A lot of individuals are moving to Germany. Some are coming for professional other for private reasons. But both will be confronted with German tax issues. Since the German tax system is complicated it is always advisable to consult a German tax adviser. Here are some points which are helpful to know:
- Every person being resident in Germany is liable to Income Tax (Einkommensteuer). There is a progressive tax rate in place with a maximum rate of 45%. On top everybody has to pay 5,5% of the income tax as Solidarity Surplus Charge (Solidaritätszuschlag). With the latter we all pay for the costs of Germany’s reunification some 20 years ago.
- But small and average income will be taxed at a much lower rate.
- Self-employed might be also liable to Germany’s business tax (Gewerbesteuer). The tax rate varies from city to city and borough to borough since it is a municipal tax. In general it is not an extra tax burden for self-employed since it might be credited against the personal income tax. But you need to be careful because under certain circumstances you cannot credit the business tax against the income tax.
- Expatriates shall always check whether they still have to prepare tax returns back home. This is definitely the case for US-citizens or Green Card holders.
- In the unlikely event of passing away German Inheritance Tax may be due. And Germany taxes if either the decedent or the heir is resident in Germany. Careful tax planning seems to be advisable especially because Germany only agreed with 6 states Double Taxation Treaties applicable on inheritance (and in some cases gift) tax. So there is always the danger of effective double taxation.
- Citizens of the UK and other Commonwealth countries shall be careful. In the UK inheritance tax is not only based on the principle of Residence but also on Domiciliation. For UK-citizens this means that they can be liable to British Inheritance Tax although they have moved abroad years ago. And of course they might be liable to German inheritance tax also.
For more information please go to:
- Personal income tax of individuals moving to Germany
- Trusts of expatriates can cause havoc
- Tax legislation not in line with EU law?
- Decentralisation and Football
US-Expats can find interesting information on the website of Greenback Expat Tax Service. Experts in other European countries you can find with IAPA International Association of Professional Advisers.
… but US-citizens and green card holders should never forget that Internal Revenue Service has their expatriats still on the radar. And to me it looks like they make serious efforts to collect taxes from US-expats. A lot of good information you can find on this website:
Please note that the deadline for US citizen to file income tax returns in the USA is
October 15, 2011
A friend of mine left Germany in 2012… he never filed a German tax return for 2012. He believes he maybe eligible for a possible refund.
Question: Is it too late for him o file for 2012?
If he can file, what form does he use.
My friend now lives in Austria and has been filing Austrian tax returns.
Thanks for any insights you can offer on this question.
In 2016 it is possible to fill an Income Tax Return for 2012. Which forms have to be used depends on the personal situation.