Residence Germany - Income from self-employment in Switzerland.
April 10, 2013 | 40,00 EUR | answered by StB Patrick Färber
For a freelance activity in Switzerland (author's fee), I received 10,000 CHF without deductions, a flat-rate allowance of 5,000 CHF without deductions, and for dramaturgical work in Switzerland 5,000 CHF minus social security contributions and withholding tax. My place of residence is in Germany. How do I have to declare these amounts in my German income tax return? Please provide the legal basis.
Value added tax does not seem to apply, as there is no taxable turnover in Germany, correct?
Thank you for your answer.
Dear inquirer,
With the information provided, the situation cannot be conclusively answered. However, here are some pointers:
With your residence in Germany, you are generally subject to unlimited tax liability on your worldwide income. The question of which country has the right to tax is governed by the Germany-Switzerland double taxation agreement (DTA).
1) Self-employment activity "author royalties"
According to Article 14(1) of the DTA Germany-Switzerland, such sources of income can only be taxed in Germany. However, if you were to establish a "permanent establishment" or fixed facility in Switzerland through your activity, then Switzerland would have the right to tax. Nevertheless, you would still have to declare the income in Germany due to the so-called progression clause. In the case of authorship, I assume that you carried out this activity from Germany. Therefore, this income should be declared and taxed as freelance income under § 18 of the Income Tax Act (EStG).
2) "dramaturgical activity"
More details would be needed here to categorize the income. Whom did you provide the dramaturgical services to? Did you "perform" yourself (as an actor) or write a piece for a theater performance? The fact that social security and withholding tax were deducted might indicate a (even if temporary) dependent employment. However, it could also be withholding tax for an artistic activity. In Switzerland, self-employed individuals are also subject to social security. I can only briefly list the possibilities here.
- If you are an artist as defined in Article 17 of the DTA (performing rather than creating works), then Switzerland has the right to tax. You must declare your income in Germany under § 18 EStG. These will determine the tax rate for your other taxable income under § 32b EStG. Declaration of income in Annex AUS.
- If it is a "normal" self-employment activity as mentioned above, i.e. without establishing a fixed facility/permanent establishment in Switzerland, the result is as above, i.e. taxable in DE under § 18 EStG.
- If you were to establish a fixed facility in Switzerland (e.g. stay longer than 6 months), then Germany would exempt you, but apply the progression clause again.
- If there is a dependent employment, then Switzerland would also have the right to tax with progression clause in Germany, Article 15.
If you provide me with more details, I can clarify further in the context of follow-up questions!
The VAT issue also cannot be conclusively answered:
Your activity is considered a miscellaneous service.
If it is provided to a business in Switzerland, the service is not taxable in Germany, with Switzerland applying the reverse-charge procedure (deferred tax).
If it is provided to a non-business entity (including public institutions), then § 3a (3) No. 3a) of the VAT Act likely applies, meaning the place of service is in Switzerland, with no German VAT.
If you provide more details, I can offer additional guidance upon request!
Is this sufficient for guidance?
Best regards,
Patrick Färber
Tax Advisor
patrickfaerber@arcor.de
