What role does the residency rule play in the double taxation of retirees?
March 5, 2023 | 110,00 EUR | answered by Albrecht Schneider
Dear tax advisor,
my name is Felix Widmann and I am a retiree. Over the past years, I have worked both in Germany and abroad, acquiring pension entitlements in both countries. Now I fear that I could be at a disadvantage due to the double taxation of my pensions.
My current place of residence is in Germany, but I also have a residence abroad, as I regularly spend my retirement there. I am now wondering what role the residence rule plays in the double taxation of retirees and whether I may have to fear potential tax disadvantages.
I am concerned that due to my international living situation, both countries may claim taxes on my pensions, resulting in a significant portion of my income being taxed. Are there ways to avoid or at least minimize double taxation? What tax regulations apply in such cases, and what steps should I take to optimize my tax situation?
I look forward to your expert advice and thank you in advance for your help in clarifying my tax-related questions regarding the double taxation of retirees.
Sincerely,
Felix Widmann
Dear Mr. Widmann,
thank you for your question regarding double taxation of pensions in relation to your international living situation. As a retiree who has worked both in Germany and abroad, acquiring pension entitlements in both countries, it is understandable that you are concerned about potential tax disadvantages due to double taxation.
The residency rule does indeed play an important role in the taxation of pensions. In principle, Germany has the right to tax all of your income if you have your residence here. This means that as a German taxpayer, you must pay taxes on your worldwide income in Germany. However, there are provisions in the double taxation agreement between Germany and the other respective state that are intended to prevent you from having to pay taxes in both Germany and abroad for the same income.
In your case, it is important to check if there is a double taxation agreement between Germany and the country where you have your second residence. If there is, this agreement will determine which income is taxed in which country and how double taxation can be avoided or at least minimized. It may be necessary for you to apply for a certificate to apply the double taxation agreement in your case in order to benefit from the provisions.
It is advisable to seek advice from an experienced tax advisor who is familiar with international tax regulations. They can examine your individual situation and provide you with specific recommendations on how to optimize your tax situation. There may also be tax-efficient structuring options available to avoid double taxation.
I hope this information is helpful to you and I am available for any further questions you may have. Thank you for your trust and contribution.
Sincerely,
Albrecht Schneider, Tax Advisor
