Taxation for non-resident taxpayers
December 24, 2013 | 25,00 EUR | answered by StB Patrick Färber
I am returning to Germany after living abroad in 2014. My residence is registered abroad, and there is no Double Taxation Agreement (DBA).
My capital income consists of dividends and interest from German stocks, foreign stock funds, European bond funds, German fixed-term deposits, and savings. The accounts and portfolios are in Germany, and so far the withholding tax has been deducted directly from the dividends.
How will taxation be carried out upon my return to Germany and unlimited tax liability? Is it advantageous to sell the stocks and funds before returning to Germany to avoid taxation on the profits?
Dear inquirer,
based on your information and considering your efforts, I would like to respond as follows:
1) Legal situation before return
You are only partially taxable on certain capital gains from German sources. When it comes to fund shares, it depends on whether they are considered "domestic" or not. However, interest income from investments is not taxable (unless secured by land register rights, which is usually not the case). As you correctly noted, withholding tax may have been deducted with final effect, which is definitive.
Capital gains transactions related to capital gains are NOT subject to limited tax liability (with the exception of certain specific transactions). These are not mentioned in § 49 of the Income Tax Act (limited tax liability).
2) Legal situation after return
Due to your residence, you are subject to unlimited tax liability. All transactions related to capital gains are taxable, and capital gains tax is usually withheld (except for foreign investments, which need to be declared in the tax return).
Capital gains are subject to withholding tax (25% plus solidarity surcharge plus possibly church tax = approx. 28%). In the context of the income tax return, it can be checked whether the flat rate withholding tax rate or the individual tax rate is more favorable (if there are other income sources).
Otherwise, capital gains (losses) subject to withholding tax cannot be offset against other income.
From this perspective, it is advantageous to realize capital gains before becoming subject to unlimited tax liability.
However, it could also be that these gains would be tax-free under unlimited tax liability if the securities were purchased before 2009 (old holdings before withholding tax). The holding period of 1 year since 2008 would then have passed, and the old regulation for private sales transactions would still apply.
Best regards,
P. Färber
Tax Advisor
