Scholarship USA, German income
May 30, 2011 | 25,00 EUR | answered by Michael Herrmann
I am a student in the USA and receive a scholarship there for my living expenses (approximately $19,000). For about half of the year, this is considered a pure scholarship, therefore falls under the tax agreement between Germany and the USA and is not taxed in the USA. In the other half, I am a teaching assistant, so my scholarship is considered as income and is taxed in the USA.
During the semester breaks, I work independently in Germany for a few weeks. My earnings are approximately 1500 Euros. Am I liable for value-added tax? How do I need to declare this income in Germany? To what extent will my US scholarship be taken into account in Germany? (Especially since, to my knowledge, scholarships in Germany are tax-free?)
Dear inquirer,
First of all, thank you for your inquiry, which I would be happy to answer based on the information provided and in the context of your situation for an initial consultation. The response is based on the facts presented. Missing or incorrect information about the actual circumstances can affect the legal outcome.
In answering your question, I assume that you do not have a residence or habitual abode in Germany due to your studies in the US.
In this case, you are subject to limited tax liability in Germany. You must declare and pay taxes on the income of 1,500€ earned in Germany. Value-added tax can be avoided through the small business regulation up to an annual turnover of 17,500€. The US scholarship would then be irrelevant, as it is income not earned in Germany. A tax return for limited tax liability is required (Form ESt 1C).
If you are actually subject to unlimited tax liability in Germany because you still have a residence here, the tax exemption status of the scholarship needs to be examined. Scholarships are tax-exempt when they are granted directly from public funds or by intergovernmental or supranational institutions to which the Federal Republic of Germany is a member. Scholarships awarded by associations or foundations are also tax-exempt. However, one of the requirements for tax exemption is that the recipient is not obligated to provide a specific scientific or artistic service or to perform employee duties in connection with the scholarship. The American salary is then subject to the progression clause.
I hope these explanations have provided you with a sufficient overview of the situation within the scope of your inquiry and this initial consultation, and remain
Yours sincerely,
Michael Herrmann
Dipl.-Finanzwirt (FH)
Tax consultant
