IRA (Individual Retirement Account)
April 20, 2012 | 35,00 EUR | answered by Dr. Yanqiong Bolik
My wife and I are American citizens living in California. We are both retired, do not receive any income in Germany, and have IRAs in the United States. We would like to spend a few years in Germany and therefore would need to have a residence there.
We have been informed that as residents of Germany, we would be subject to German income tax. How would interest, dividends, and capital gains, which are taxed in the US only upon withdrawal under the IRA umbrella, be taxed in Germany in this case?
Dear inquirer,
Thank you for your inquiry, which I am happy to answer taking into account your input and the rules of this platform.
Please note that my explanation is based on the situation presented, and that adding, omitting, changing information, or the ambiguity of information can affect the tax result.
It is correct that with a residence in Germany, you will be subject to unlimited income tax liability. Your worldwide income is subject to German income tax.
According to the US/Germany tax treaty, in general, these pensions from IRA in the United States, which are for your former non-self-employed work or pensions where the economic burden of contributions is borne by a private employer, can only be taxed in the country where you will be resident (Germany), and should be exempt from taxation in the US. However, through a saving clause (Art. 1 Para. 4 US/Germany tax treaty), you may be subject to taxation in the United States according to US law for a period of ten years after your move if you were a US citizen before the move.
I hope this has been helpful to you.
If there are still any uncertainties, please feel free to use the follow-up function.
Best regards,
Dr. Yanqiong Bolik
Tax Consultant
Bildstöckle 6, 70567 Stuttgart
Tel: +49 (0)711 / 2132 1815
Email: info@zdbz.de
www.steuerberatung.zdbz.de
