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183-day tax rule for foreign residents in Germany

25 posts in this topic

Posted

I've had a bit of a search but kind dig up the answer to this and since it's a quick question someone will probably know the answer to...

If I'm "ordinarily resident" in German for more than 183 then I become liable to German tax.

Is it 183 days in a German tax year? so I could be here for 182 days in 2008 and 182 days in 2009 but still not be liable to German tax?

Thanks

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Posted

is this not ever so slightly qualifying for the dumbest tax question of the year?

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Posted

Actually the question isnt that stupid. In the past the 183 day rule was generally based on the tax year, but even then there were exceptions. But the DTAs between Germany and Canada, Norway, Russia and apparantly all newly negotiated DTAs are now based on a 12 month period.

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Posted

now based on a 12 month period.

As in "calendar year" or a rolling 12-month period?

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Posted

Do you know if that applies to the UK too? Especially as the UK tax year is from April 6th.

Would one country attract all your tax revenue even though a proportion was "earned" before deemed tax resident?

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Posted

Agree with Freising, the question isn't stupid.

Freising, is that a rolling-12 month period? What compromises a "day"? 24hrs, overnighting, etc? e.g. you fly in on Monday, but flight out Thursday. You work 4 days a week, but only overnight for 3, etc...

Ollya, it would be interesting to have this issue clarified, but I would say the most important issue is if you already pay taxes on your earnings here in GY. In my opinion, it becomes of question of who has the money and how would you get it back from them if ever even possible... Good Luck!

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Posted

I agree that this is not a dumb question.

Freising, is that a rolling-12 month period? What compromises a "day"? 24hrs, overnighting, etc? e.g. you fly in on Monday, but flight out Thursday. You work 4 days a week, but only overnight for 3, etc...

As far as the UK is concerned they have abolished the "travelling day" as NOT counting - was the previous system. So on the above example you would have been in the UK for 4 days (they are not interested in the overnights). In the old days it would have counted as just 2 days - but not any longer.

That said...

Is this not one of those equations that simply "comes out in the wash"?? Just consider a real world option:

Living in the UK, until October 15th 2008, then move to Germany and stay.

You need to complete UK tax return for 2008 for period up to October 15th, and also complete a German tax return from October 16th to 31st December 2008.

I am guessing that any REAL WORLD examples you post, will have a logical answer. You are always resident in one or the other, because residency is NOT only decided by the 183 day rule - they can call in other factors such as homes, kids, pets, work, mobile phone etc etc until they decide WHERE you live.

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Posted

Tax year = Calender year in germany (normally) and 12 months means 12 consecutive months. But I think you need to look into the DTAs yourself, because there is more to it than just staying less than 183 days. I tried to find the DTA UK-germany in english, but strangely was out of luck. (The HMRC webpage is a horrible mess btw) So here is the german version:

(3) Ungeachtet des Absatzes 2 werden Vergütungen, die eine in einem der Gebiete ansässige Person für eine in dem anderen Gebiet ausgeübte unselbständige Arbeit bezieht, nur in dem erstgenannten Gebiete besteuert, wenn

a) der Empfänger sich in dem anderen Gebiet insgesamt nicht länger als 183 Tage während des betreffenden Steuerjahres aufhält,

b ) die Vergütungen von einem Arbeitgeber oder für einen Arbeitgeber gezahlt werden, der nicht in dem anderen Gebiet ansässig ist, und

c) die Vergütungen nicht vom Gewinn einer Betriebstätte oder festen Einrichtung abgezogen werden, die der Arbeitgeber in dem anderen Gebiet hat.

So in this case it is the tax year, but dont ask me if they are talking about the german or the british one.

EDIT: Actually it should be the german tax year.

Maybe Ill find a helpful webpage in english later, but now its time for the lunch break. ;)

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Posted

I had originally written a reply to this, which I've just gone and lost! However, the question is still [moderately*] dumb because what the OP is really asking is this:

'Can I avoid paying tax in year 1 if I arrived >July 1 and/or spent less than 18x days here and avoid paying tax in year 2 as I will leave/intend to leave before June 30/spending 18x days here'

to which the obvious answer is you are still liable for UK tax in year one - on your worldwide income (irrespective of where it is 'earned') and will be so in year 2 as the UK tax year is not in harmony with the German one. If you LIVE in Germany the first year will still be subject to UK AND German tax and you will need an accountant to ensure you don't get overtaxed due to double taxation issues.

*am trying to be nice now...

p.s there is no such thing as a rolling tax system in UK or Germany afaik... but others may know much better

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Posted

No luck concerning helpful webpages. But I finally realized that the HMRC publishes the DTAs in a one-article-per-webpage way. So here is the relevant Article 11 in english.

(3) Notwithstanding the provisions of paragraph (2) of this Article, remuneration derived by a resident of one of the territories in respect of an employment exercised in the other territory shall be subjected to tax only in the first-mentioned territory if:

(a ) the recipient is present in the other territory [germany] for a period or periods not exceeding in the aggregate 183 days in the fiscal year concerned, and

(b ) the remuneration is paid by or on behalf of an employer who is not a resident of the other territory[germany], and

(c ) the remuneration is not deducted from the profits of a permanent establishment or a fixed base which the employer has in the other territory[germany].

(I added [germany] to the quote.)

If anyones german would be up to the task he could read this letter (german, pdf) of the Bundesfinanzministerium that explains the whole 183 day thing in depth and with examples. If you cant, dont feel bad about it - most germans wouldnt be able to understand it either. ;)

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Posted

:( but which "fiscal year" is that, the German or UK one?

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Posted

If you claim that you are only deployed to germany for less than 183 days from your UK employer, it should be the german fiscal year.

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Posted

In order for Article 11 of the treaty (quoted above) to be at all relevant, you have to remain a tax resident of the UK, and a nonresident of Germany.

Query whether the length and circumstances of your stay in Germany may qualify you as a German tax resident under German domestic law (and, if the UK continues to treat you as a resident, then under the treaty's residency "tie-breaker" rules)?

If after analyzing German law, and the treaty tie-breaker (in the case of "dual" residency), you are a German resident, then Germany can tax you during the German residence period on your worldwide income. The treaty article on dependent personal services, and its 3 part test, including that 183 day test, would thus be rendered moot.

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Posted

No, if you live elss than 183 days in Germany per year, then you play tax locally. If you live more than 183 days in Germany then you play taxes on your income worldwide. Either way you must be taxed on the work you do in Germany.

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Posted

Panta munich...no! I am right, please copy and paste where it says otherwise..you either non-resident or resident, and the latters texes you on all worldwide earnings!

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Posted

Can someone explain if those 183 days are in a rolling or a calendar year?

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Posted

That depends on the double taxation agreement, you have to check for each country separately.

But, again, those 183 days only apply to a very rare and special case (see post no. 18).

In all other cases you immediately become unlimitedly taxable in Germany with your worldwide income from the date that you register here with the intention to stay.

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Posted

Is it 183 days in a German tax year? so I could be here for 182 days in 2008 and 182 days in 2009 but still not be liable to German tax?

you need to be a tax resident somewhere - that is the bottom line.

183 = 365/2 rounded up - which is why they base it on this. in reality; wherever you are resident most of the year, that is where you should declare your taxation for that year. as others mentioned; some countries require you to declare taxation in BOTH countries, which is what they call "double taxation agreement". if you are in germany for 178 days, and split across a few other countries for the remainder of the year; it is only logical that you would file your taxes in germany. if you are a taxation resident in another country that has double taxation agreements, you'll need to declare in both countries regardless - this is mainly due to the fact that your employer automatically takes taxes from your salary. you may be able to get around the whole "tax residency" issue if you are self employed.

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Posted

hello ,

I am in a similar situation . wouldn't say the SAME but similar because I am free lancing and have a limited company in UK (I am a UK resident) for which I am the sole director.

Having done some research online (especially about the 183 rule) , I decided to take up a contract with my limited company being based out of UK but my client is in Germany.

I am having to stay in Germany for a lot more days than was initially thought . I come back say 2 weekends in a month or something like that

While I wont cross the 183 day mark of stay in Germany , for a 6 month period I would have stayed in Germany for a lot more than days than I would have stayed in UK.

Looking at some of the posts , especially LesEdelman's , PandaMunich's and the treaty itself posted by Freising , it appears I should be OK

But I chanced up on a web link such as this :-

http://www.contractoruk.com/overseas_guides/does_the_183-day_rule_let_me_avoid_tax.html

I called up a company which said this link is correct and I asked them - but the treaty doesn't say anything about limited companies being an exception for which I was told its a "gray area"

I have just rented an apartment in germany , i dont even have a local phone there.

I am calling the tax authorities in UK tomorrow but they will give me only a UK view

I also called some tax advisors in UK but they werent a 100 % sure.

Can I have some advise on where I should pay tax?

Am I right that as long as my stay doesnt exceed 183 days in Germany , I will have to pay tax in UK?

Many Thanks!

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Posted

Just in case other people are in the same situation as mine

I called up the tax authorities and got a confirmation that my case is OK. i,e with my situation stated as above (with my number of days in Germany , ltd company being setup in uk and all that stated above in my post) I need to be paying tax in UK.

Its best to get a call reference number so that you can use it for proof later on.

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Posted

I have a question relating to this 183 days rule, which hopefully someone may know about.

I am here flying in to Frankfurt on Monday every week and out again every Thursday I stay in a hotel and will not be moving here permanently. I spend 3 days here if you count it like in the UK from midnight, but 4 days in reality. So if I am here for about 47-48 weeks this year I can affectively fall over 183 days if you count each week as 4 days, or well under if you count each week as 3 days, but I don't know.

But certainly I am working as a contractor from my UK based ltd company and will be UK resident for tax purposes as I will spend way over the 90 days in the UK.

Hope someone can help with this because it is not stated anywhere how this is counted.

Chris

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Posted

I'm no lawyer, but it don't think it's defined anywhere in German law. However, according to Duden dictionary a day is equal to 24 hours just like in the UK, so 183 days equal to 4392 hours.

If you spend in reality 3 days and 10 hours, 82 hours/week in total, then it will be 3936 hours/year and you are ok.

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