This guide reviews what you should consider when moving away from Germany or back to Germany during a tax year (= calendar year), in which you then also had income in another country.
Note: This is not professional tax advice and you should verify all the information contained here. In particular, we do not guarantee that this page will always be up to date to the newest regulations.
Tax residency in Germany
There are two different types of tax residencies in Germany.
Resident for tax purposes. A resident for tax purposes generally refers to an somebody who has a domicile in Germany or spends more than 6 consecutive months in Germany (habitual place of abode). A domicile is a home or dwelling owned by, or rented to, the taxpayer who has full control over the property. Domicile is determined by fact, not by the intention of the taxpayer.
Non-resident for tax purposes. A non-resident of Germany is generally someone who spends less than 6 consecutive months in Germany. The general rule is that a person who is a resident of Germany is assessable on the individual’s worldwide income. Non-residents are generally assessable on income derived from German sources. Extended business travelers are likely to be considered non-residents of Germany for tax purposes, unless they stay in Germany for more than 6 months in a row (brief interruptions such as home trips over the weekend or vacations are disregarded).
Only as resident for tax purposes, you will be possibly taxed on your worldwide income.
Tax treaties (Doppelbesteuerungsabkommen)
Most tax treaties will make sure that you will not be taxed twice on foreign income. You will need to check the individual treaty, but typically one of the following two rules will be applied:
Foreign income subject to progression (Progressionsvorbehalt). This is the most common rule, which applies to most foreign income as dependent worker. Such foreign income will only be taxed in the country where you do the work or where the respective company or institution is located. However, you will still need to declare this income in the German tax form N-AUS, because it is subject to progression. The idea is that your tax is computed in the following way: First, your foreign income will be converted to EUR and included (as if it were regular German income) to compute the respective tax rate as percentage of your total income. Once this percentage is determined, your income is computed again, but this time the respective foreign income is excluded. Your total tax is then determined by applying the previously computed percentage tax rate only to the income calculated in the second step. See below
Foreign tax credit. This concept of avoiding double taxation is less common for German taxes, but occurs sometimes. Here, your foreign income is included in the calculation of German taxes. However, after the total amount of taxes are determined in the standard way (as if all income came from German sources), you are allowed to subtract the income taxes that you already paid (or will pay) in the foreign country.
Declaring foreign income
If you are a resident for tax purposes in Germany and