Determining tax residency in Germany can be a complex issue for both German citizens and foreigners, particularly for remote workers or individuals who divide their time between Germany and their home country. Understanding when you are liable to pay taxes in Germany is crucial to avoid complications with the Finanzamt (tax office).
A primary guideline for tax liability in Germany is the 'six-month rule.' Generally, if you maintain a main residence in Germany or stay in the country for more than six months (183 days) within a year, you are considered fully liable for German income tax. This obligation applies regardless of where your income was earned, meaning all income, whether domestic or foreign, must be declared and taxed accordingly.
The German Finance Ministry states that anyone living in Germany or having their habitual place of residence there must pay income tax. For individuals residing in Germany for over three months, completing an Anmeldung, or registration, at their local citizens' office is mandatory, providing the state with essential residency information.
However, tax specialists emphasize that the six-month period is not the sole determinant of tax residency. Even if a taxpayer does not maintain a house or any other type of domicile in Germany, they can still be subject to German tax if their habitual stay is deemed to be in the country. The German Fiscal Code does not always require a fixed six-month stay; a stay of less than six months can still constitute a habitual stay under Germany's national law.
Proof of where you are liable for tax is essential. Almost everyone, from employees to the self-employed, jobseekers, and pensioners, has to declare and pay tax in Germany. If there is any uncertainty about an individual's tax liability, tax authorities will examine various factors to ascertain the amount of time spent in Germany annually.
Official records, such as passport stamps when entering or exiting Germany directly to or from a non-Schengen Area country, can provide evidence of time spent. However, due to the EU's open-border policies, authorities may look beyond passport data. Additional evidence considered can include Anmeldung records, vehicle registration details, club memberships, and receipts for travel, such as flight or train tickets.
Alternatively, if you have been accused of owing tax in Germany even though you spend most of the year in a different country, these are the types of documents you can provide to show that you were actually living abroad. For those transferring to work in Germany within a calendar year, it is important to account for income earned before becoming a German resident when calculating taxable German income.
Germany has concluded double taxation agreements with many countries to ensure that individuals earning income both in Germany and abroad do not have to pay tax twice on the same income. A list of these countries is available through the German government's dropdown menu. German residents earning money in other EU countries should still check this list, as certain tax provisions may be unique to the two countries in question.
If required, you can obtain a tax residency certificate from your home country or Germany stating where you paid taxes. Owning property in Germany, such as a holiday home or flat, does not automatically make someone a German tax resident if they do not typically live there. Nevertheless, property owners are still liable for any relevant property taxes and other fees on the home, as well as declaring rental income in Germany.
Germany's tax bureaucracy can be tough to navigate for Germans and foreigners alike, and situations such as frequent travel and remote work can all cause further confusion.
READ ALSO: What German tax class are you in?
