DBA, taxation of freelancer income, spouse's income
August 6, 2011 | 100,00 EUR | answered by Oliver Burchardt
My questions relate to the income tax return for 2010. Since 2009, I have been working as a freelancer in Germany.
In 2010, I worked continuously for between 2 and 3 weeks in Germany and pre-paid sales tax for 2010 (although I am likely to be below the taxable sales tax rate, as I see it now).
In September 2010, I married a French citizen in France (legal marital regime of the community of gains (Art.1394 para. 3)).
My husband works for an Italian company in France. He is an employee and subject to French tax law. He pays taxes on his income in France. I did not have any income in France in 2010.
My questions:
What do I need to consider in the context of the double taxation agreement? Do I need to inform the tax office of anything?
What is the basis for taxation in Germany (only my income or our entire income)?
How will we be assessed, or what is advantageous for us? What benefits can I claim from our marriage?
I am still registered in Germany and my office address is there as well. The accommodation and office are about 80km away from the place of work. To what extent can I deduct travel and transportation costs? Can I also deduct travel costs from France?
What else should I consider?
In 2011, I will earn income in both countries (as an Auto-Entrepreneur). Do I need to consider anything today?
Thank you and best regards!
Dear inquirer,
Thank you for your inquiry, which I am happy to answer in the context of an initial consultation.
The response is based on the information provided in the situation. Adding, omitting, or changing information can alter the tax assessment, possibly significantly.
The question of the place of taxation primarily depends on your so-called residence. Since you still maintain a residence in Germany, you are considered to have a residence here according to German tax laws. However, since you also live in France with your husband, you are also considered to have a residence here according to French tax laws.
Therefore, you are considered resident in both states according to the Double Taxation Agreement (DBA). Residency in this case is determined by where the center of your life interests is. The center of life interests is considered to be the place where you have closer personal ties. For married couples, this is usually the shared residence, which in your case is France. The following explanations assume that before the marriage, the center of your life interests was in France.
Therefore, you are not subject to unlimited taxation in Germany, but only for the part of your income earned in Germany. The DBA Germany - France in this case assigns the taxation rights for independent income to Germany, so you must declare the income earned in Germany to the German tax authorities.
If you earn income in both Germany and France from 2011 onwards, you must submit two tax returns (one in Germany and one in France), in which you separate the income earned in each country. Therefore, your accounting must allow you to determine the portion of income attributable to each country.
Whether you can utilize a rule in France similar to the German joint taxation of married couples and whether this is advisable in your case should ideally be determined through a simulation calculation by a French colleague. Such a forum is not suitable for such a simulation, as extensive information is needed to obtain a meaningful result.
However, it is also possible in your case that residency in France was only established in September 2010. In this case, you still only need to submit one tax return in Germany, but you must allocate your income. Income earned in Germany until September is subject to unlimited taxation, while income earned from September onwards is subject to limited taxation. You must allocate this for 2010.
For the year 2010, you have the option to request unlimited tax liability in Germany, but joint taxation with your husband in Germany is not possible, as both spouses must earn at least 90% of their income in Germany. Depending on your income level and the applicable marginal tax rates in both countries, this could potentially be more beneficial for you.
You can claim travel expenses for out-of-town client meetings based on actual expenses incurred (such as train tickets, or if using a car, the actual expenses per km; if you cannot determine this, you can use 0.30 euros per double km). The travel costs from your home to the office can be claimed at 0.30 euros per double km. Whether you travel from France or Germany does not affect the deductibility.
I hope that my explanations have helped you and I am available for further information.
Best regards,
Oliver Burchardt
Tax Advisor
