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When Is A Residency for Tax Purposes Triggered in Germany?

Comprehensive legal advice on residency for tax purposes

Everyone who has permanent access to any type of apartment or its habitual stay in Germany can be subject to unlimited tax liability in accordance with the German Income Tax Act (Einkommensteuergesetz, EStG) if several criteria are met. If you are a resident also in another country, the right of Germany for taxation may be limited by a double taxation agreement (DTA).

Residence in Germany is one of the main criteria

The residency for tax purposes is defined in the German Fiscal Code (Abgabenordnung, AO). Everyone who has permanent access to a house, apartment or any other type of domicile can be considered a tax resident of Germany if the domicile is maintained and used on a regular basis. While a hotel room normally does not lead to German tax residency as the criteria of regular maintenance and usage are not met, a humble abode can lead to a tax residency as long as it can be used for living and sleeping permanently. The migratory status in Germany or the legal right to use that domicile is not decisive.

Habitual stay can also lead to tax liability

Even if a house or any other type of domicile is not maintained by the taxpayer, the taxpayer is subject to German tax if his habitual stay is in Germany. While many countries ask for a stay of more than six months to be considered a tax resident, the German Fiscal Code does not have this fixed requirement. Even if a stay in Germany is less than six months it can be a habitual stay in accordance with Germany's national law. In general a stay of only up to two month per year does not lead to tax liability in Germany.

The significant criteria for having a habitual stay is that the stay is not temporary in Germany. It needs to have a planned end and must constitute only a small portion of the year to not be considered a habitual stay. If the stay in Germany is only temporary for

  • visitation,
  • recreation,
  • cure or
  • similar private purposes

it can last up to one year without having fiscal obligations. For those longer stays it is important to not have any business or working activities in Germany and the private purpose of the trip should be documented.

Double tax agreements and its tie breaker rules

If another country has the right to claim fiscal obligations by its national law at the same time, double tax agreements play an important role. While many countries still do not have DTA, Germany is one of those countries who has signed many double tax agreements. These international agreements are signed by two countries to avoid double taxation as well as non-taxation if both countries have the right for taxation because a person or entity is considered a tax resident by more than one country. Most of the tax treaties use the following order to assign the right of taxation to one country: 

  1. The establishment of a permanent home, 
  2. the center of vital interests, 
  3. the habitual abode and, 
  4. the country of citizenship.

Your attorney for tax residency in Germany and international tax

If you plan to buy or rent property, to stay a longer time or if you want to start a business in Germany: Avoid expensive mistakes or even consequences under criminal tax law. Contact us today if you have questions about your tax status in Germany! Your experts for all questions concerning residency tax in Germany are:

Please do not hesitate to contact us by e-mail (info@winheller.com) or by phone (+49 69 76 75 77 80) and we will be happy to schedule an appointment with you in order to discuss your questions and tax planning needs. We are looking forward to working with you.

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