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International Tax Law

When does international tax law apply to you?

International tax law applies to you whenever at least two countries have an interest in your income—typically in the following cases:

  • You live in Germany but work abroad from time to time (assignment, working from home in another EU country, etc.).
  • You have moved to Germany from abroad or are planning to move abroad.
  • You earn income from abroad, e.g., from rental property, equity interests, investments, or self-employment.
  • You hold an interest in foreign companies or advise subsidiaries or sister companies operating abroad on behalf of a German company.

From a purely legal perspective, the issue concerns how German tax law, double taxation treaties (DTA), and special provisions such as the Foreign Tax Act (AStG) interact.

Avoiding Double Taxation – The Role of DTAs

Without special rules, many cross-border cases would be subject to double taxation: in the country of residence (world income principle) and in the source country (where work is performed or investments are made).

To prevent this, Germany has concluded double taxation treaties with approximately 100 countries. Essentially, these treaties address the following:

  • Where is each type of income taxed? (e.g., wages, pensions, dividends, interest, rent)
  • To what extent may the source country tax this income? (e.g., limiting withholding taxes on dividends)
  • How is double taxation avoided in the country of residence?
    • either through exemption (the income is tax-free in Germany, but often increases the tax rate—progression clause)
    • or by crediting the tax paid abroad against the German tax

The Federal Ministry of Finance regularly publishes a circular on the status of double taxation treaties and their application.