Working and living abroad, paying taxes in Germany.
November 11, 2011 | 40,00 EUR | answered by Dipl.BW/SB Ulrich Stiller
Hello, my name is Andreas.
I would like to have the following question answered:
I will be taking up a permanent position (employment relationship) in Russia in the foreseeable future. It starts on 01.12.2011. My employer is also a company based in Russia. In Russia, I have to pay 30% taxes on my salary and I am also fully insured by law in Russia. I will be living in Russia for about 46 weeks a year and only spend my vacation in Germany. However, I still want to keep my place of residence in Germany, as insurances and similar things are debited from my German account. I have also rented my own apartment in Russia. I have a work permit for 1 year, which is renewed annually for 1 year. My tax class in Germany is 1.
And my question is:
Do I still have to pay taxes in Germany or is it waived because I pay taxes in Russia? And if so, is it the full tax rate or not? Or do I have to deregister in Germany in order not to have to pay taxes?
Best regards, Andreas
Dear inquirer,
Thank you for your inquiry, which I would like to answer based on the information you provided and in the context of your situation in a first consultation as follows:
If you have a residence or habitual abode in Germany, you are considered to be subject to unlimited income tax liability in accordance with § 1 EStG, with your so-called worldwide income.
Since you have a residence in both Russia and Germany, the Double Taxation Agreement (DTA) with Russia applies. The DTA aims to avoid double taxation.
Since you earn income from employment in Russia, Article 15 applies in your case. According to this article, your income in Russia is subject to normal taxation if you carry out your activities in Russia and stay there for more than 183 days a year, which is the case for you.
Your income from activities in Russia is tax-free in Germany, even if you maintain your residence in Germany. If you have additional income in Germany, the Russian income is taken into account in the context of progression proviso for German income taxation. In simple terms, it increases the tax rate on German income.
Therefore, you do not need to give up your residence in order to avoid a tax burden in Germany.
I hope my explanation was helpful to you.
Best regards,
Ulrich Stiller
Tax advisor/Diploma in Business Administration
