Freelancer residing in France
April 17, 2012 | 30,00 EUR | answered by Dr. Yanqiong Bolik
Hello,
I have been living in France with my family for several years and worked as a cross-border commuter for a German company until 2009. Therefore, I have always filed my tax return in France.
Since September 2011, I have been working as a freelancer in Saarland with my own practice. I now want to include the profit and loss statement (EÜR) in my tax return, but I am now wondering whether my income should be taxed in France or only in Germany. What exactly is unlimited tax liability, and should I apply for it or not? And what about the income of my wife, who is still working as a cross-border commuter for a German company? Should I specify this separately or should I declare myself as single, as she will not be included in the German tax return anyway?
Thank you!
Dear questioner,
Thank you for your inquiry, which I will gladly answer taking into consideration your contribution and the rules of this platform.
Please note that my explanation is based on the facts presented, and that adding, omitting, changing information, or the ambiguity of information can change the tax result.
Based on your description, you earn income from self-employment with a fixed (permanent) establishment (practice) in Germany. The profits attributable to this fixed (permanent) establishment are taxed in Germany. In France, double taxation of this income is avoided by proportional offsetting of the taxes paid in Germany against French taxes (Art. 20 (2) (a), double letter cc Germany/France Double Taxation Agreement).
Individuals who have a residence or habitual abode in the Federal Republic of Germany are subject to unlimited income tax liability. With unlimited tax liability, the entire worldwide income of the taxpayer is subject to German income tax.
Since you neither have a residence nor habitual abode in Germany, you are not subject to unlimited income tax liability in Germany. However, you are subject to limited tax liability because you earn domestic income from self-employment within the meaning of §49 (1) No. 3 EStG. If your income in the calendar year is subject to at least 90 percent of German income tax, or if the income not subject to German income tax does not exceed the basic tax-free allowance (8004 EUR), you can request to be treated as subject to unlimited income tax. Please note that this does not exempt you from your tax obligations in France. Your French tax liability will continue to be assessed according to French law.
In principle, your tax liability in Germany does not affect how your wife's income is taxed. If you do not apply for unlimited tax liability according to § 1 (3) EStG, you should file a tax return in Germany for individuals with limited tax liability, providing information on your German income.
I hope this information was helpful to you.
If you have any further questions, please feel free to use the follow-up function.
