In German tax law, various factors must be observed and assessed for tax purposes in relation to tax liability, which ultimately determine whether and how a natural person or corporation is to be taxed in Germany. In addition to the place of residence, habitual residence or the center of life can lead to tax liability in Germany.
Tax liability in Germany is divided into limited tax liability and unlimited tax liability.
THE UNLIMITED TAX OBLIGATION IN GERMANY
Essentially, unlimited tax liability in Germany depends on your own place of residence or habitual residence in Germany. In addition, the center of one’s life can also lead to unlimited tax liability in Germany. A corporation, on the other hand, is subject to unlimited corporation tax if it has got its registered office or management in Germany.
It should be noted that the income tax and corporation tax liability applies to the entire world income and thus all domestic and foreign income must be reported in Germany.
In order to avoid possible double taxation, so-called double taxation agreements are used, which regulate the taxation of income generated abroad in Germany and are intended to avoid double taxation.
THE LIMITED TAX OBLIGATION IN GERMANY
On the other hand, there is limited tax liability in Germany, insofar as neither a place of residence, nor a habitual abode or center of life is in Germany, but income is obtained and accrued in Germany. Only domestic income is subject to limited tax liability and German taxation law could moreover be restricted by a double taxation agreement.
The taxation of income in connection with foreign countries, taking into account your place of residence, habitual residence, center of life and double taxation agreements, is one of the most demanding areas of tax advice, and we would like to welcome you as a client to our office. We are happy to arrange an initial consultation with us.