First time German Tax declaration, asked about foreign income

Question

I am EU citizen, I was wondering how the German tax system would allow me to get proper refund after I left the country. I went to Germany in middle 2016 and worked there until end March 2018, then searched a job abroad for some months and settled again abroad (not Europe).

I made my Steuererklarung for 2016-2017-2018 in March this year, and was expecting to receive a lot back since I didn't work full year in 2016 and 2018.

The finanzamt sent me a letter last week asking me what was my foreign income the last half of 2016 (was zero) and foreign income from April to December 2018.

• For 2016 I didn't make any tax declaration elsewhere than in Germany, can I just reply zero to them ?
• For 2018 I got some income in my new country, and if I enter this amount on the simulator in Steuergo it goes down from a refund of 3200 to 1500... Less than half.

I would like to avoid this scenario as last year was financially very difficult (Lost a job, had to move to another continent, furnish, girlfriend dependant on me), but I don't know how to deal with that, seems to me best option would be to just give them my income total, worst option say that I got nothing (but I know Germans can't be fooled).

Is the finanzamt aware of our world income ? Or can I give my expenses as tax credit ? They adjust the tax rate on the world income and not only the one from Germany, my new residence country taxed me only from the date of moving in :/

Thanks a lot for any replies !

Answer 1

If your foreign income was zero, you say that your foreign income was zero. If you had foreign income but didn’t declare it anywhere, you have to declare it in your German tax declaration.

You will not be asked to pay tax on this income, but it is used to determine your tax rate. You know that someone with low income might pay say 20% tax, and someone with high income may pay 30%. So your foreign income will be taken into account to determine your tax rate, as if it was German income, but that rate is then applied to your German income only.

If you declare zero foreign income for times when you lived abroad, the Finanzamt might ask you to explain how you survived without income. So only do this if you did indeed have no foreign income, otherwise it would be tax evasion. And the German Finanzamt is quite capable of asking a foreign Tax office about your affairs and find out. Worst case, if they think your numbers are wrong, they can estimate the numbers. Their estimate will be high enough to force you to produce proper evidence for your numbers.

Answer 2

In addition to what @gnasher729 explained, you'll probably want not only to list what foreign income you had but also some more information.

• if that foreign income was already taxed somewhere else, say what tax office collected the taxes.
• if the foreign income is of a type that is exempt of German income tax (e.g. scholarship), add this information.
• if the foreign income is subject to 0 % income tax in the foreign country, that is relevant information as well: this means that from the point of view of the German tax office it is also not subject to German income tax, only to enter the tax rate calculation (Progressionsvorbehalt). So this situation is treated as "foreign income taxes of x € have been paid on foreign income of y €. x isn't of any interest for the German tax office, not even if it is 0 due to the foreign country setting a tax rate of 0 % for that particular type of income. The German tax office is only interested in y and whether the foreign tax office "had already had their chance to collect their taxes".

In any case, prepare to submit proof for all of this.

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A separate question would be whether you can also list deductions from that foreign income. I'm thinking of the deductions for work-related moving and e.g. insurances such as health care, pension plan etc. (I have a suspicion that this may have been possible before ever handing in the tax declaration but it still could be too late now).

OTOH, a tax advisor who can tell you this will probably cost you more than what you gain in additional tax refunds. But if you have precise questions ("I lost my job and had to mover to new country for the new job. Where do I put the deduction" as opposed to "what deductions may be relevant for me") the tax office would have to tell you whether this is a possible deduction, and where to put this.