Moved to Germany March 2017 - now being double-taxed on previous UK income

9 posts in this topic

Hi all,

 

I moved from the UK to Germany and started a job here 1st March 2017. I submitted my tax return for 2017 through ELSTER Online, and found it tricky but less painful than I'd expected. During my research for that, I spent quite some time reading through the support notes and forums (inlcuding TT) and came to the conclusion that I only needed to put in there income received in Germany.

 

Whether this was correct or not is now moot, as I've received my Einkommensteuerbescheid and it appears they've dug up my UK income anyway. 

 

Namely, the Bruttoarbeitslohn on the Bescheid is significantly higher than my gross income here in Germany, and the difference is the same as converting my net UK income for 2017 into Euros. This has lead them to ask for several hundred Euros extra tax on this difference.

 

As far as I understand, I shouldn't be having to pay tax twice on this income. The question is, how do I avoid paying this double tax? Do I need to show the Finanzamt that this income has already been taxed? Or do I need to pay this demand, and ask for money back from the UK?

 

Any ideas?

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It's a long time since this impacted me.   Yes, our tax authorities share such information, and  you should have reported it.   Without sounding lecturing, it's really not advisable to start "as I understand it, based on an an expat site that quite suited what I wanted to hear..." with a tax authority anyway, but especially when they know you did not declare income you should have.   Move on from that and get on with the matter at hand - not paying twice.

 

What we should do is declare both the UK income *and* the UK tax deducted,which includes NI etc.       That should ideally have gone on one of the forms in your submission (so long ago, I do not know which form or how).    It is essential that the UK tax deducted does, if you want it offset.  Because I had no great idea what to do, I also actually sent them my relevant UK docs showing the totals.   

 

Your logical step could be to be to put in a response to the certificate (inside a month I think) and report how much tax you paid in the UK and then that UK tax should be offset.   

 

It's also worth noting that our total deductions in Germany are high but actual income tax rates are lower here than in the UK (because more items are in separate ring-fenced funds here while the UK funds far more items from general taxation).  So we should not really expect to end up with a higher charge here. (EDIT - Subject to that point below, I was not in high income at that point).

 

I never paid a cent more to Germany in respect of residual UK affairs.  It's usually an overrated risk.  

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Smells like this:

 

https://de.wikipedia.org/wiki/Progressionsvorbehalt

 

Let's assume you wouldn't have to pay taxes on the first 10.000€ you earn in Germany.

 

Now you assume that this applies to the earnings in Germany without the consideration of the money you already made and taxed abroad.

 

Now let's assume you already made 10.000€ abroad before coming to Germany. So the first 10.000€ you earned in Germany are considered the second 10.000€ you earned that year, and therefore they aren't exempt for being taxed.

 

Look at this chart: https://en.wikipedia.org/wiki/Taxation_in_Germany#/media/File:Income_Tax_Germany_2010.png

The earnings made abroad shouldn't be taxed again, but will definitely move your starting point to the right.

 

Wait for @PandaMunich, she knows this stuff precisely.  

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2 hours ago, franklan said:

Wait for @PandaMunich, she knows this stuff precisely.  

 

@franklan

I will make an exception here because you asked, but please read about my New New Year's resolution:

 

3 hours ago, Andy H said:

During my research for that, I spent quite some time reading through the support notes and forums (inlcuding TT) and came to the conclusion that I only needed to put in there income received in Germany.

 

Well, then you evidently didn't read the TT Elster wiki attentively, because it clearly says in there that you do have declare any income you had had that calendar year before moving to/moving away from Germany in your German income tax return:

Quote

Any income you had prior to moving to Germany, or after moving away from Germany, fill in gross total into line 98 (for 2012: line 99) of Mantelbogen ESt 1A only!

 

The place where it is declared has in the meantime been moved from the Mantelbogen ESt1A to Anlage WA-ESt:
https://www.toytowngermany.com/forum/topic/376127-tax-declaration-of-non-resident/?do=findComment&comment=3642628

 

3 hours ago, Andy H said:

As far as I understand, I shouldn't be having to pay tax twice on this income.

 

You aren't. 

Your UK income wasn't taxed again, it just made the German income tax rate that you pay on your German income rise.

 

What are paying is the fair tax rate based on your ability to pay.

Taxation is seen as a social equaliser in Germany, the higher your total worldwide income was, the higher a share of it you can afford to give up of it, i.e. taxation is progressive. So the higher your total worldwide income, the higher your German tax rate on your German tax rate will be.

This called Progressionsvorbehalt: https://de.wikipedia.org/wiki/Progressionsvorbehalt

 

You can calculate its effect by inputting into this official progression calculator: https://www.finanzamt.bayern.de/Informationen/Steuerinfos/Steuerberechnung/Progressionsvorbehalt/

  • Zu versteuerndes Einkommen in Euro: German taxable income 
  • Dem Progressionsvorbehalt unterliegende Ersatzleistungen und Einkünfte in Euro: the UK income you had that calendar year before your move to Germany, converted into €

 

 

 

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Hi all, and thanks for the replies.

 

4 hours ago, swimmer said:

 ... it's really not advisable to start "as I understand it, based on an an expat site that quite suited what I wanted to hear..." with a tax authority anyway

1 hour ago, PandaMunich said:

Well, then you evidently didn't read the TT Elster wiki attentively ...

 

 

I don't remember exactly what reading up I did, or how I came to my conclusions, but clearly it was wrong. Believe me that I'm kicking myself thoroughly over this.

 

1 hour ago, PandaMunich said:

The place where it is declared has in the meantime been moved from the Mantelbogen ESt1A to Anlage WA-ESt.

 

Anlage WA-ESt was not any part of my initial declaration, so clearly I missed something big. 

 

4 hours ago, franklan said:

Smells like Progressionsvorbehalt

 

1 hour ago, PandaMunich said:

Your UK income wasn't taxed again, it just made the German income tax rate that you pay on your German income rise.

 

What are paying is the fair tax rate based on your ability to pay.

Taxation is seen as a social equaliser in Germany, the higher your total worldwide income was, the higher a share of it you can afford to give up of it, i.e. taxation is progressive. So the higher your total worldwide income, the higher your German tax rate on your German tax rate will be.

 

That makes sense and isn't something I'd considered (there's a theme here ...). The calculation made using my figures doesn't quite add up with what's on the Bescheid though, with a difference of €60 (plus Solidaritätszuschlag).

 

However, given that:

Bruttoarbeitslohn on Einkommensteuer Bescheid = 
    (Bruttoarbeitslohn on Lohnsteuerbescheinigung) 
    + (Net UK Income)*(GBP-EUR rate on date of last payment from UK)

to the nearest single Euro, and then the rest of the Bescheid is calculated with this total, it really does look to me like they've taxed my UK income again. But given the difference between the two things is small(ish), and the danger that any recalculation of the Progressionsvorbehalt would be done with my Gross UK income, I'm inclined to leave things as they stand.

 

Life lesson learned: Just because you can do maths, doesn't mean you can understand taxes.

 

Thank you all again for taking the time to help this prize idiot, and particularly to PandaMunich for coming out of hibernation!

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13 minutes ago, franklan said:

Concerning the 60Euro difference: You did notice that the GBP was doing better in February 2017 (presumably the month with the last UK payment) than it does now? 

 

Yeah, I worked it out using the rate from the date of the last payment from the UK (So March 2017). This was also the best rate from all the payment dates in 2017.

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After having another look, I realised that I've missed a factor here. I had assumed that the tax I had paid so far was roughly the same as what I should have paid.

 

When I moved to Germany I took a reasonable pay rise. The rate at which I have been paying tax each month is based on me earning the full amount of my German salary for one year (worked out using this tool: https://www.bmf-steuerrechner.de/bl/bl2017/eingabeformbl2017.xhtml). As my actual total income was lower, even including the Gross amount from the UK, I should have been paying at a lower rate. The actual difference therefore between what they've done, and what should have been done, is significantly more than 60€.

 

I'll be submitting an objection once I've got all the paperwork sorted.

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A final update for anyone who's curious: I submitted an objection, with a request to attach an Anlage WA-ESt to my original application. I got a letter back allowing this, and promptly sent them the Anlage, a cover letter thanking them, and my UK payslips for the relevant months.

 

About a month later I got the new Bescheid, and was pleased to see that instead of owing them several hundred Euros, they now owed me over €100, which has since been paid into my account.

 

So a happy ending, but via a lot of stress that could have been avoided if I'd actually paid more attention in the first place.

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