How does double taxation affect my tax burden?
December 3, 2022 | 110,00 EUR | answered by Guido Hoffmann
Dear tax advisor,
I am Lorenzo Beck and I have a question regarding double taxation and how it affects my tax burden. I am a self-employed entrepreneur and operate a small business in Germany. Lately, I have been earning income from abroad as well, as I have also established business relationships there.
My concern now is that I may have to pay taxes on my foreign income both in the foreign country and in Germany, which would result in double taxation. I am wondering if there are ways to avoid or at least reduce this double taxation in order to optimize my tax burden.
I have heard that there are double taxation agreements between different countries that are meant to prevent double taxation. However, I am unsure if these agreements apply to my specific case scenario and how I can benefit from them.
Could you please explain to me how double taxation affects my tax burden and what measures I can take to minimize it? Are there any specific regulations or agreements that I can use to improve my situation?
Thank you in advance for your help and advice.
Sincerely,
Lorenzo Beck
Dear Mr. Beck,
Thank you for your question regarding double taxation and how it may affect your tax burden as a self-employed entrepreneur. It is understandable that you are concerned about having to pay taxes on your income earned abroad both in the foreign country and in Germany, which would result in double taxation. Indeed, double taxation can lead to an unnecessarily high tax burden, and it is important to take measures to avoid or reduce it.
Double taxation occurs when a taxpayer earns income in two or more countries, and both countries have the right to tax that income. To avoid double taxation, many countries have entered into double taxation agreements (DTAs). These agreements determine which country has the right to tax certain income and how double taxation can be avoided.
In your case, as a self-employed entrepreneur with income from abroad, it is important to check whether Germany has a DTA with the country from which you earn income. If so, you should determine if and how you can benefit from the provisions of the DTA. Typically, DTAs include provisions for avoiding double taxation through tax credits or exemptions for taxes paid abroad.
To improve your situation and minimize double taxation, I recommend seeking advice from a tax advisor or a specialized tax lawyer. An expert can analyze your individual situation and provide you with specific recommendations on how to optimize your tax burden.
In addition to DTAs, other measures can also help avoid double taxation, such as utilizing tax credits, establishing a foreign subsidiary, or structuring your business activities. It is important to seek professional advice to find the solution that is right for you.
I hope this information is helpful to you and answers your question about double taxation. If you have any further questions or require more detailed advice, I am at your disposal.
Best regards,
Guido Hoffmann
