Ask a tax advisor on the topic of Double taxation

Income tax class, double taxation, foreign assignment

December 6, 2010 | 30,00 EUR | answered by Michael Herrmann

Good day,

M and F, both Germans residing in DE and BE, got married in 2010. From 2011 onwards, they are considering changing their tax class to III/V.

Scenario:

Husband M
- M was sent by his German employer to Brussels for 2 years to work at an EU institution in 2010.
- He continues to receive his salary from his German employer during this time; the income tax (tax class I) is still automatically deducted and paid to the German tax authorities.
- M receives daily allowances from his Brussels employer, which are not subject to taxation under Belgian law.
- After registering in Belgium, he now has two residences (the German residence will not be dissolved due to the expected return and regular visits for maintaining social contacts).
- However, M is not considered a Belgian resident under the BE-DE double taxation agreement because the Belgian residence is not considered a long-term "domiciliation."

Wife F
- F (previously in tax class I) moved to Brussels with her husband M.
- Like M, F also has two residences.
- She found work in Belgium in 2010 and is considered "domiciled" under the Belgian Income Tax Act. Therefore, she is subject to (high) Belgian income tax.

Is it possible, given the scenario described, to apply for tax class III for husband M (and tax class V for wife F)? Or are there even more financially attractive alternatives?

Michael Herrmann

Dear inquirer,

First of all, thank you very much for your inquiry, which I would be happy to answer based on your information and in the context of your initial consultation. The response is provided according to the description of the situation. Missing or incorrect information about the actual circumstances can affect the legal outcome.

The tax class combination III/V is only possible if the spouses meet the requirements for joint assessment.

This does not seem to be the case based on the description of the situation, as, according to the interpretation of the double taxation agreement between Germany and Belgium, only the husband has his residence in Germany. Therefore, the wife is not subject to unlimited taxation in Germany, and joint assessment is not possible. A different taxation than the existing one is not possible.

Since the tax classes only regulate the interim withholding of income tax as prepayment, any excess amount can be reclaimed through an income tax return. The amount of income tax cannot be influenced by the choice of tax classes.

I hope that with this information, I have provided you with a sufficient overview of the situation within the scope of your inquiry and this initial consultation.

Best regards,

Michael Herrmann
Dipl.-Finanzwirt (FH)
Tax Advisor