English Severance Payment - Relocation of Residence to Germany
May 1, 2012 | 30,00 EUR | answered by StB Kiehne Katja Kiehne
Dear Sir or Madam,
I am currently in the process of completing my German and UK tax returns.
I worked in England until 02.09.2011 (since mid-2006) and had my permanent residence there. On 01.10.2011, I started a job in Germany and moved my residence to Germany (registered on 04.10.2011).
My question concerns where my residence was from a tax perspective between 02.09.2011 and 01.10.2011, as this may have an impact on the taxation of my English severance payment.
I rented an apartment in Germany from 15.09.2011 and had my belongings moved (furniture, etc.) on 15.09.2011, but then only stayed in the apartment for a few days to make it habitable before returning to England to prepare my house, which I still own there, for rental by 30.09.2011 (all documented with ferry tickets, etc.). My final move to Germany was on 30.09.2011.
My question now is from which day I became subject to unlimited income tax liability in Germany, 15.09.2011 or 01.10.2011, as my English employer for technical reasons only paid my last salary, including severance, on 23.09.2011.
Dear inquirer,
In the context of an initial consultation and fee deployment, I answer your question as follows:
According to § 1 para. 1 of the Income Tax Act (EStG), you have been subject to unlimited income tax liability since 15.09, as you have had a residence in Germany since that time. According to § 8 of the Tax Code (AO), a residence is where someone has a dwelling under circumstances that suggest they will maintain the dwelling. This is the case in your situation. Registration with the registration office is not binding for tax purposes, it only has indicative effect. You have also had the residence since 15.09, as you were able to use the dwelling from that time.
Additionally, you may have had a residence in Great Britain until 30.09. Therefore, you were likely resident in both Great Britain and Germany (dual residency). According to Art. 4 para. 2 of the Double Taxation Agreement (DBA), it must then be determined where your habitual abode is located. If this question cannot be answered, then it must be determined where the center of your life interests lies. Since you can prove that you only moved on 30.09, it could be argued that your center of life interests was in Great Britain up to that point. While this does not prevent you from already being subject to unlimited income tax liability, it does have an effect on the allocation of tax rights of the respective countries.
I am happy to provide further advice to you under the usual fee conditions.
Best regards,
Katja Kiehne
Tax consultant
Master of Business Consulting (M.BC.)
Dipl.-Finanzwirtin (FH)
Eifelplatz 5
50677 Cologne
www.katjakiehne.com
