Ask a tax advisor on the topic of Double taxation

Tax treatment of spouses during foreign assignment

April 15, 2020 | 25,00 EUR | answered by Steuerberater Knut Christiansen

Good day,

I have been seconded by my German employer to a non-European country for three years. I still have a residence in Germany and am subject to unlimited tax liability. There is a double taxation agreement with the host country, and as I stay there for more than 185 days, the right to tax is assigned to the foreign country and I also pay income tax there.

Now to the question: my wife initially accompanied me, but will now return to Germany alone and take up employment there. What does this mean from a tax perspective? Will only her income be taxed in Germany, or does this have any influence on my tax situation during the secondment? Which tax class would apply to my wife in this case? Currently, I am in tax class 3, but I do not pay taxes in Germany. Could my wife then be placed in tax class 3?

Steuerberater Knut Christiansen

Good morning and thank you for using frag-einen.com!

I would like to answer your question as part of an initial consultation and taking into account the fee involved.

Assuming that you are subject to unlimited income tax liability in Germany, your wife's income will not affect the taxation of your foreign income.

In principle, if you are subject to unlimited tax liability in Germany, you could still be jointly assessed with your wife. However, your foreign income is usually taken into account when calculating your joint tax rate (progression clause). This means that domestic income (your wife's income) will be taxed at a higher rate. She could theoretically choose tax class 3. In this case, however, you may have to expect a tax payment due to the progression clause, as the tax deduction for class 3 is lower. Only in the context of the tax assessment would her personal tax rate be applied. I would therefore recommend switching to tax class combination IV/IV. This way, your wife's tax deduction is higher, making a tax payment less likely.

I hope this answers your question, if not feel free to ask further questions.

I would like to point out that this forum cannot replace a detailed and personal tax consultation, but is mainly intended to provide an initial tax assessment. By adding or omitting relevant information, the legal assessment of your issue could be different.

Best regards,

Knut Christiansen
Tax advisor