Relocating to Germany raises a number of tax and legal issues. A careful and early examination of your particular situation is indispensable when establishing German residency. The results can be striking; in some cases, a move may be ill-advised.
If relocation to Germany is non-negotiable because of your job, commuting from a neighboring country might be a better alternative. Depending on the specific country, however, weekend trips home can also have extremely unpleasant tax consequences.
Surprisingly high tax burdens can be imposed on certain types of revenue after relocation. For example, the German tax authorities will classify the foreign company in which you hold shares or interest. In some cases, a company treated as a corporation in your home country will be regarded as a transparent entity in Germany, triggering an immediate taxation of your profit share irrespective of the compensation you have received.
Moreover, settlors or beneficiaries of US trusts may be subject to the rules for foreign family foundations in section 15 of the German Foreign Tax Law. If so, taxes may be due even when no payments have been made from the trust.
A wealth tax or the abolition of the flat tax on interest revenues – which some groups have advocated for years now – could be a deal breaker for anyone contemplating residency in Germany. And what about existing wills? Have you checked whether you need to notify the Transparency Register? Do you know your social security status and the obligations associated with it?
Often, residence in Germany is only temporary and ends after several years. Ideally, you will already know what your stay and the end of your stay will mean for your tax situation before you move to Germany. Fictitious sales or similar tax schemes can result in the taxation of built-in capital gains from shares and business assets – resulting in a tax liability on “dry income,” i.e, income for which you have not received a cash payment. In addition, there is no guarantee that your future country of residence will grant a step-up, putting you at risk for the double taxation of your capital gains when you sell your shares.
I analyze the tax implications of a relocation to Germany based on your current life circumstances and your future plans. I also work together with experts in your home country to consider tax and other legal issues such as wills. This helps you set the right course early on or, if needs be, go in a completely different direction. I can make sure that all your compliance requirements are met before your relocation and can assist later in the event that you leave Germany.