Thousands of German employees breathed a sigh of relief a few days ago – the cancelling of the so-called Pendlerpauschale was ruled to be invalid by Germany’s constitutional court.

Germans pay a lot of tax compared to may other European countries, but they also have a lot more ways to claim tax back than in those other countries as well.  The rules are very complex, but generally speaking it is possible to offset such things as courses and books that you have paid for privately, as long as they are for your career.

Until the end of 2006, the cost of getting to work could also be claimed back, either by producing tickets for public transport or on the basis of the kilometers driven.  But then, all that changed, and the first 20km could no longer be claimed back.

For the past two years, people have been arguing that this is unfair and several local courts had already dealt with the issue.  But now, the consitutional court has taken the final, binding decision.

It didn’t take long for the politicians to respond.  On the lunch-time news that very same day there was an interview in which they were saying that they did not like the verdict, but that they would – as soon as possible – repay all of those affected since Januar 2007.

I checked my tax statement for that year, and sure enough it contained the important words (translated) “The tax statement is not yet conclusive.  Should a court decide that dropping the Entfernungspauschale be unlawful, it will be revised.  You do not need to contact us for this”

Let’s see how long they take…

Einkommensteuer is a form of tax that is paid on income in Germany.

One of the main forms is Lohnsteuer which is taken directly out of your wages, but other forms of income such as dividends, rent, interest and some pensions are also taxed in this way.

There is a Freibetrag which is the amount you can earn without paying tax on it. How much this is depends on your tax class.

To hear a simple explanation and a short discussion in German, listen to the podcast:

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Disclaimer: this podcast is a simple explanation for non-native speakers. For tax advice, please contact a Steuerberater.