Income tax, making advance payments

Advance payment according § 37 Income Tax Act (Einkommensteuergesetz, EStG)

In order to save you substantial income tax arrears and back payments, the tax office will determine an advance payment if the expected annual income tax liability is not covered by the tax deduction amounts paid. The advance payment includes the solidarity surcharge and, if applicable, church tax.

As a rule, advance payments arise when there is no direct tax deduction at the source of income (such as wage tax). This occurs – among other things – in the event of

  • Positive income from renting and leasing
  • Pension income
  • Profits from commercial or freelance activities or from agriculture and forestry
  • Investment income from accounts and deposits abroad

In exceptional cases, advance income tax payments may also be determined if the income tax deducted from wages is not considered sufficient to cover your total annual tax liability. Such exceptional cases might arise if

  • spouses with the tax class combination III/V pay too little wage tax during the year.
  • the provisional lump-sum allowance granted for health and long term care insurance in the tax assessment for wage tax deduction is higher than the actual social insurance contributions (health, long-term care and unemployment insurance) and the other miscellaneous provisional expenses (e.g. private liability and risk insurance).

Determination and tax bill

In principle, the advance payment bill is based on the last income tax bill, namely on the income tax liability that resulted after offsetting tax deductions. If there is no previous assessment because the tax liability only arises in the course of an assessment period, the expected tax liability will be taken as a basis. The advance payment amount is then estimated by the tax office.

Advance payments are determined on a quarterly basis. They are only determined if they amount to a minimum of EUR 400.00 per calendar year.

If an advance payment has been determined, the tax office may increase it only if the increase for a current or future calendar year amounts to a minimum of EUR 100. There are no minimum amounts for the reduction of advance payments.

Reduction upon request

Advance payments may be adjusted if your income has changed or is expected to change during the calendar years for which the advance payments were determined. If your income situation deteriorates, you can apply for a reduction. The tax office requires proof or a credible declaration from you.

Applications for an adjustment from employees might also be granted if, for example:

  • There has been a change from tax class combination III/V to another tax class combination. (In these cases, the advance payments are calculated incorrectly because wage tax is deducted according to tax class III or tax class V).
  • There are higher professional expenses to be taken into account.
  • There is evidence of higher deductible provisional expenses.

Note: After the annual tax return has been submitted, the advance payments made will be offset against the income tax assessment. If your income, from which no tax deduction was made, is higher than initially expected, arrears and back payments will arise.

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Service details

Prerequisite

  • An expected income for which tax arrears are likely to arise.
  • Advance payments are only determined if they will amount to at least EUR 400.00 for the calendar year and at least EUR 100.00 for an advance payment date.

Procedure

  • The amount and due date of the advance payments can be found in the advance payment or income tax bill.
  • Transfer the amounts on the specified dates or issue the tax office with a SEPA direct debit mandate on the form provided.

Note: If you demonstrably do not achieve the expected income, the tax office can adjust the advance payments. You or your tax advisor apply for the adjustment in writing with the relevant evidence to the tax office that issued the advance payment bill.

Required documents

  • current advance payment/income tax bill
  • SEPA direct debit mandate (recommended)

Deadlines

Pay the income tax advance payments each year on

  • March 10
  • June 10
  • September 10
  • December 10

Legal basis

Release note

Saxon State Ministry of Finance. 10.01.2020