As a freelancer or a small business owner in Germany, navigating the intricate world of taxes can be a daunting task. Understanding and managing your tax obligations are essential for your financial well-being and compliance with local tax laws.

The good news is, Germany has a powerful tool to help you simplify the tax process: ELSTER (Elektronische Steuererklärung), which translates to the "electronic tax declaration." Developed by the Federal Central Tax Office (Bundeszentralamt für Steuern), ELSTER is a user-friendly online tax office system designed to assist individuals, businesses, and entrepreneurs in filing their tax returns online.

Why ELSTER matters for freelancers and small business owners

In Germany, around 90% of businesses, including freelancers and small business owners, are obligated to use ELSTER to submit their monthly VAT returns and employee tax statements. Furthermore, an increasing number of private individuals are discovering the benefits of using ELSTER to submit their annual tax returns and request tax refunds. This digital platform allows you to streamline the tax filing process, eliminating the need to print out and mail your tax forms to your local tax office (Finanzamt). Plus, ELSTER can automatically retrieve a significant portion of your personal information, greatly expediting the process.

How to Get Started with ELSTER

To harness the power of ELSTER for your tax obligations, you need to start by registering for a free account. Here's a step-by-step guide to help you through the registration process:

1. Choose Your Login Method: In the initial step, you must select your preferred login method. For most people, a Zertifikatsdatei (digital signature) is the most suitable option. It's free and straightforward to use. While there are other paid options available for business owners or tax advisors, you can opt for these at a later stage if necessary. Select "Zertifikatsdatei" and click "Auswählen."

2. Personalization: This step allows you to specify whether your registration is for a personal account or a joint account with your spouse, or if it's for any business structure.

3. Personal Information: Fill in your personal information, including your email address, date of birth, tax ID, preferred username, and password.

4. Participation in Pre-Filled Tax Return: You will be asked to confirm whether you consent to the tax office preparing pre-filled tax returns for you, known as "vorausgefüllte Steuererklärung" or "Belagabruf." This feature automates much of the information needed for your tax return, such as your salary, income replacement benefits, pension benefit payments, and more.

5. Confirm Your Email Address: After submitting your personal data, you will receive a confirmation that your registration is in progress. Verify your email address by clicking the link in the email you receive.

6. Activate Your Account: Once your registration is complete, you will receive an email with an activation code. Keep it safe while you wait for another activation code to arrive by mail within 14 days. Upon receiving it, open your activation email and click the link to return to the ELSTER website. Enter both activation codes received via email and mail.

7. Get Your Zertifikatsdatei: After successfully activating your account, a digital signature (Zertifikatsdatei) will be automatically generated for you. Download and store it securely on your computer, as you'll need it each time you log in to ELSTER.

Now, you're all set to make your tax management more efficient.

Using ELSTER for Your Annual Income Tax Return

Once you've logged into ELSTER using your Zertifikatsdatei and password, you'll find yourself on your "Mein ELSTER" (My ELSTER) homepage. Here, you can see which tax return forms you need to submit, especially if you are obliged to complete an income tax return.

Here are the key steps:

1. General Tax Form: Complete the "Hauptvordruck" (general tax form) with details of your income, German bank account, and any deductible expenses. If you consented to participate in pre-filled tax returns during registration, much of this information should already be filled out. If not, you can find this information on your employment tax statement (Lohnsteuerbescheinigung) issued by your employer at the end of the financial year.

2. Additional Tax Forms: Fill out any necessary Anlagen (additional tax forms) based on the types of income you receive and whether you want to make tax deductions. You may also need to attach receipts or proofs for expense deductions.

3. Check and Submit: Once you've filled out all the necessary fields, a green tick will appear next to each section. Check that the information is accurate, and consider granting access to a tax advisor for a double-check. Click to submit, and your information will be securely transferred to the tax office. You will receive a confirmation in your ELSTER inbox once it's been successfully received.

ELSTER simplifies tax filing for freelancers and small business owners in Germany, making the process efficient and less cumbersome. As a powerful tool, it helps you navigate the intricacies of the German tax system with ease, allowing you to focus on growing your business without tax-related stress.