What does collective investment mean?

Joint assessment is a tax procedure in which spouses or civil partners submit a joint tax return. It allows for more favourable taxation through the so-called spouse splitting, which is particularly beneficial for couples with different incomes.

How does joint assessment work?

1. Combine incomes: The incomes of both partners are first added together.
2. Halve the total income: The combined income is halved to determine the so-called splitting income.
3. Calculate income tax: The tax is calculated based on the halved income.
4. Double the tax: The tax calculated for the half income is doubled. The result is the income tax the couple has to pay in total.

This procedure ensures that the higher income of one partner is tax-relieved by being offset against the lower income of the other partner.

Who can use joint assessment?

Joint assessment is generally only available to married couples or civil partners. The following rules also apply:

• Newlyweds: Couples can choose between joint assessment and individual assessment in the year of marriage.
• Divorced couples: In the year of divorce, there is also a choice between the two assessment types.
• Widowed: If a spouse dies, the surviving partner can still use joint assessment in the year of death.

Advantages of joint assessment

Joint assessment is particularly advantageous for couples with large income differences. The splitting procedure results in the total income of a couple being taxed lower than if both partners were assessed separately.

Example: One partner earns 60.000 Euro a year, the other 20.000 Euro. Through spouse splitting, the income is more evenly distributed between both partners, resulting in a lower tax burden.

When is individual assessment more beneficial?

In some cases, individual assessment may offer advantages, for example:

• If both partners have similarly high incomes.
• If one partner wishes to claim high work-related expenses or special expenses that would not be fully effective in a joint assessment.

Conclusion: Joint assessment offers spouses and civil partners a way to save taxes through spouse splitting. It is especially beneficial when the partners' incomes are very different. However, couples should check whether individual assessment is more favourable in their specific case.