Paradise in low taxation?
Admittedly, the thought sounds very tempting; simply to break off his tents in Germany and start a new life in warmer climates and perhaps even in a so-called low-tax country.
Before the road to the new paradise, however, the legislator has built up some hurdles. On the one hand, this must be skipped. On the other hand, the highest judges of the European Court of Justice put the financial administrations of the countries within the limits.
Example Worker Relocation Switzerland
When moving to Switzerland, for example, the legislators' intention is to pay a tax bill. This means de facto: once German tax liability always German tax liability.
This is always limited to the first five years after the final move, but it still causes great pain in the Brieftasche.
Attention Double taxation!
A German plaintiff did not want to. His labor wage was taxed in Switzerland and should nevertheless be taxed under the Swiss tax - in Germany.
This taxation practice is now being examined before the European Court of Justice.
But even if you want to move the location not only as a “private person”, but with your company, a fictitious sale is assumed, with the result that the hidden reserves are uncovered.
The Spanish financial authorities would also have taxed the ill-gotten profits in this way, but have also been restricted by the European judges (AZ: C371 / 10).
How can you flag out tax-friendly?
The Spanish laws are comparable with the German regulations. Nevertheless, the legislature does not (yet) need any action.
So how can a “flag out of Germany” be implemented as tax-friendly as possible? There are a few things to consider when it comes to emigration and taxes. For example, when an actual move or relocation takes place. Or your personal tax background.
Attention family bond
In order to understand the tax aspects of emigration, we first have to clarify what emigration or relocation actually means. Because: emigration is not the same as emigration. You no longer want to be based in Germany? In order to achieve this, you have to relocate both your place of residence and your habitual residence from Germany. Specifically, this means:
You must leave Germany with your entire family living in your former household. So it is not enough for you to leave your home country alone and leave your wife and children in Germany. The undesirable result: You are presumed that you still have the food point in Germany because of the close family ties.
There are also specific regulations for your home:
- If they are tenants, the lease must be terminated for a house or apartment.
- Are you selling your property or renting it at least permanently.
- They must be economically excluded from spontaneous self-employment!
The German Treasury also installed a horse-foot here. Rental to close relatives or a temporary rental is not recognized!
- However, if you only have a temporary rental, you need to search new users for the property just before or immediately after the expiry of the temporary rental contract.
- If you can not prove these rental efforts, you are advised to provide the living space for your own use. Even the mere possession of a key is disadvantageous!
- Even the power of one room, for example, with close relatives or friends, leads to the unfortunate assumption that you are still resident in Germany.
Attention Period of stay
They have to stay less than 6 months (183 days) or less than one year in Germany for exclusive visits, recreation and spa stays. Attention!
The current case law has further exacerbated the requirements: even the regular overnight stay for several days a month can lead to an ordinary stay in Germany, even if you do not live an 183 days in one piece here.
Short term stays in Germany
Short-term interruptions of the stay in Germany are not taken into account and are counted as a cohesive stay.
It is not only the “weekend trip to your new home that is considered short-term! A period of three to four weeks can be regarded as short-term (e.g. annual leave abroad).
Unwanted tax liability in Germany
All these points must be observed, so that a change of residence according to German tax law has actually taken place.
Otherwise, even if you are staying for more than one year, you will continue to be resident in Germany with the undesirable consequence of the comprehensive German tax liability with your world income.
What about your assets?
Before you finally demolish the tents in Germany, you must of course deal with the existing assets and, if necessary, reschedule them. Why?
The catchphrase here was: “essential economic interests”. If these continue to exist in Germany, financial management tools are used to secure German tax revenue.
Extended limited tax liability
In Germany, they are subject to extended restricted tax liability. What is meant by this?
- The personal requirements are German citizens
- in the last ten years at least five years unlimited taxable in Germany
- Move into a low tax country or in a foreign country. Low-tax countries are already countries where the tax rate is thirty percent lower than in Germany.
The material requirements (essential economic interests) are:
- You are involved in a corporation with at least 1% or
- You are still involved in a partnership (not as a limited partner) or
- You are a limited partner and receive more than 25% of the profit
Too much German wealth?
But too much German wealth can have unpleasant consequences:
If you still have assets exceeding 30% of your global assets or 154.000 Euro in Germany, you will also be subject to the extended limited tax liability as well as your income from Germany more than 30% of the world income at least 16.500 Euro in any case with more than 62.000 Euro exceed.
What can you do?
There is hardly anything to be done about the personal requirements, but very much on factual obstacles imposed by the German financial administration.
- So, before you finally say goodbye to your homeland, you should divest shareholdings in corporations greater than 1 percent, or give them away as part of the anticipated succession.
- The same applies to a participation in a private company if they are fully liable. Risk of further taxation exists for limited partners only (as a limited partner) if you receive more than 25% of the profit distributions.
- The restriction of the earnings reference can also provide for a relaxation in the new home country.
If you now also manage your assets according to the requirements of the German treasury, you can not stand in the way of a decent evening of life, at least tax-free.
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