Nowadays, it is quite normal to move abroad. Although this step has no immediate consequences, people leaving Germany must not forget their obligations to the German tax office. How does moving abroad affect the tax return? Do you still have to think about a declaration with the tax office after leaving the country? Everything depends on the individual situation of the German citizen, especially on the income earned.
Does moving abroad exempt you from tax obligations in Germany?
People with permanent residence in Germany are subject to unlimited tax liability (due to their tax residency in Germany). These citizens must, of course, account for their income by submitting a declaration to the tax office after the tax year. If they move abroad, theoretically they will have no more obligations to the tax office – provided they no longer earn income in Germany.
In other words, unlimited tax liability ends with the move from Germany. However, this does not mean that the emigrant is no longer subject to income tax in Germany.
Tax return when moving abroad vs. unlimited and limited tax liability
For tax residents of Germany, there is an obligation to the German tax office for the entire income – including income from abroad. If the taxpayer also has to consider taxes abroad, this can lead to double taxation of the income (if there is no agreement between countries to avoid double taxation).
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However, if a person does not have a permanent residence in Germany (or does not usually reside there), but earns income in Germany, they are subject to the so-called limited tax liability, meaning they only account to the tax office for income earned in Germany. If such a taxpayer leaves the country and pays taxes abroad, they are not obliged to submit a declaration. However, if the move occurs within a calendar year, foreign income is subject to the progression clause in the German tax statement (for the year of departure). In this case, the income is considered in determining the tax rate for the income taxed in Germany.
Tax return when moving abroad – summary
Persons who are no longer tax residents in Germany and are subject to limited tax liability only need to account to the tax office for domestic income – if they do not earn any, they remain “neutral” for the office. Therefore, they should only consider preparing and submitting a declaration to the tax office if they earn income in Germany. Finally, it should be noted that German income does not only consist of labor income. The necessity to submit a declaration can also result from passive income, such as permanent living abroad with simultaneous income from renting or leasing a flat in Germany.
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Maciej Wawrzyniak
In his private life, Maciej enjoys sporting challenges, playing the guitar, and swimming in the lake. He is also the proud father of three sons.
