Main Tax Residency Rules in Germany for Employees: An Overview
By Ulrich Gehrke and Vanessa Szymik, Gehrke econ Group
Individuals with a domicile for private use or a customary place of abode in Germany are considered to be residents in Germany. A customary place of abode in Germany is fulfilled if an individual intends to stay a continuous period of six months or more in Germany, considering that this period may be split across two calendar years. The status of being a German resident leads to an unlimited taxation of individual’s worldwide income.
However, non-residents are only taxable on their income resulting from German sources (employment income).
Furthermore, people located in foreign countries may designate to be treated as residents, if their German income amounts to 90% of their worldwide income or if the income not derived from German sources does not exceed the basic tax-free threshold of, currently, EUR 8,820 for the calendar year 2017, and EUR 9,000 for 2018. As a result, non-residents are able to submit a German income-tax return, taking account of all deductions and allowances, as residents can.
When requesting one’s residency, it is important to consider the regulation for EU citizens or EEA member-country citizens between a resident and a nonresident in Germany who are married or live in a civil union. However, the non-resident one must stay in an EU or EEA member state for tax purposes.
On these terms, a married couple can file a joint tax return and therefore apply for the favourable split-tax rates.
If individuals are moving to Germany within the calendar year (transfer year), both the non-resident and the resident period must be declared together in one tax return. In this process, the foreign income must be considered for tax-rateprogression purposes, which means it impacts the individual’s personal income tax rate. Moreover, the same regulations apply if individuals leave Germany within the calendar year.
Ulrich GehrkeGehrke econ Group, Hanover, Isernhagen, Germany
T: +49 511 700 50 600
Gehrke econ Group offers tax consulting, auditing, legal advice and business consulting from a single source. It is owner-managed and advises mediumsize companies at eye-level. Two hundred employees carry out interdisciplinary consulting projects specialised on the economic sectors automotive, real estate, food, textile and health care.
Ulrich Gehrke is one of the managing partners. He has more than 30 years’ experience in anticipated inheritance, asset planning and M&A.
Vanessa SzymikGehrke econ Group, Hanover, Isernhagen, Germany
T: +49 511 700 50 600
Vanessa Szymik is a member of a team specialising in the optimization of personal taxes.
Published: International Taxation, No. 10, Spring 2019 l Photo: Sebastian Grote - stock.adobe.com