Are there any specific regulations to avoid double taxation in cross-border transactions?
October 13, 2023 | 125,00 EUR | answered by Guido Hoffmann
Dear tax advisor,
My name is Xenia Neumann and I run a small business that conducts cross-border transactions. Lately, I have noticed that I may be affected by double taxation. My company already pays taxes abroad, and I am concerned that I may have to pay taxes again in Germany.
The current situation is as follows: My company already pays taxes abroad for the profits we generate there. Now I am wondering if I will also have to pay taxes in Germany when I bring the profits back to my home country.
My concerns are that double taxation could significantly reduce my profits and negatively impact my financial situation. Therefore, I would like to know if there are specific regulations to avoid double taxation in cross-border transactions.
Can you provide me with possible solutions or strategies to avoid double taxation? Are there any specific agreements or treaties between countries that could help me circumvent this issue? I would greatly appreciate your assistance and advice on this matter.
Best regards,
Xenia Neumann
Dear Mrs. Neumann,
Thank you for your inquiry regarding double taxation in cross-border transactions. As a tax advisor specializing in this topic, I can understand your concerns and would like to help you further.
Double taxation occurs when two or more countries have the right to tax the same income. This can result in profits being significantly reduced due to multiple taxation. In your case, you are already paying taxes abroad on the profits generated there. Now you are wondering if you also have to pay taxes again in Germany when bringing the profits back to your home country.
There are various ways to avoid double taxation. One of them is through double taxation agreements between the countries involved. These agreements determine which country has the right to tax certain incomes and thus avoid multiple taxation. Germany has signed such agreements with many countries to coordinate the taxation of cross-border incomes.
It is important for you to familiarize yourself with the specific provisions of the double taxation agreement between Germany and the relevant country to determine if and how your profits have already been taxed and if tax credits or exemptions are possible. In many cases, you can avoid double taxation by offsetting the taxes paid abroad against the taxes due in Germany.
I recommend seeking advice from an experienced tax advisor to analyze your individual situation and develop suitable solutions. Together, we can assess how you can avoid double taxation and what steps are necessary.
I hope this information helps you and I am available for any further questions. Thank you for your trust and I look forward to assisting you in solving this tax problem.
Sincerely,
Guido Hoffmann
