Foreign income (Germany)

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The distinction between foreign and domestic income for tax purposes is aimed at exempting or exempting foreign income from German income tax, as this income is regularly subject to income tax in other countries. The aim of the definition of the term in § 34d EStG is therefore to avoid or weaken double taxation , provided that this has not already been prevented by a double taxation agreement .

For foreign income, the tax liability can be reduced according to § 34c EStG. There are basically three procedures:

  • Crediting procedure
  • Deduction procedure
  • Special treatment by decree of the highest tax authorities of the states or the tax authorities commissioned by them with the consent of the Federal Ministry of Finance for economic reasons or special difficulties in the application of the crediting procedure

Section 34d EStG defines foreign income simply as:

  • Income from agriculture and forestry carried out in a foreign country
  • Business income
    • one located abroad permanent establishment or a permanent representative working abroad
    • from surety and surety commissions if the debtor has residence , management or headquarters abroad
    • the operation of own or chartered ocean-going vessels or aircraft
      • for transports between foreign or from foreign to domestic ports
      • including income from other transport services related to such transport and extending abroad
  • Income from self-employed work that is or has been exercised or exploited abroad
  • Income from the sale of
    • Assets that are part of a company's fixed assets if the assets are located abroad
    • Shares in corporations, if the company has management or headquarters abroad
  • Income from employment ,
    • exercised abroad or,
    • without being or having been exercised in Germany, is or has been exploited abroad, and
    • Income that is granted by foreign public coffers with regard to a current or previous employment relationship.
    • Income that is granted by domestic public coffers, including the coffers of the Deutsche Bundesbahn and Deutsche Bundesbank, with regard to a current or previous employment relationship, is also considered domestic income if the activity is or has been carried out in a foreign country
  • Income from capital assets if the debtor has residence, management or headquarters abroad or the capital assets are secured by foreign property
  • Income from renting and leasing , insofar as the immovable property or the physical assets are located abroad or the rights of use have been transferred in a foreign country
  • Other income , if
    • the person obliged to pay the recurring payments has his or her place of residence, management or headquarters abroad,
    • In the case of private sales transactions, the assets sold are located abroad,
    • In the case of income from services, including income from services within the meaning of Section 49 (1) No. 9 EStG, the person obliged to pay for the service has his place of residence, management or headquarters abroad.