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Liability for taxation in Germany

Bursary
Stay with employment contract
Double taxation treaty
Limited and unlimited taxation
Tax return
Types of tax

Bursary

If you are spending your research stay in Germany in the scope of a bursary, under specific prerequisites you are exempted from paying tax under German income tax law; for example, those receiving a bursary from the DAAD or Alexander von Humboldt Foundation are exempted from paying tax. To be certain of the tax regulations with regard to your bursary, please enquire of your bursary provider or at the Welcome Centre/International Office of your research establishment.

Stay with employment contract

If you have an employment contract with a German research establishment for the period of your research and are working in Germany for longer than six months, then you shall be subject to taxation in Germany for the calendar year for the income and assets that you generate or earn worldwide. With some countries there is an agreement that university lecturers and researchers travelling abroad for a maximum of two years to research at a public research establishment may pay tax in their home country. These agreements are based upon the so-called double taxation treaty.

Double taxation treaty

To avoid foreigners being required to pay tax in both Germany and their home country, so-called double taxation treaties are in place with many countries. These regulate the country in which tax is required to be paid. You can find the individual treaties with various countries here.

Limited and unlimited liability for taxation

In Germany a distinction is made between limited and unlimited obligation to pay taxes, depending on whether you have a permanent residence in Germany and habitually reside in the country.

Unlimited liability for taxation

Unlimited liability for taxation exists where a person has a permanent residence in Germany or resides here for longer than six months in the respective fiscal year.

The tax that falls due for payment is deducted by the employer, i.e. taken out of the salary. Income earned in another country following relocation to Germany also needs to be listed in the tax return (worldwide income principle).

In this case it is important which tax treaties exist between Germany and your home country. The so-called double taxation treaty often applies here. This states that income or financial assets are only required to be taxed in one country, depending on regulations regarding the respective agreement. Information on the treaties with individual states can be found here.

Limited liability for taxation

Limited liability for taxation exists where the person concerned does not initially have a permanent place of residence in Germany and is also not resident in Germany for a period of more than 6 months. However, one prerequisite is that the person receives income from self-employment or employment or has other income from Germany.

The income of the employee is taxed directly at source (place of work principle), as the financial authorities cannot access the person liable for taxation and his assets due to the fact that he does not have a place of residence or habitual residence in Germany. For example, if someone is employed at the university, then wages shall be taxed there directly; the tax rate here is currently a fixed rate of 15 percent. However, all professional expenses associated with the employment may be deducted, so long as this is applied for in good time.

Only income earned in and from Germany is relevant for limited liability for taxation.

Tax return

Who is required to submit a tax return?

The good news is that not everyone is required to submit a tax return.

If you are obliged to submit a tax return, the tax office will assume that insufficient taxes have been deducted from the employee. This applies, for example, in the following cases:

  • If, beyond your wages, you have additional income totalling more than 410 euros per year. This may be, for example, income from letting or leasing, as well as pensions.
  • If you and your spouse or partner have been paid wages and one of you is taxed according to tax bracket V or VI or if you and your spouse or partner have selected tax bracket IV with factor.
  • If the tax office has granted a tax allowance for you, for example for the costs of travelling to work or for childcare costs, and your wages as a single person are more than 11,000 euros per year or, as a couple, more than 20,900 euros per year.
  • If you have received wages simultaneously from multiple employers.

Therefore, if you are a single visiting academic or scientist from abroad working for a single employer in Germany, you are not required to submit a tax return.

However, a voluntary tax return may be worthwhile in some circumstances. Submitting a tax return is worthwhile in particular if

  • you have not been in an uninterrupted employment relationship as employee over the course of a calendar year.
  • (for example, if you only take up your position in August, you will pay tax for the whole year. With a voluntary tax return you have the opportunity to recover the tax already paid.)
  • the amount of your wages varies in the course of the calendar year.
  • your tax bracket has changed in the course of the year.

Tax return

At the end of a calendar year you have the opportunity (if your stay is over 183 days) to submit a tax return to the tax office in your place of residence. In some circumstances you can use this to receive a reimbursement of some of the tax that you have paid. The documents required for this can be obtained from your local tax office or town hall. The tax return should be submitted to the local tax office by May of the following year, but at the latest by December 31. After being processed by the tax office you will receive a tax assessment, stating whether and to what amount tax will be reimbursed to you.

The most important documents for the tax return are the tax ID number, your bank details and a print out of the electronic wage tax certificate. The documents that you require for the fields of work, insurance etc. can be found here.

Types of tax

Income tax

Income tax is deducted directly from your salary and transferred to the state by the employer. The amount of income tax depends on the tax bracket you are in. In addition, income and marital status are also decisive. All persons registered in Germany are assigned a so-called identification number, which retains its validity throughout their lifetime. They usually receive this number through the post a few days after registering at the Citizens' Office. It is necessary if you are to commence employment with liability for taxation.

Church tax

Church tax, collected by the state, is a particular feature in Germany. Under certain circumstances religious communities have the opportunity to have church tax collected by the tax office. For the major churches church tax (approx. 9 % of income tax) is collected by the state together with wage tax and deducted automatically from your monthly salary. You are therefore required to declare your religious affiliation when registering at the Resident Services Office.

For further information with detailed examples of the two tax forms please read our information flyer, which has been provided to us by Fischer / Fechner / Almasi Steuerberater Rechtsanwalt Partnerschaftsgesellschaft.

Sources:

Federal Ministry of Finance, Euraxess Germany, Vereinigte Lohnsteuerhilfe e.V. 


last update: 15.05.2017 

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