Emigrating to the USA with continued payment from Germany - Tax issues
January 22, 2016 | 25,00 EUR | answered by StB Patrick Färber
Hello,
I (German citizen) emigrated to the USA in mid-2015, no longer have a residence in Germany, and got married in the USA (to a US citizen).
I continue to receive a monthly payment from my former German employer due to a non-compete clause. I did not work in the USA in 2015.
For my tax returns in 2015/2016, I have the following questions (related only to the German tax return, the topic of the USA is completely different).
1) For 2015, I am using ESt 1 A (unlimited tax liability, confirmed with the responsible tax office). I do NOT want to file jointly. Do I have to declare the marriage at all or can I simply skip this information?
2) In the USA, after moving my residence in 2015, I made a small profit with stocks. However, together with my other interest income in Germany, I am below the tax-free allowance. Do I need to declare the foreign profit somewhere separately in my tax return?
3) In 2016, I will be working in the USA and continue to receive compensation from my old employer. I will use ESt 1 C (limited tax liability) for my tax return. Is it correct that only the German income should be declared here and that I can expect to receive withheld tax back?
Thank you.
Dear inquirer,
Regarding your questions considering your fee, I would like to provide the following information:
1) On form EST 1 C, it is correct to indicate marriage, and in the tax assessment form, you must check "individual assessment of spouses". You only need to provide the name and address of your spouse.
2) If your total capital gains are below the tax-free allowance, there is no need to declare them (check if you are eligible to receive any withheld capital gains tax back as part of the beneficial tax assessment).
3) Form EST 1 C is generally correct, and the domestic income tax deduction is initially accurate. However, according to the Double Taxation Agreement (DBA), the country where you are RESIDING (in this case, the USA) has the right to tax payments from non-competition clauses. Therefore, you should suggest to your former employer to submit an application for exemption from income tax under the DBA to their tax office so that the income tax deduction can be avoided. Alternatively, you can also submit the application yourself. A retrospective assessment for limited tax liability with residence in a third country is no longer possible (only with EU residence).
Best regards,
P. Färber, Tax Advisor
