Natural persons with their domicile or habitual abode in Germany (§ 8 and § 9 German General Fiscal Code ("Abgabenordnung") respectively) are subject to unlimited income tax liability in Germany pursuant to § 1 para. 1 sentence 1 of the German Income Tax Act ("Einkommensteuergesetz") with all income earned in Germany and abroad.
Pursuant to §§ 1 para. 4, § 49 para. 1 no. 4a of the income tax act, foreign employees working in Germany may even be subject to limited income tax liability if they do not have a domicile or habitual abode in Germany.
Unilateral tax relief regulations exist (§§ 34c, 34d Income Tax Act) to avoid overlaps in the tax claims by different countries of a taxable person. They are based on the principle of taxpaying ability whereby no distinction may be made under the aspect of equality of taxation whether income is earned and must be taxed solely in Germany, or involves foreign remuneration.
Additionally, Germany has concluded (bilateral) double taxation agreements with most countries that regulate which country waives the tax due according to the national legislation. The double taxation agreements do not substantiate any tax liability; rather they merely determine or limit the right to taxation.
If your research stay in Germany is supposed to take place in the framework of a fellowship you may, under certain circumstances, be exempt from taxation under German income tax law. It is certainly worth consulting the organisation which has awarded the fellowship on this point. Furthermore, you should find out whether the fellowship paid in Germany is subject to taxation in your own country.
Details on tax exemption on fellowships in Germany.
If you spend a research stay in Germany within the scope of an employment contract, three tax scenarios are conceivable:
- Pursuant to § 1 para. 4 of the income tax act, if you do not have your domicile or habitual abode in Germany, you are subject to limited income tax liability if you earn income in Germany from permanent or temporary dependent employment in the sense of § 49 of the Income Tax Act. While personal tax concessions mostly do not exist, it is possible to limit the German right of taxation due to a double taxation agreement with your home country.
- Natural persons without a domicile or habitual abode in Germany in permanent dependent employment in Germany are also able to select the option of § 1 para. 3 of the Income Tax Act and, upon application, request for their income earned in Germany in the sense of § 49 of the Income Tax Act to be deemed (fictively) liable to income tax in Germany – with simultaneous unlimited income tax liability abroad. This allows tax concessions and exemptions to be taken advantage of and can therefore be more advantageous, as taxation then corresponds more with the principle of subjective taxpaying ability.
The condition for an application is either that 90% of all income is subject to German income tax, or that the income subject to foreign taxation does not exceed the basic exemption allowance ("Grundfreibetrag"), which is currently set at 8.652 EUR (§ 32a para. 1 sentence 2 No. 1 Income Tax Act), and confirmation is provided by the foreign tax authorities of the total income taxable abroad.
- If you choose to have your domicile or habitual abode in Germany while in dependent employment and members of your family remain in your home country, you are subject to unlimited income tax liability both abroad and in Germany for the entire year. The taxation rights of each country are offset in the pertinent double taxation agreement. In case of employment in Germany based on a German employment contract, a domicile or habitual abode in the sense of the tax legislation (§§ 8, 9 General Fiscal Code) regularly occurs. An employee is also able to have several residences.
The tax due is deducted from your salary immediately and transferred to the tax authorities by your employer as so-called wage tax ("Lohnsteuer").
At the end of each calendar year you may apply to the tax office in your place of residence to have your income tax adjusted ("Einkommensteuererklärung"). This may entitle you to a partial reimbursement of tax paid. The necessary documents can be obtained from the local tax office ("Finanzamt") or town hall ("Rathaus"). Often, it is worth paying a tax accountant to help you complete your tax return.
- Double taxation agreements
Texts of the double taxation agreements concluded by the Federal Republic of Germany as well as other state-related publications
Federal Ministry of Finance
- Local tax offices
Lists of local tax offices (in German)
Federal Finance Office
- Your Europe
Information on your rights and opportunities in the EU and its Internal Market plus advice on how to exercise these rights in practice. Useful information on living, working and studying in another EU country, including taxation
- Database of tax accountants
Search for tax accountants in Germany, Europe and worldwide amongst other things by area of expertise (for instance "income tax") and by country on whose tax law the adviser is specialised
German Association of Tax Advisers