Tax on foreign income

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Hello Memeber,

 

I do not find any information about tax on forign income.

 

What is limit of Tax free foriegn income? Foreign income source are rent, interest earned from foreign bank.

 

Thank you very much,

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Hello Sameer,

 

On the rental income. So you are tax resident in Germany and have rental income from abroad? India perhaps?

 

As per the Double taxation Agreement between India and Germany, you are to pay taxes on rental income in India(from property located in India).

 

"ARTICLE 6 - Income from immovable property - 1. Income derived by a resident of a Contracting State from immovable property situated in the other Contracting State may be taxed in that other State.

2. The provisions of paragraph 1 shall apply to income derived from the direct use, letting, or use in any other form of immovable property.

3. The provisions of paragraphs 1 and 2 shall also apply to the income from immovable property of an enterprise and to income from immovable property used for the performance of independent personal services."

 

However, you will need to report the foreign Rental income to Germany (Progressionsvorbehalt). The income shouldn't be taxed in Germany, however it will put you into higher tax bracket (tax rate).

 

What is limit of Tax free foriegn income? - I don't know if there is such a limit.

 

Good luck,

Lubo

 

NOTE: Please note that I am not a tax advisor or have any tax education. Someone more knowledgeable can probably correct me if I am wrong.

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Additionally to what Lubo (@Lubo, thanks!) said, there is no limit for foreign income, i.e. you have to declare all of it, no matter how little it is.

 

Although rental income is taxed by India, you also have to declare it in your German tax return, in Anlage AUS, with a link to the detailed rental profit in Anlage V.

The Indian rental income will not be taxed again by Germany, but it will be used to raise the German tax rate which you will have to pay on your other income. This is called Progressionsvorbehalt, and is permitted by article 23 section 1a) of the double taxation agreement between India and Germany:

 

  • "The Federal Republic of Germany, however, retains the right to take into account in the determination of its rate of tax the items of income and capital so exempted."

 

The foreign interest has to be declared in Anlage KAP.

If your total worldwide capital income is less than 801€ (1,602€ if you're married and your wife lives in Germany), then you will end up not paying any tax on it.

All capital income above 801€ (1,602€) will be taxed with 26.375% (= 25% Abgeltungsteuer + 5.5%*25% Solidaritätszuschlag).

 

For instructions, please see the TT Elster wiki.

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Thank you very much for all answer.

 

Is it mandatory in germany to do tax declaration each year?

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I mean to ask,

1. If there is no foreign income , still mandatory to do tax declaration each year or ever?

2. If foreign income is less than 800, mandatory to do tax declaration?

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For sake of others who need to know the answer for the questions

 

1. If you are employed with only a income from Germany, filing of income tax returns in Germany is voluntary. However, you will only be entitled for a tax refund(if any) if you will file the tax returns.

2. The €800 limit is for interest earned and not for income. However, I suppose you will still have to do your returns even if your interest income is less than €800 but earned from a foreign country (Correct me if I am wrong PandaMunich).

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  1. It isn't quite that simple. For example, a married couple with the tax combo 3 and 5 has to file if the spouse in tax class 5 drew a salary. Or if you drew unemployment benefits or Elterngeld.
  2. Correct.
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I have few followup question for PandaMunich.

 

1. In India, any income earned (any source including interest) by a non-resident is taxed at 25% from the first penny/cent/paisa. I have earned some paltry interest, on which there was tax deducted at source. How and where should I declare both of them?

 

2. What happens to capital gains through investments in shares (Indian market,Indian brokerage account). I sold some shares last year, few of which were bought prior to 2009 (which I read is tax free gains?). Since I reinvested it again and never made a withdrawal from the brokerage account into my checking account, I was not taxed at source in India. Where do I include this, same as interest earned?

 

3. How about dividends? They are considered as income I suppose, therefore where do I mention this in Anlage AUS? In India it is tax-free in the hands of the shareholder in India since the company pays the dividend distribution tax (16.995%) prior to distributing it to the share holders. Do I have to mention the dividend distribution tax? If so, where? This is similar to the UK I read, but could not get any pointers on the thread there.

 

All added, capital gain + dividend + interest, the sum is less than €800, therefore I still may not be required to pay any tax in Germany I presume. Or maybe I am if the dividends are taxed at my current income tax rate which is higher than the ~17% the company paid already. This is getting complicated now, but I would like to avoid the visit to the tax adviser if possible since the amount I end up paying will be more than the additional money I earned.

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All of them are declared in Anlage KAP, instructions are linked from the TT Elster wiki.

Since all of them are capital income, if the total is below 801€ then you end up not paying any German tax on it.

 

Capital gains from the sale of shares bought before 1.1.2009 are tax-free, as you already mentioned, and therefore do not reduce your 801€ saver's allowance.

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Thank you very much, I read the Wiki and also did a search, but somehow missed checking the links provided on Wiki..

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All of them are declared in Anlage KAP, instructions are linked from the TT Elster wiki.

 

Sorry, I have tried reading most of the threads here, but I am still a bit confused here. I have the following questions:

 

1. For interest/dividend income and for capital gains from the sale of shares, do I need to fill Anlage KAP or Anlage AUS or both? If I need to fill Anlage AUS, what is the income heading(Einkunftsquellen) for these two - "Einkünfte aus Kapitalvermögen"?

 

2. In my case, I have interest/dividend income and losses from sale of shares (some purchased before 2009 and some after). Can I offset all the losses or just ones for shares purchased after 2009?

 

3. If I have capital gains from shares purchased before 2009, where do I declare those?

 

4. Do I need to attach a detailed breakup of the all interest/dividend income and capital gains/losses? If yes, is there any set format for this?

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You did go through the instructions for Anlage KAP?

 

 



  1. Yes, if you do need Anlage AUS use that heading. However, if you read the above linked instructions, you will see that it is now only needed in a few cases.

  2. Losses from the sale of shares can only reduce profits from the sale of shares. If you made only losses, they are carried forward to the next year, but such losses from before 2009 can only be used to offset such profits until 2013 inclusively.

  3. Not at all.

  4. Yes. There is no fixed format, but it should be self-explanatory and of course in German.
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You did go through the instructions for Anlage KAP?

 

Sorry, just re-read it and noticed the last sentence about Anlage AUS. But regarding the offsetting of losses, I read the Anlage KAP instructions & it says the following:

 

 

Capital income that was not taxed at the source in Germany with 25% Abgeltungsteuer (+ Soli 5,5% on these 25%):

Line 16 German capital income that for whatever reason was not taxed at the source (except the amount from line 23)

Line 17 Sum of all your non-German capital income

Line 18 contained in amounts of lines 16 and 17: profit made from selling stocks/shares (= Aktien) or trading futures

Line 19 contained in amount of line 18: Profit you made from selling stocks/shares (= Aktien)

Line 20 contained in amounts of lines 16 and 17: the loss you applied to to reach the resulting amounts in line 16 and 17, without the loss from selling shares/stocks

Line 21 contained in amounts of lines 16 and 17: the loss from selling shares/stocks

 

I assume line 17 has interest/dividend +/- capital gains/losses. So assuming I have € 1000 of dividends and an overall capital loss of €750, I would fill the following:

 

Line 16: 0

Line 17: €250 (=1000-750. Is this correct or should I leave out the loss here?)

Line 18: 0

Line 19: 0

Line 20: 0

Line 21: €750 (If I leave out the loss in line 17, this becomes zero?)

 

Also, if I carry forward the loss to next year, do I need to declare it somewhere in 2013 tax returns?

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Hi,

I also have a tax question, however a bit different that the above chain.

 

My husband works in Germany and I have recently started working as a freelancer. Thus, I earn income from UK, USA and India. It all goes in my Indian bank account and I pay tax there.

 

My question is:

1. Am I eligible for family insurance in Germany, or should I inform the insurance company about my foreign income and take separate insurance?

 

2. I am paying tax in India. Shall I disclose it here? How?

 

Thanks in advance.

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I assume line 17 has interest/dividend +/- capital gains/losses. So assuming I have € 1000 of dividends and an overall capital loss of €750, I would fill the following:

 

Line 16: 0

Line 17: €250 (=1000-750. Is this correct or should I leave out the loss here?)

Line 18: 0

Line 19: 0

Line 20: 0

Line 21: €750 (If I leave out the loss in line 17, this becomes zero?)

 

Also, if I carry forward the loss to next year, do I need to declare it somewhere in 2013 tax returns?

 

Yes, that's correct.

 

The loss is carried forward automatically, but that's why the attached overview of interest, dividend and profit/loss from share sales has to be self-explanatory.

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1. Am I eligible for family insurance in Germany, or should I inform the insurance company about my foreign income and take separate insurance?

 

You have to inform them, and if your income is more than 395€ a month, you will have to pay separately for your own health insurance.

 

 

2. I am paying tax in India. Shall I disclose it here? How?

 

Since you are resident in Germany, you should pay tax to Germany only, not to India.

You have to declare your freelance income in Anlage S and attach a profit/loss calculation, for details see the turquoise section of the TT Elster wiki.

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Thank you so much PandaMunich.

 

One more question: What if I am earning 1000Euros in 1 month and nothing in other. Will my annual income (395X12 = 4740Euros) is tax free, or I have to inform them (health insurance) even if my income in any 1-2months in a year is more than 395Euros?

 

What is the tax assessment year in Germany?

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What is the tax assessment year in Germany?

 

Calender year

 

 

One more question: What if I am earning 1000Euros in 1 month and nothing in other. Will my annual income (395X12 = 4740Euros) is tax free, or I have to inform them (health insurance) even if my income in any 1-2months in a year is more than 395Euros?

 

Why are you confusing between health insurance and income tax?

 

For health insurance - Since you are a freelancer (registering as one in the Finanzamt and getting a work permit for being able to work as one in Germany is different discussion altogether) you should pay health insurance depending on how much you will/may earn. The answer PandaMunich gave was for this.

 

For purpose of income tax - if you earn less than €8004/€16008 p.a (depending on your tax class) you do not have to pay tax i.e in case of normal income. However, I am not sure about VAT/MwSt since you are a freelancer.

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