Can I avoid double taxation on capital income?
June 19, 2024 | 115,00 EUR | answered by Isabel Zimmermann
Dear tax advisor,
My name is Hildegard Heuser and I have a question regarding double taxation of capital income.
My issue is that I earn capital income in both Germany and another country, and I am concerned that these income could be double taxed. I have already found out that Germany follows the principle of worldwide income, meaning that all income worldwide must be taxed. At the same time, there is a possibility that the other country may also tax these income.
I am worried that I may end up paying more taxes than justified, as the income has already been taxed in one country. Are there ways to avoid or at least minimize double taxation?
I have heard that there are double taxation agreements between different countries aimed at avoiding double taxation. Do these agreements also apply to capital income and how can I benefit from them?
I would greatly appreciate it if you could assist me and provide possible solutions to avoid double taxation of my capital income.
Thank you in advance for your support.
Kind regards,
Hildegard Heuser
Dear Mrs. Heuser,
Thank you for your question regarding double taxation of capital income. It is understandable that you are concerned about potentially paying more taxes than necessary. Indeed, double taxation can be a complex issue, especially when income is earned in multiple countries.
The worldwide income principle in Germany that you mentioned does require that all income earned worldwide must be taxed. This means that you must pay taxes on your capital income in both Germany and the other country where you earn income. However, there are various ways to avoid or minimize double taxation.
One important approach to avoiding double taxation is through double taxation agreements (DTAs) between different countries. These agreements help determine which country has the right to tax certain types of income, including capital income. Typically, these agreements specify which country taxes must be paid to in order to avoid double taxation.
To benefit from a DTA, you should check if there is an agreement between Germany and the other country where you earn income. These agreements usually include provisions for avoiding double taxation for various types of income, including capital income. If a DTA exists between the two countries, you should examine how you can benefit from the provisions.
It is advisable to consult a tax advisor or expert in international tax law to analyze your individual situation and help minimize double taxation on your capital income. An expert can also assist you in considering all relevant tax regulations and agreements to ensure you do not pay more taxes than necessary.
I hope this information helps you and supports you in avoiding double taxation on your capital income. If you have any further questions, please do not hesitate to contact me.
Sincerely,
Isabel Zimmermann
Tax Advisor
