Can I avoid double taxation on my capital gains abroad?
March 24, 2024 | 110,00 EUR | answered by Yvonne Schreiber
Dear tax advisor,
My name is Christine Altmayer and I am currently working abroad. I have capital investments there from which I regularly generate income. Now, my return to Germany is approaching and I am concerned about a possible double taxation of my capital gains.
Currently, I am already paying taxes in the country of my residence, but I am unsure if I will have to pay taxes again on the same income when I return to Germany. I would like to know if there are ways to avoid double taxation and how best to proceed to optimize my tax situation.
I have already done some research, but I am unsure of the specific steps I should take. I want to avoid paying more taxes in the end than necessary. Therefore, I would greatly appreciate it if you could provide me with your expertise and suggest possible solutions.
Can you please explain to me what options there are to avoid double taxation of my capital gains and what specific steps I should take to optimize my tax situation?
Thank you in advance for your help.
Sincerely,
Christine Altmayer
Dear Mrs. Altmayer,
Thank you for your inquiry regarding the double taxation of your capital gains upon your return to Germany. As a tax advisor specializing in this topic, I would be happy to assist you and provide you with possible solutions.
First and foremost, it is important to understand that double taxation of capital gains between different countries is a common issue, as each country has its own tax system and overlaps often occur. Fortunately, there are various ways to avoid or at least minimize double taxation.
One way to avoid double taxation is through the existence of a Double Taxation Agreement (DTA) between Germany and the country of your residence. A DTA determines which country has the right to tax certain income and how double taxation can be avoided. It is advisable to check if such an agreement exists between the two countries and if it is relevant to your specific situation.
Another important step is to clarify your tax residency. Upon returning to Germany, you will have your tax residency here and therefore be subject to the German tax system. It is crucial to properly report your capital gains and income in your tax return to ensure correct taxation.
Furthermore, you should consider whether the tax credit method or exemption method is suitable in your case to avoid double taxation. With the tax credit method, foreign taxes paid are credited against German taxes owed, while with the exemption method, foreign taxes are not credited but the income is exempt from German taxation.
It is advisable to consult with a tax advisor early on to discuss your individual situation and develop the best solutions to avoid double taxation. Through careful planning and advice, you can ensure that you do not pay more taxes than necessary.
I hope this information is helpful to you and I am available for any further questions.
Sincerely,
Yvonne Schreiber, Tax Advisor
