Ask a tax advisor on the topic of Cross-border commuter

Limited tax liability for speculative transactions (stock profits) from abroad?

August 19, 2011 | 70,00 EUR | answered by Oliver Burchardt

I am a German citizen and live exclusively from buying and selling stocks and options, which I usually do through a German bank on a German stock exchange (but also on off-exchange trading platforms). I am essentially a trader who aims to make profits through the short-term buying and selling of stocks and options. I only trade for my own account and with my own personal assets.

Since January 1, 2005, I have been living and trading from Turkey. I have deregistered in Germany and no longer have any personal ties to Germany such as a residence, properties, family, etc. I have not set foot in Germany since 2005.

The stocks I buy and sell are 70% German companies, such as Siemens or VW, but also foreign companies like Fiat or Coca Cola. The options can be related to any stock or even to indices like the DAX or commodities like gold.

Do I still have to pay taxes on my speculative gains in Germany (limited tax liability) or here in Turkey? In other words, am I still liable for tax in Germany on this income? Has this regulation changed in 2008, so that previously I was only liable for tax on a stake in the stock value over 1% of the respective company and now always? Is there a tax difference if I make a speculative gain with a German company like Siemens or with a foreign one like Fiat?

If I am liable for tax, is there any legal way to avoid this tax liability, for example by switching to a foreign bank through which I would conduct my transactions, even if I continue to buy German stocks on German exchanges?

How long would I be liable for tax in Germany? And how can I prevent being taxed twice, in Turkey and in Germany?

There is a double taxation agreement between Germany and Turkey. Does this mean that I must exclusively adhere to Turkish law and pay Turkish taxes on my speculative gains, without any connection to the German tax office, therefore not having to declare anything in Germany or submit a tax return?

Oliver Burchardt

Dear inquirer,

Thank you for your inquiry, which I am happy to answer as part of an initial consultation.

Please note that the tax assessment is based on the information provided. Changing, adding or omitting information may alter the tax assessment, possibly significantly.

According to your description, you have been resident in Turkey exclusively since the year 2005, so you are only subject to limited tax liability in Germany from this year onwards. Your unlimited tax liability in Germany ended in the year 2004.

The income you described constitutes income from capital assets from the year 2009, generated through trading on German stock exchanges in Germany.

The profits you described were generally taxable in Germany even before the year 2009, as you bought and sold stocks within the then-applicable speculation period of 1 year.

However, whether you become tax liable in Germany is determined by § 49 of the Income Tax Act. However, there is no corresponding provision for limited tax liability for both types of income.

The income is ultimately not subject to taxation in Germany, but is exclusively subject to taxation in Turkey.

The same result would also be achieved by the double taxation agreement. Such agreements are specifically intended to avoid double taxation.

I hope my explanations have been helpful to you.

Best regards,

Oliver Burchardt
Tax advisor