Income from Cyprus
April 12, 2013 | 25,00 EUR | answered by Dipl.-Kfm. Frank-Olaf Illiges
Dear Sir or Madam,
I have been working part-time on cruise ships since last year. My contracts range from 6 weeks to 3 months in duration. During the remaining time, or when I am at home (in Germany) between contracts, I receive unemployment benefits for that period. My place of residence is still in Germany. The contracts are signed through a company based in Cyprus. The salary is paid to my German bank account as gross=net from Cyprus.
Now I am wondering if I need to declare the income I received from these ship contracts in my tax return for the year 2012, and if it will now be retrospectively taxed by my local tax office?
Thank you for your response and assistance.
Sincerely,
S.M.
Dear inquirer,
Thank you for your inquiry, which I will gladly answer taking into consideration your contribution and the rules of this platform.
Please note that the situation presented is based on my explanation, and that adding, omitting, changing information, or ambiguity in the information can alter the tax result.
Since you reside in Germany, you are subject to unlimited income tax in Germany on your worldwide income (§ 1 para. 1 Income Tax Act (EStG)).
According to the Double Taxation Agreement between Cyprus and Germany (DTA), remuneration for dependent work performed on board a ship is only taxed in the country where your employer is based (Article 14 para. 4 DTA). Based on your description, this is Cyprus.
To avoid double taxation, Germany credits the tax paid in Cyprus for this income (Article 22 para. 1 DTA). This means that income from your dependent work is subject to income tax in Germany according to German law, on which the Cypriot tax is then credited. If no income tax is due in Cyprus, German income tax on this income will apply.
Furthermore, unemployment benefits affect your income taxation in Germany. While unemployment benefits are tax-free income (§ 3 no. 2 EStG), they are taken into account in determining your income tax rate, which is used to tax your taxable income (= progression clause) (§ 32 b para. 1 no. 1a EStG).
Therefore, you must submit an income tax return for the calendar year 2012 to your competent tax office in Germany, in which you specify not only your unemployment benefits but also your Cypriot income from dependent work. The tax office will then calculate the income tax for the calendar year 2012 based on your income tax return. To credit the Cypriot tax, you must provide the tax assessment from the Cypriot tax authorities.
Kind regards,
Dipl.-Kfm. Frank-Olaf Illiges
Tax consultant
Am Wieksbach 55
33378 Rheda-Wiedenbrück
Phone: 05242/4055666
Fax: 05242/4055677
e-mail: office@illiges-steuerberatung.de
Website: www.illiges-steuerberatung.de
