What tax aspects need to be considered in the case of double taxation of employees?
November 16, 2023 | 120,00 EUR | answered by Albrecht Schneider
Dear tax advisor,
My name is Siegfried Fuchs and I have been working as an employed worker in Germany for several years. In my job, I have the opportunity to work in other countries and be stationed there for a certain period of time. I have heard that there may be a risk of double taxation with such international activity. I am concerned that this could lead to financial disadvantages and would like to know which tax aspects I need to consider.
Currently, I am tax liable in Germany, as I have my residence here and have registered my primary residence. However, if I work abroad for a certain period of time, I may also become tax liable there. This means that I would have to pay taxes in both countries, which would of course lead to double taxation.
My concerns are that I may suffer financial losses as a result and I do not know how to protect myself against this. I want to ensure that I do not pay more taxes than necessary and do not encounter any problems with the tax authorities.
Therefore, my question to you as a tax advisor is: What tax aspects need to be considered in the case of double taxation of employees and how can I protect myself against it? Are there possible solutions or strategies to avoid or at least minimize double taxation?
I would be very grateful if you could help me with this question and inform me about the tax consequences and possibilities.
Thank you in advance for your support.
Sincerely,
Siegfried Fuchs
Dear Mr. Fuchs,
Thank you for your inquiry regarding double taxation in international employment. It is understandable that you are concerned, as double taxation can lead to financial losses. I will be happy to explain the tax aspects that you should consider in this situation, as well as possible solutions and strategies to avoid or minimize double taxation.
In general, double taxation can occur in international employment when both the country of residence and the country of employment have the right to tax you. In your case, you are taxable in Germany as you are a resident here. However, if you work abroad for a certain period of time, the country of employment may also have the right to tax you. This can result in double taxation, as you would have to pay taxes in both countries.
There are various ways to avoid or minimize double taxation. One of them is the so-called Double Taxation Agreement (DTA) between the countries involved. A DTA determines which country has taxing rights and how double taxation can be avoided. Often, a DTA stipulates that the country of employment has taxing rights for income from employment if you work there for a certain period of time.
Another approach to avoiding double taxation is the credit method or the exemption method. With the credit method, taxes paid abroad are credited against domestic tax to avoid double taxation. With the exemption method, taxes paid abroad are not credited, but you are exempt from domestic tax.
It is important that you familiarize yourself with the tax regulations in the countries involved before starting your international employment, and if necessary, consult a tax advisor or an expert in international tax law. They can help clarify the tax aspects and take appropriate measures to avoid double taxation.
I hope this information was helpful to you and I am available for any further questions.
Best regards,
Albrecht Schneider
