Tax deductibility of the residence when seconded to Russia?
August 27, 2010 | 20,00 EUR | answered by Oliver Burchardt
Dear Sir or Madam,
I have a consultation request regarding the following question:
My wife is being seconded to Moscow by her public employer from October 1, 2010 for three years. For us (my wife, myself, and our three-year-old daughter), this means that we will be moving to Moscow for this period. Since this is an international secondment and my wife remains unlimitedly taxable in Germany and stays in the social security system, we need to keep our German residence (rental apartment in Düsseldorf) for this time.
My wife's public employer grants tax-free allowances in Germany, including a housing allowance, which amounts to approximately 1,500 euros for three persons - this corresponds to the rent for a 2-room apartment in Moscow, for a 3-room apartment, one would have to pay an additional 700 euros.
Now to my question: since our apartment in Düsseldorf, which would essentially be unused during this time, also costs us around 700 euros in rent monthly, significant rental costs are incurred for us. Are there any possibilities to deduct one or even both apartments for tax purposes - and if so, what steps would need to be taken? For example, if we were to rent a 3-bedroom apartment in Moscow costing approximately 2,200 euros - would our share (2,200 euros rent minus housing allowance of 1,500 euros - so 700 euros) be somehow deductible?
I would like to thank you in advance for your response on this matter.
Sincerely,
Dear inquirer,
thank you for your inquiry, which I would like to answer as part of an initial consultation.
Please note that the tax assessment is based on the description of the circumstances.
The tax deduction of expenses for one of the two residences is governed by the regulations on the double household management. According to this, a residence must be maintained at the place of employment and a residence at the center of life. In your case, however, the center of life is no longer in Düsseldorf after the move, but in Moscow, so the recognition of a double household is not possible. Therefore, deductibility of expenses for the residence in Düsseldorf is not possible in this context.
A different situation could only arise if you are obliged for professional or legal reasons to maintain the residence in Düsseldorf. At least from a tax perspective, this is not the case. According to § 1 para. 2 of the Income Tax Act, German nationals who work abroad and receive their salary from domestic public funds are already subject to unlimited tax liability in Germany by law. Therefore, maintaining a residence in Germany is not necessary.
From a social security perspective, I cannot assess the obligation as well as possible professional obligations to maintain a residence.
However, a deduction would be possible if you temporarily sublet the residence in Düsseldorf. In this case, you would generate rental income, with the rent paid by you in this case constituting advertising costs.
I hope my explanations have helped you.
Oliver Burchardt
Tax consultant
