a holiday home).

The deduction can only be claimed if the person does not claim expenses for a home office or for accommodation for a second household.

Glossary

Autoren:

Peter Scheller, Steuerberater, Master of International Taxation, Fachberater für Zölle und Verbrauchsteuern

Alexander Wangerowski, Steuerberater, https://aw-stb.de/

Bildquelle: www.fotalia.com