Taxation of rental income from the USA
August 2, 2011 | 30,00 EUR | answered by Dr. Yanqiong Bolik
An American has been living and working in Germany since mid-2010. In 2010, he had rental income from the USA throughout the year and earned income from work during his time in the USA.
1. How will the rental income be taxed - exemption or offsetting?
2. Am I correct in assuming that the income from work in the USA is subject to progression clause in Germany?
Thank you.
Dear inquirer,
Thank you for your inquiry. Based on the information provided, I am happy to answer your question within the scope of an initial consultation, considering your input as well as the rules of this platform. The response is based on the facts presented. Missing or incorrect information regarding the actual circumstances may affect the tax outcome.
1. According to your statement, you were resident in Germany in 2010 (center of life interests in Germany in 2010).
2. Regarding the property in the USA from which you earned rental income in 2010, the USA has the right to tax (Art. 6 (1) DBA-USA).
3. Compensation (income from dependent employment) from the USA is taxed in the USA if one of the following conditions is met:
i) You stayed in the USA for more than 183 days in 2010,
ii) The compensation is paid by an employer not resident in Germany, or
iii) The compensation is attributed to a permanent establishment in the USA of this employer.
4. However, paragraph 3 does not apply generally to supervisory board and board of directors compensation, compensation for artists and athletes, pensions, retirement benefits, public service, visiting professors and teachers, students and trainees, members of the regular crew of a ship or aircraft. Special regulations apply to these cases.
5. To avoid double taxation, the income to be taxed in the USA is excluded from the basis for German taxation (exemption). However, Germany retains the progression clause. This means that you should indicate the amount of income, source of income, and type of income in your income tax return.
I hope that this initial consultation, based on your input, has given you an overview of the situation and has been helpful to you.
For further questions, I am available for a personal consultation.
Best regards,
Dr. Yanqiong Bolik
Tax consultant
Bildstöckle 6, 70567 Stuttgart
Email: info@zdbz.de
