Employees with income and residence in the UAE have income from investments in Germany. How is the taxation?
June 24, 2013 | 25,00 EUR | answered by Michael Herrmann
My partner, who is a German citizen, has his residence in Abu Dhabi. He receives his salary from a company in Abu Dhabi, which is taxed at a rate of 0% there. Since May 5, 2011, there has been a double taxation agreement between Germany and the UAE. According to this agreement, the credit method applies. However, the determining factor is the ordinary place of residence. If this is in Germany, then, if I understand correctly, the entire worldwide income is to be taxed in Germany. In our case, the residence and ordinary place of abode are clearly in the UAE, but my partner wants to buy an apartment in Germany and rent it out to third parties. He would thus receive income from renting and leasing. How should this income be taxed? Are the earnings subject to taxation at all? If so, at what tax rate? If my partner buys an apartment in Germany and sells it within 10 years, how would the sales proceeds have to be taxed?
Dear inquirer,
First of all, thank you very much for your inquiry, which I would be happy to answer based on the information provided and in the context of your initial consultation. The response is based on the facts presented. Missing or incorrect information about the actual circumstances can affect the legal outcome.
If you do not have a residence or habitual abode in Germany, you are subject to limited tax liability in Germany if you earn certain income specified in the Income Tax Act. This includes rental income from the leasing of real estate. The rental income minus the costs associated with the leasing are the income from rental and leasing that are subject to German income tax.
The purchase of the apartment does not establish a residence unless there is personal use.
Any profit made from a sale within the next 10 years would also be subject to limited income tax liability.
An income tax return for limited tax liability must be submitted, in which the income is disclosed. The tax rate is income-dependent and ranges between 15.8% and 42% income tax plus a 5.5% solidarity surcharge.
I hope that these details have provided you with a sufficient overview of the situation within the scope of your inquiry and initial consultation.
Kind regards,
Michael Herrmann
Diploma in Financial Management
Tax advisor
