Are there situations where double taxation can be advantageous?
March 11, 2022 | 110,00 EUR | answered by Guido Hoffmann
Dear tax advisor for the topic of double taxation,
My name is Quentin Keck and I have a question regarding double taxation. I work as a freelance graphic designer and have income from both my self-employment as well as from capital investments. Lately, I have been wondering if there are situations in which double taxation can actually be advantageous.
Currently, I pay income tax on my self-employment income as well as capital gains tax on my capital investments. This results in a portion of my income being taxed twice, which has a negative impact on my financial situation. I am wondering if there are possibly strategies to avoid this double taxation or even to use it to my advantage.
I have researched and found that there is, for example, the possibility of using double taxation agreements between different countries to avoid taxes. Are there similar regulations or opportunities within Germany that could help me reduce double taxation?
I would greatly appreciate it if you could provide me with some information and possible solutions on this topic. I want to ensure that I am optimizing my tax situation and not having to accept unnecessary tax burdens. Thank you in advance for your support.
Best regards,
Quentin Keck
Dear Quentin Keck,
Thank you for your question regarding double taxation. As a freelance graphic designer with income from self-employment and capital investments, you indeed have a complex tax situation that may result in double taxation. It is understandable that you are looking for ways to avoid this double taxation or even to use it to your advantage.
First and foremost, it is important to understand that double taxation is typically to be avoided as it can lead to an excessive tax burden. In your case, both your self-employment income and capital gains are being taxed, resulting in double taxation. However, there are some situations where double taxation can actually be beneficial.
One example of this would be if you are able to offset losses from your self-employment against your capital gains for tax purposes. In this case, double taxation could result in you paying less tax overall. It is important, however, to discuss this with a tax advisor or financial expert to ensure that you are making the most of all tax benefits available to you.
In terms of using double taxation agreements between different countries to avoid taxes, it is important to note that these agreements primarily serve to avoid double taxation on cross-border income. Within Germany, there are similar regulations that can help you reduce double taxation.
An example of this is the crediting of foreign taxes against your domestic income. For instance, if you have income from capital investments in another country and have already paid taxes there, you can credit those taxes against your German tax liability. This will reduce double taxation and result in paying less tax overall.
There are also other ways to reduce double taxation, such as choosing the right tax classes, utilizing tax-free allowances and lump sums, and strategically structuring your income. However, it is important to seek individual advice to find the optimal solutions for you.
I hope this information helps you and supports you in optimizing your tax situation. If you have any further questions or would like personalized advice, I am happy to assist. Thank you for your trust and inquiry.
Sincerely,
Guido Hoffmann, Tax Advisor
