Taxation for residence abroad
March 26, 2012 | 30,00 EUR | answered by Michael Herrmann
I live abroad and am not liable for taxes in Germany. Currently, I am living in Switzerland but will be relocating to Canada in a few months.
I plan to participate in a closed real estate fund in Germany. The profit distribution is rental income. (Expected income EUR 15,000 - 20,000 per year.) Is this income necessarily taxable in Germany, or can I declare it in my country of residence according to the Double Taxation Agreement?
How does it work if I participate in a corporation that owns and rents out properties? In this case, the distribution is considered capital gains. (The corporation is taxed on a corporate level in Germany, of course.) Will this capital gain result in a tax liability in Germany?
Dear inquirer,
First of all, thank you for your request, which I would like to answer based on the information provided and in the context of your question during an initial consultation. The response is based on the facts presented. Missing or incorrect information about the actual circumstances can affect the legal outcome.
According to the Double Taxation Agreement with Canada, Germany has the right to levy income tax in both cases.
In the case of rental income, the principle of location applies according to Article 6 of the Germany-Canada DTA. The income is taxed in Germany. A tax return for limited tax liability is required.
The participation income is income from capital assets according to § 20 of the Income Tax Act. They are subject to capital gains tax at a rate of 25% (flat tax). The residence of the debtor of the capital gains is decisive for the tax deduction (Article 10 Germany-Canada DTA). The tax deduction has a final effect, so no tax return is required.
However, according to Article 10 paragraph 2 of the Germany-Canada DTA, the German withholding tax must not exceed 15%. The excess amount can be refunded through a refund procedure upon request.
I cannot comment on the taxation in Canada as a German tax advisor.
I hope that these explanations have given you a sufficient overview of the situation in the context of your question and this initial consultation.
Sincerely,
Michael Herrmann
Dipl.-Finanzwirt (FH)
Tax advisor
