Globalisation means that not only companies but also employees are active internationally. If an employee lives and works in Germany during the first half of the year and then relocates their workplace and residence abroad mid-year, the following questions arise:
- Where must which tax obligations be fulfilled?
- Which part of the salary must be taxed where?
- Which costs can be deducted where?
As a rule, two tax returns must be filed in the year of the transition -- regardless of whether the employee is leaving Germany (outbound) or moving to Germany (inbound): one in Germany and one in the foreign country. Germany has concluded double taxation agreements (Doppelbesteuerungsabkommen) with many other countries. These typically provide that the "German" salary is taxed in Germany and the "foreign" salary is taxable abroad. In Germany, the amount of foreign income is additionally taken into account when calculating the tax rate on German income (Progressionsvorbehalt - progression reservation).
The precise rules vary from country to country, however. There are also numerous special rules for certain groups of employees (e.g. public sector employees, directors/managing directors of corporations, teachers and professors, etc.) or for particular types of remuneration (e.g. severance payments, bonuses, pensions, etc.)
Please contact us so that we can find the right and most tax-efficient solution for you.