# When do I become taxable in Germany?



## Melissa58275

Hi, as I firm up my post-US retirement plans to spend as much of 2015 as possible in Europe, some questions have arisen regarding taxes and residency visa. Hoping someone here can confirm or correct some assumptions I've been making.

Does my U.S.-derived income (withdrawals from tax deferred retirement savings) become taxable in Germany if I stay in the country more than 183 days, as it does in Spain, France, etc.? That's been my working assumption, but no one has confirmed it yet. 

And if I have a long-term visa to stay in Germany for say, nine months, would I be considered by Germany to be a taxable resident for that period whether or not I am physically in Germany all that time or not (i.e....even if I spend 4 of those months in France and Spain...meaning I'm technically NOT in Germany for 183 days out of the year). 

Finally, my working plan is to arrive in Germany without visa (under the 90-day tourism allowance) and then to apply for an extended stay visa once there. Unlike those folks who bought in Hof (see thread about residence denied) I got a very positive response to an inquiry at the local Ausländerbehörde during a recent vacation visit to Germany. I assume that, being financially savvy, the German government will date the beginning of my extended visa (and presumably my potential tax residency) from my arrival in Germany and not from the date of application or granting of the extended visa. Does anyone know if I'm being too pessimistic and that no, I may get a pass on the first 60 or so days before I apply and I am still simply a tourist and not a resident?

Of course, if possible, I'd like to arrange my plans to avoid becoming a tax resident of Germany in 2015, when I expect to be in and out of the country and probably not actually there for a full 6 months. But since I plan to take advantage of the ability to relatively easily get an extended stay visa in Germany to travel in other Schengen countries beyond the 90-day limit, I'm willing to pony up for it, if I must. Particularly since I may end up there more permanently in 2016 and beyond, anyway!


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## Bevdeforges

Actually, the 183 day thing is nothing more than a guideline. If you spend 183 days (i.e. over one-half the tax year) in a country, it is usually more or less "assumed" that you are tax resident there.

Actual determination of tax residence, however, is a much more subtle sort of thing. It's normally considered to be where you have your "primary centers of interest" - which is a fancy way of saying where you live. And that is evidenced by where you keep your belongings, where you have your main financial and legal relationships and other obligations, etc.

As far as your US derived income is concerned, you should take a look at the US-Germany tax treaty - which usually specifies where taxes are paid on such things as government pensions (i.e. US SS) and other foreign-source income. Germany - Tax Treaty Documents (hint: skip the treaty text and go to the "technical explanations" - they're usually easier to understand).

The tax deferred retirement accounts are kind of a special item - and as far as I know, are not normally covered in most tax treaties. Many governments consider them to be "savings" that were funded when you were not under their jurisdiction and thus your "withdrawals" from your IRA or 401k may well be considered simply transfers of capital (i.e. living off your savings) as long as you are paying the US taxes on the withdrawals as you're supposed to.
Cheers,
Bev


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## Melissa58275

Hi Bev. Well that would be good news about the 401(k) savings. And it sounds, as if it's POSSIBLE that for phase I/year 1 retirement, I may be able to claim that my only real residence is still in the US, so I'd be subject only to the taxes there. In subsequent years, assuming all works out as planned, I would have a more permanent residence somewhere in Europe...Germany, France or Spain, depending on what tickles my fancy in Phase I...and I would become taxable there. But for that first year, if I'm living out of a suitcase and in temp. housing wherever I am, maybe I wouldn't be taxed in both places. (As I'm sure you know, Uncle Sam will get his pound of flesh no matter WHERE I am!)


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## Melissa58275

*So what is the German law determining taxability?*

OK, Bev, I've printed out a copy of the treaty's technical explanations and am plowing through it. It has illuminated a couple of issues about where my pension and social security taxes would be taxed if I am deemed to be resident in two countries. But I still don't know how it is determined by Germany that I am a resident. 

I gather from your answer that the 183 day guideline holds for Germany. Clearly, however, my primary interests, financial and otherwise would still be in the US in 2015, since I would continue to own my home here and all my investments are here. So how can I find out if it is possible to have an extended stay visa in Germany, and presumably an address in Germany for more than 183 days out of the year and still NOT have my income considered taxable there? 

At this point, really what I want to know is will I have to file a tax return? I'm not yet at the point of worrying about whether the tax hit will be bigger (probably) or smaller if I pay German taxes and get a credit for them toward my US taxes.


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## beppi

The German tax code does not know any 183 day rule. Taxability hinges on having a permanent abode in Germany - that is a place (rented or owned apartment, room, whatever) that you COULD use if you wanted. Any visa beyond the standard Schengen type (allowing 90 days stay out of every 180 calendar days) requires a registered abode and thus makes you tax liable.
Tax treaties can overwrite the general tax code in certain areas. I don't know the US-German one, but I know that such matters are usually VERY complicated and you definitely need a good tax consultant!


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## Melissa58275

As I suspected, Beppi. Fortunately, my reading so far indicates that much of my income --withdrawals from IRA and 401(k) savings-- will either only be partially taxed or not taxed at all. But now I know I'll have to plan on filing and finding a consultant!


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## Nononymous

I'm by no means an expert on this, so take my advice for what it's worth.

There is no magic alarm clock that makes a tax collector suddenly appear at your door after 183 days in Germany, that is certainly true.

In your case, I would take that view that you're only temporarily in Germany for 2015. You may have a residence permit for 9 or 12 months, but you'll be in rented accommodation with the intention of leaving again, and traveling for a good part of that time. If you have *no* German-source income, and your US-source income (pension and 401k withdrawal) looks to be exempt anyway, I'd say you can make a strong case that you don't have any business entering the German tax system. 

It's an honour system in terms of reporting yourself - the Ausländerbehörde will want to see proof of income or savings so that you don't become destitute during your stay, but I don't believe they report any of this to the Finanzamt.

The alternative is to hire a Steuerberater and figure it all out, possibly after you've left because all the reporting for 2015 would happen in 2016.

If you stay longer, you'd need to regularize the situation.


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## Melissa58275

That's even better news Nononymous! If I do start to earn any income in Germany, or when I "regularize" my living situation in one country or another, I'll regularize the tax situation. In the meantime, while moving about, it'll be a relief to know t hat it's only Uncle Sam that I'll have to report to!


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## Nononymous

I would exercise a small amount of caution in taking any of my advice. I'm simply telling you what I would do in the same situation.

If you're concerned, and have serious plans to resettle, you might want to speak to a Steuerberater at some point.


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## Melissa58275

Nononymous said:


> I would exercise a small amount of caution in taking any of my advice. I'm simply telling you what I would do in the same situation. If you're concerned, and have serious plans to resettle, you might want to speak to a Steuerberater at some point.


Understood nononoymous. Sounds like a reasonable plan to me though, given that I don't know where I'll resettle yet. When I arrive, I'll consult with my German friends about the need for a Steuerberater even for this first year of travel and partial residence in Germany. My guess is they'll agree with you though... Not necessary at this point.


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## Nononymous

My experience has been with the academic world, which may be a special case. Quite typically when professors come for a year's sabbatical, they draw salary from their home institution, but stay out of the German tax system. Spouses often work remotely if they have the right sort of job, and again they just pretend they are still in the US or Canada for tax purposes. (This all works because one obtains the residence permit as a visiting scholar with dependents.) Strictly speaking that's probably not 100 percent kosher, but if it's a temporary visit for a year, I've never heard of it being a problem. In fact, I suspect that if you went down to the Finanzamt in that situation and asked what to do, you'd be told to forget about it and go away.


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## Bevdeforges

Melissa, you don't get to choose where you are tax resident. It's the "facts and circumstances" of the case that determine where you are tax resident. I don't know the precise regs that are used in Germany, but normally it's determined by where you have your "center of interests."

Simply maintaining a residence in the US isn't sufficient. If you are, in fact, living in Germany for the bulk of a given tax year (i.e. calendar year) then you are considered tax resident there. That said, if you return back "home" after a single year, it may be a moot point - with no penalty for not having filed a German return. If you continue to live in Germany after that initial year, then your intention will be deemed to have been to become resident in Germany.
Cheers,
Bev


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## Nononymous

That's sort of my point. If you're in and out within a year, with all your income from US sources, it's not likely to be an issue. (Will you file a German tax return by mail six months after you've left?) If you stay on for the long haul, the tax clock begins when you arrive, of course.


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