Freelance income from DAB countries, evidence
October 12, 2009 | 70,00 EUR | answered by Dipl.BW/SB Ulrich Stiller
As a self-employed concert pianist, I occasionally receive performance or teaching fees from abroad (European countries with double taxation agreements). On the tax tip page of Manager magazine, I read an article (http://www.manager-magazin.de/geld/geldanlage/0,2828,413133-3,00.html) with the following paragraph: "Foreign income is generally tax-free up to an amount of 10,000 euros. If the amount is higher, you must prove that the income earned abroad was actually taxed or that taxation was waived in the country where you were working." Since this article refers to Annex N, my 2 questions are:
1) Does this regulation also apply to self-employed income?
2) By which law or regulation is it stipulated that proof of taxation in a foreign country is only necessary for income above 10,000 euros?
This is particularly important for me, as such proof is rarely provided to me, as negotiations usually only involve net fees.
I am aware that all of this income must be declared on Annex AUS due to the progression clause. Thank you for your help.
Dear inquirer,
thank you for your inquiry, which I would like to answer based on the information provided and in the context of your situation as follows:
Section 50d paragraph 8 of the Income Tax Act (EStG) is to be applied, which reads as follows:
"If the income of a resident taxpayer from employment (§ 19) is to be excluded from the assessment base of German tax under a double taxation agreement, the exemption shall only be granted in the assessment, irrespective of the agreement, if the taxpayer proves that the state entitled to taxation under the agreement has waived this taxation right or that the taxes imposed on the income in that state have been paid. If such proof is provided after the income has been included in the income tax assessment, the tax assessment shall be amended accordingly. Section 175 (1) sentence 2 of the Tax Code shall apply mutatis mutandis."
It is evident from this provision that the proof requirement only applies to income from employment.
The so-called de minimis threshold of 10,000 euros for income from employment is regulated by a leaflet on the tax exemption of foreign income pursuant to Section 50d paragraph 8 EStG - BMF-21.7.2005 IV B 1-S 2411-2/05 - and under section 4.2. (Determination in case of missing proof). According to this, proof is not required if the employment income determined under German law does not exceed 10,000 euros in total for the respective assessment period.
As mentioned, this regulation does not apply to your self-employed, freelance activity. You must determine the profit yourself, either through income-surplus calculation or through balancing.
I hope my explanations have been helpful to you.
Sincerely,
Ulrich Stiller
Tax consultant
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