Tax on foreign income

86 posts in this topic

Hello,

 

I need to declare my foreign income (capital gain/dividend/interest from India) in my German tax return.

Most of the information that I need, is clarified in this thread ( Mostly in the posts from 13/14th May 2014). Thanks to PandaMunich.

 

I just need some clarification on the basis of that. According to that

1. I don't need Anlage AUS to declare income from capital gains (shares sales/dividend/interest) ! I just need to declare this income in anlage KAP. Is it correct ?

 

2. All capital gains (shares sales/dividend/interest) can be bunched together and declared in anlage KAP under lines 16 to 21. Is it correct ?

 

3. Taxes(if any) paid on the above capital gain can be declared in line 54 (Anrechenbare noch nicht angerechnete ausländische Steuern) ?

 

4. Profits/losses made from sale of shares bought before 2009 need not be mentioned in the tax return at all ?

 

5. Which kind of documentation, would I be required/need to show along with tax return ? I only have bank account statement showing funds inflow and tax deduction certificates for the tax deducted.Do i need to provide a handwritten note of the income breakup declared in point  2 above ?
 
6. Do I not need to declare the country, where the income was generated ? If yes, where do i declare this ?

 

Thanks

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  1. Correct.
  2. Actually, in the 2015 Anlage KAP it's lines 14 to 19.
  3. Line 51 in the 2015 form.
  4. Correct.
  5. Attach those but also attach a printed out Excel table showing how you reached those sums and from which source each profit came.
  6. Also mention the countries in the above Excel table.
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A related question on this.

For capital gains (overseas income) declared in Anlage KAP, can indexation benefit be used?

If so, are there 'official' inflation rates that needs to be used?

 

Also losses - can losses from overseas investments be as well captured in tax filing to any benefit?

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I have lived in Germany for all of 2015, having moved to Germany from India in Sept 2014. I paid taxes (as applicable) in my home country(India) for 2015 and filed return there with the primary purpose of getting refunds and maintaining my audit trail with the Tax department there. I understand that I am supposed to include all my non-salary income from India in my German ITR under Anlage KAP, and foreign salary income under Anlage-AUS, as  I am a tax resident in Germany for 2015.

 

 Here are my questions:

 

1. As per German law, is the interest on long term retirement savings (provident fund in India) also to be included in foreign capital income? This income is already "tax assessed" but usually tax free in India.

 

2. how does DTAA work? let's say on some interest income I paid 10% tax in India and I include the gross interest and the information that 10% tax is paid on it in Anlage KAP. Does it mean that the Finanzamt will deduct (25% -10%) = 15%
tax? How do they get the remainder 10%, if at all?

 

3. Is it required to attach the official foreign country ITR filing acknowledgement anywhere in the submission to Finanzamt?

 

4. This question is more tactical and to those who have used tax-filing softwares. I am using Viso "start" , the basic version. However, I later realised that I have to fill Anlage KAP which is not offered in this version. Is it possible to fill
Anlage KAP from ELSTER free software and merge with the Viso output? If no, can this be done in hard copy submission as against electronic submission? I don't want to undo my hardwork in Viso. The other option is to pay an
"aufpreis" and upgrade to the next version of the software which has Anlage KAP included.

 

5. I had an Indian salary (read bonus) income equivalent of 4941 Euro in April 2015, even though I did not stay in India even for a single day in 2015. In my Indian ITR, I have included this income and paid 10% tax on it. I understand I
have to include this income in Anlage AUS. Is that correct? Now, I entered this in the software into something which looked like Anlage AUS showing 1 day of employment in India which means that that 213/214th portion of this income (4917 Euros) will be taxable in German, 214 being my total days of work in 2015. Is this understanding correct?.

my questions:

 

5a.  I don't see any place where I can tell Finanzamt that I paid 10% tax on the India salary income already? How do I then make sure that I am not double/over taxed?
5b.  I get a prompt: "Der steuerpflichtige Arbeitslohn muss in Zeile 6 der Anlage N enthalten sein". Bitte kontrollieren Sie, ob diese angabe in den bereich Lohnsteuerbescheingung erfasst ist" What does this mean? My
Lohnsteuerbescheingung does not include information of this additional payout. Can I "edit" the Lohnsteuerbescheingung? Do they really mean Anlage N-AUS?
5c. How much will be the marginal tax on this income be considering progression vorbehalt? my annual gross is 99K.

 

best regards,

itsnikee

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Ok, let's start by clearing up a few terms:

  • foreign employee income that you had while being resident in Germany is declared in Anlage N-AUS, not Anlage AUS.
  • foreign capital income that you had while being resident in Germany is declared in Anlage KAP lines 14 to 18, and the foreign source you already paid on it in line 51.
  • all other foreign income you have to declare both in Anlage AUS and in the specific Anlage tied to that income, e.g. foreign income from a private pension would have to be declared both in Anlage AUS and in Anlage R.

To answer your questions:

  1. Yes, sorry.
  2. Yes, but remember you only start paying 25% Abgeltungssteuer on capital income above the tax-free amount 801€ (1,602€ if you're married and your spouse also lives in Germany). Regarding the 10%: they don't get it back, India gets to keep the 10%, Germany gets 15%.
  3. It can't hurt. The more documentation you attach, the more transparent you are and the less the Finanzamt can accuse you of hiding income. For some stuff, like the 10% source tax, you have to attach proof.
  4. If you are an employee, you are allowed to file on paper, i.e. print out everything from both sources and stick everything into an envelope.
  5. You have to declare it in Anlage N-AUS. Yes, there may be a prompt to copy a figure to line 6 in Anlage N. But I suggest you don't do that, just fill in Anlage N-AUS and let the Finanzamt decide whether that really is taxable income in Germany. Just for your information, if things were the other way round, i.e. if you got income from a German former employment after having moved away from Germany, Germany would still tax it, so they should extend the same courtesy to India. If you fill it into line 6 of Anlage N it will be taxed for sure by Germany (completely taxed, not just fall under Progressionsvorbehalt), so don't copy any amount from Anlage N-AUS to Anlage N. Should the Wiso Start software insist on it and not let you continue if you don't copy something into Anlage N, forget about the 12€ you paid for it and simply file paper, you can find the forms here: http://www.finanzamt.bayern.de/Informationen/Formulare/Steuererklaerung/Einkommensteuer/2015/
    Attach documentary proof for the 10% source tax you paid to India, and also all possible documentation explaining what that money is for, so that the Finanzamt can correctly classify it.
    The Finanzamt will then sort out how they will tax it. 
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Thanks Panda for the gazillionth time! I will fill all these Anlages out and club together my next round of doubts. Once again very quickly, constituents of foreign capital income are:

 

1. All foreign bank account interest

2. Dividends from mutual funds and stocks

3. Capital gains on sale of stocks, bonds and Mutual funds or F&O

4. where will sale of property abroad be counted? ( not now, but it will be relevant for me in 2016)

 

Is interest on retirement savings also to be counted in foreign capital income? If no, which Anlage besides Anlage AUS? The contributions made to EPF(employee provident fund) in India are not voluntary, every public/private sector employee has to contribute towards it. The funds are managed by the government or designated fund managers.

 

 

 

 

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Yes for 1. to 3.

 

Profit from the sale of real estate is part of "sonstige Einkünfte", so it's declared in the combo Anlage SO and Anlage AUS.

 

The interest is capital income --> Anlage KAP

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Hi,

 

I think I have found the right thread for my situation. i do share the foreign income circumstances mentioned above. plus I have few other questions.

 

I'm a employee and in tax class III. apart from my wages, i get some income from shares in Germany/India and P2P investments in Lativa. I have some family agricultural lands in India and i manage it from Germany (believe me, although it is hard to explain). I get income once per 3-4 years but it incurs expenses every year. i also visit India once / twice in a year to manage it. plus i get interest from my loans to others in India. I file tax returns in India for these income. 


I like to understand one thing. As i'm supposed to show these worldwide income in my Germany tax return and pay the progressive rate of tax, is the tax law allows to claim the the worldwide expenses? or not because the income is not arising in Germany.

 

If these income paid directly to my Germany account, will it be considered as Germany income?

 

 

 

 

 

 

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All that non-immovable property profit (= income minus expenses) should have been taxed in Germany, not just under progression.

 

I suggest you start reading the double taxation agreements that Germany has with these countries.

And then correct your tax returns.

 

It doesn't matter into which account this income is paid, Germany always has the taxation rights on it.

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16 minutes ago, PandaMunich said:

All that non-immovable property profit (= income minus expenses) should have been taxed in Germany, not just under progression.

 

I suggest you start reading the double taxation agreements that Germany has with these countries.

And then correct your tax returns.

 

It doesn't matter into which account this income is paid, Germany always has the taxation rights on it.

 

Thanks Panda. I should looked in to that before. I understand that as i'm a fiscal resident in Germany i have to pay to tax on my worldwide income.

 

1. Then the question is how to deduct my business expenses (travel expenses , labor wages, cost of whatever). Are they deducted from overall income or only business income?

2. How to consider my travel expenses? my mother live in India. will it make any difference?

 

 

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Your own labour costs are not tax deductible ;)

Travel expenses will only be allowed if they are deemed related directly to that source of income.

The Finanzamt will not believe that you have to travel to India just to get those dividends...

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Sorry for misunderstanding. i don't mean my own cost. it is the labor expenses incurred in my farming.

 

of course not. but the fact is my visit is needed for my farming business, not for collecting dividends/interest.

 

do you see any genuine way to prove it :)?

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What you take in is the turnover.

The turnover minus the expenses gives you the profit. The profit is what the Finanzamt wants to know.

 

The labour costs of your farm labourer are part of the "expenses" mentioned above.

If the travel costs are absolutely necessary to make that turnover, they are also expenses.

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@agnostic

 

Art. 6 of the tax treaty between Germany and India read in conjunction with Art. 23 exempts your income from Indian real estate from German taxes except for purposes of Progressionsvorbehalt.  Theoretically, your claimed expenses with respect to the income from this source must satisfy both the Indian and German tax authorities but as a practical matter I suspect that if the Indian authorities are happy with your bottom line the German Finanzamt is unlikely to raise much of a fuss.

 

I am not sure what the nature and source of income from "P2P" in Latvia might be but depending upon the answers to those - and perhaps other - questions, it also may be exempt like foreign real estate (Art 23(a)) or eligible for credits for Latvian taxes paid (Art. 23(b)) or a combination of the two (Art 23(c)) under the Germany-Latvian tax treaty.

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On 11/6/2016, 7:09:14, PandaMunich said:

You have to declare it in Anlage N-AUS. Yes, there may be a prompt to copy a figure to line 6 in Anlage N. But I suggest you don't do that, just fill in Anlage N-AUS and let the Finanzamt decide whether that really is taxable income in Germany. Just for your information, if things were the other way round, i.e. if you got income from a German former employment after having moved away from Germany, Germany would still tax it, so they should extend the same courtesy to India. If you fill it into line 6 of Anlage N it will be taxed for sure by Germany (completely taxed, not just fall under Progressionsvorbehalt), so don't copy any amount from Anlage N-AUS to Anlage N


Attach documentary proof for the 10% source tax you paid to India, and also all possible documentation explaining what that money is for, so that the Finanzamt can correctly classify it.
The Finanzamt will then sort out how they will tax it. 

Hi Panda,

Apologies for coming back to it after two months as I met with an accident and my tax filing got pushed back. I got it that I should not copy anything from Anlage N-AUS to Line 6. Are you also proposing that in order not to shoot myself in the foot, I should not copy any figures into Line 20 and 21 of Anlage N from Anlage N-AUS, as you have mentioned in the TT Elster Wiki page "How to fill out Anlage N-AUS"?  

 

By the way, I should mention that because of deductions available in India, I only paid 1% tax on that income, not 10%. But that does not take away the fact that this payout was purely on account of my previous Indian employment that had terminated on 30.08.2014, 1 day before I moved to Germany and started my German employment. The bonus was paid out on 01.04.2015 because of company policy, no other reason. I have documentary evidence for that. 

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  1. Yes.
  2. Attach copied proof for that bonus and for the Indian income tax you paid on that bonus, pencil in German translations of the keywords and let the Finanzamt sort it out.
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Thanks ! And the best outcome I could expect is that the bonus income is considered ONLY towards "progressionvorbehalt" thereby raising my tax liability by about 750 Euros( courtesy the calculator). Correct??

 

It probably would not happen that they just ignore the foreign income. 

 

 

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Yes, that would be the best possible outcome.

 

In order to help reach that best possible outcome, I suggest that you attach the following cover letter to the copies of the documents showing your bonus and its Indian taxation:

 

************************************************************************

 

An 

Finanzamt München 

 

 

Betrifft: Progressionsvorbehalt für nachträgliche Zahlung aus meinem ehemaligen indischen Arbeitsverhältnis

 

Sehr geehrte Damen und Herren,

 

mein indisches Arbeitsverhältnis endete am 30.08.2014, am Tag darauf flog ich nach Deutschland um meine Arbeitsstelle hier anzunehmen.

Aus diesem indischen Arbeitsverhältnis floß mir am 01.04.2015 eine nachträgliche Zahlung zu, die von Indien besteuert wurde, da ich mit mit diesen Einkünften der beschränkten Einkommensteuerpflicht unterlag, analog §49 Absatz 1 Nr. 4 Buchstabe a und d EStG:
 
(1) Inländische Einkünfte im Sinne der beschränkten Einkommensteuerpflicht (§ 1 Absatz 4) sind
4. Einkünfte aus nichtselbständiger Arbeit (§ 19), die
a) im Inland ausgeübt oder verwertet wird oder worden ist,
d) als Entschädigung im Sinne des § 24 Nummer 1 für die Auflösung eines Dienstverhältnisses gezahlt werden, soweit die für die zuvor ausgeübte Tätigkeit bezogenen Einkünfte der inländischen Besteuerung unterlegen haben,

 

Ich möchte deshalb diese Zahlung aus meinem ehemaligen indischen Arbeitsverhältnis melden, damit sie in den Progressionsvorbehalt einbezogen wird.

Ich habe die Dokumentation für diese Zahlung beigefügt.

 

Mit freundlichen Grüßen

your signature

your name

 

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Did as advised PandaMunich! Did you have this template ready for such cases ? ;)

I will have a couple more questions regarding document submission, but I will post them on a more general tax filing thread. 

This was really helpful, thanks again!

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