What should be considered by Expatriates when moving to Germany regarding tax purposes?

Most expatriates moving to Germany think that their foreign income is not subject to German income taxation. This is a grave misjudgement. Foreign income is either taxable in Germany or it effects the progressive German income tax rate. In both cases the income has to be declared in the German income tax return.

For example, if you move to Germany or leave Germany in the course of a calendar year, you must declare the income earned in that year abroad in the German tax return. In this case, it is important that you prove to the German tax authority that you have paid taxes on the foreign income. If the proof of tax payments in your home country is provided, it merely increases the progressive German income tax rate. The foreign income itself remains tax-free.

If the proof of tax payments in your home country can not be provided, this foreign income will be taxed by the German tax office. As a result this income will be taxed twice, in your home country and in Germany. This means a large part of your salary will be eaten up by tax payments.

Note: If you move to Germany in the course of a calendar year, make copies of your income earned and tax paid in your home country!

Hans-Guenter Dillenburg
Diplom-Finanzwirt Steuerberater Partner

GINSTER THEIS KLEIN & PARTNER mbB

Wirtschaftsprüfer Steuerberater Rechtsanwalt

GTK Steuerberater (Berlin, Bonn, Bornheim, Brühl, Hamburg)

          

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