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EXPLAINED: Do I have to declare income from foreign sources on my German tax return?

Aaron Burnett
Aaron Burnett - [email protected]
EXPLAINED: Do I have to declare income from foreign sources on my German tax return?
A German tax declaration form with the box indicating income tax return ticked. Photo: picture alliance / Hans-Jürgen Wiedl/dpa-Zentralbild/dpa | Hans-Jürgen Wiedl

If you're a resident in Germany, you will typically have to declare and pay tax on your worldwide income. But there may be some exceptions in certain cases.

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If you're filling in a German tax return, you are generally legally required to declare and pay tax on all income you earn - wherever in the world you earn it. This is true even if you keep the money abroad.

In most cases, your worldwide income is subject to what's called "unlimited tax liability" - which means that there's no exemptions or discounts on your taxes for money earned abroad - whether its from work or capital gains like the sale of stocks. This is generally even true if Germany doesn't have a Double Taxation Agreement (DTA) with the other country in question.

If, however, Germany does have a DTA - some of your tax might end up getting limited in Germany. This is generally providing that you've paid it in the other country.

For example, the US may apply a withholding tax to payments made to you for freelance services you provide in the US, for example. In this case, the DTA between Germany and the US would allow you to submit documentation proving that you've already paid tax on this payment in the US. That'll prevent you from having to pay tax again in Germany on the amount that actually gets wired to your account.

READER QUESTION: How can I find a German tax advisor?

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Who has a double taxation treaty with Germany?

Germany has concluded double taxation agreements with numerous - but not all - countries and territories. You can check out the German government's dropdown menu here to see which countries are on the list.

German residents earning money in other EU countries should still check this list, as certain tax provisions may be unique to the two countries in question.

READ ALSO: Everything you need to know about paying taxes in Germany

What about rental income?

As a general rule, rental income is taxed in the country where the property is located, meaning you don't have to declare or pay it in Germany. There are some notable exceptions - for example if the property is located in Spain. In this case, you would report this income in Germany.

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What about inheritance?

Some double taxation agreements have clauses that specifically govern what tax rules there are around inheritance that a German resident might get from abroad.

In general, the inheritor will still have to pay inheritance tax in Germany, but could see their tax liability reduced if tax already has to be paid abroad.

There are also other exceptions possible, such as if a child receives a property in their parent's will and then proceeds to live in it for at least 10 years after they acquire it. In this case, they may not need to pay any tax on it.

In certain complicated cases - or if you have any doubt - it may be a good idea to seek out the services of a professional tax advisor who can make sure you don't get in trouble with the Finanzamt (tax office). 

READ ALSO: Do foreigners owe tax in Germany on money that is inherited from overseas?

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