What Are My Tax Obligations When Living in Germany and Abroad?

Question from MSR, What Are My Tax Obligations When Living in Germany and Abroad?

Answer from AI:

Tax Implications for Part-Time Residents in Germany

1. Tax Obligations Based on Days Spent in Germany:

   • If you spend 180 days in Germany, you are below the 183-day threshold, so you may not be considered a tax resident. However, if you have a permanent home in Germany, even fewer days could classify you as a resident. As a non-resident, only income sourced in Germany (e.g., from a German employer or property) is taxable. If you exceed 183 days, worldwide income becomes taxable.

2. Proving Compliance with the 183-Day Rule:

   • To prove compliance, maintain a detailed record of your days in Germany, such as a calendar, travel tickets, or entry/exit stamps. If you have a home in Germany, this could affect your residency status. Consider filing an annual tax return to clarify your situation.

3. Tax Obligations When Spouse Stays Beyond 183 Days:

   • If your wife stays past 183 days, she becomes a tax resident, making your joint assets potentially taxable in Germany. You may need to file a joint tax return. Be cautious about transferring assets to avoid taxes, as this could trigger tax implications. Consulting a tax advisor is advisable.

4. Taxation of Roth IRA Withdrawals in Germany:

   • Under the US-Germany tax treaty, Roth IRA withdrawals may not be taxed in Germany if already taxed in the USA. Report the withdrawal in your German tax return to ensure compliance and avoid double taxation.

5. Estate Planning and Children’s Residence:

   • German inheritance tax applies to worldwide assets if the deceased was a tax resident. Non-resident children may face higher taxes. Consider estate planning strategies like trusts or wills to minimize taxes. Consulting an international estate planner is recommended.

6. Estate Tax on Assets Above 500K Euro:

   • Assets over 500K Euro may be taxed at 19% if the deceased was a German resident. To mitigate this, use exemptions, lifetime gifts, or adjust your will. Tax-efficient investments or trusts could help. A tax advisor can provide tailored strategies.

Conclusion:
Each situation requires personalized attention. Consulting a tax professional can help navigate German tax laws, ensuring compliance and optimizing your financial structure.