Expat Tax Cases in Germany: Real Situations and How the Rules Apply
The following cases are based on real client matters. Facts have been simplified and details changed so that no client can be identified. They show how German and international tax rules apply in typical expat situations. The outcome of an individual case always depends on the facts.
Case 1: How is my income taxed if I move to Germany during the year?
Your German tax liability starts when you establish a residence or habitual abode in Germany. Income you earned abroad before that date is generally not subject to German income tax. From then on, your worldwide income is taxable in Germany, although a tax treaty may exempt certain foreign income. The result depends on your move date and the treaty.
Many of our clients move to Germany during the calendar year. Before the move they earn income in their home country, afterwards they work in Germany. They want to know how both periods are taxed.
Your German tax liability starts when you establish a residence or habitual abode in Germany (§ 1 (1) EStG, § 8, § 9 AO). Income you earned abroad before that date is generally not subject to German income tax. From that date, your worldwide income is taxable in Germany. A tax treaty can exempt certain foreign income, but exempt income is usually still taken into account when calculating your German tax rate (progression clause, § 32b EStG). The outcome depends on your move date, the type of income and the applicable treaty.
We fix the date your German tax liability begins, allocate each income item to the period before and after the move, check the applicable treaty and handle the reporting to the German tax office.
Move date, lease start and registration differ from each other.
Lease, registration certificate, payslips from both countries.
Moving to Germany during the year does not mean that all income of that year is taxable in Germany. The move date and the treaty decide.
Need your German tax return for the year of your move? We prepare it for you.
Request Your Personal Free OfferCase 2: Do I have to declare rental income from a property abroad in my German tax return?
Yes. If you are tax resident in Germany, you usually have to declare rental income from property abroad in your German tax return, even if Germany does not ultimately tax it. Under most tax treaties the country where the property is located may tax the income. Germany then either exempts it or taxes it and credits the foreign tax.
A client is assigned to Germany for a limited time and wants to rent out the family home in the home country during the assignment.
If you are tax resident in Germany, you usually have to declare rental income from property abroad in your German tax return, even if Germany does not ultimately tax it. This also applies to a temporary stay if you have a residence in Germany or stay longer than six months (§ 9 AO). Under most tax treaties, the country where the property is located may tax the rental income. Germany then either exempts it (while it may still affect your tax rate) or taxes it and credits the foreign tax (§ 34c EStG), depending on the treaty. Rental income from property located in another EU/EEA country that is exempt under a tax treaty is not taken into account for your tax rate (§ 32b (1) sentence 2 no. 3 EStG). For property in other countries, such as the US, the progression clause generally still applies. German rules determine how the income is calculated, for example deductible expenses and depreciation, and the result can differ from the foreign calculation.
We analyze how the foreign rental income must be reported, recalculate it under German rules and check whether the treaty exempts it or the foreign tax can be credited.
Figures from the foreign tax return are used without recalculating them under German rules.
Foreign tax return, rental statements, depreciation schedule.
A rental property abroad does not disappear from the German tax return. Whether Germany taxes the income or only takes it into account depends on the treaty, and the calculation follows German rules.
Have a specific question about rental income from abroad? Talk to us before you file.
Book Your Individual Tax ConsultationCase 3: How are RSUs and stock options taxed in Germany if they were granted abroad?
Germany taxes RSUs and stock options as employment income when the benefit is received: when RSUs vest and shares are delivered, or when options are exercised. If you worked in several countries between grant and vesting, generally only the part attributable to work in Germany is taxable here. The allocation depends on the plan terms and the applicable tax treaty.
A client received RSUs or stock options while working abroad. The awards vest after the move to Germany, or the vesting period spans several countries.
Germany taxes RSUs and stock options as employment income when the benefit is received, that is, when RSUs vest and the shares are delivered, or when options are exercised. If you worked in more than one country between grant and vesting, generally only the portion attributable to work performed in Germany is taxable here. How that portion is determined, usually by working days in the relevant earning period, depends on the plan terms and the applicable tax treaty (BMF letter of 12 December 2023, BStBl I 2023, p. 2179, as amended on 19 December 2025). If you are no longer resident in Germany at vesting, the German-source portion can still be taxable (§ 49 (1) no. 4 EStG).
We review the plan documents and the vesting schedule, determine the earning period and the working days in each country and allocate the income between the jurisdictions.
There is no record of working days per country.
Grant letter, vesting schedule, plan terms, records of working days.
Where an award was granted matters less than where you worked while it was earned.
Have a vesting date coming up or equity from abroad? We review your plan documents with you.
Book Your Individual Tax ConsultationCase 4: Can the Germany–US tax treaty reduce German tax on my US employment income?
It can, depending on the facts. Whether Germany may tax your US employment income depends first on where you are resident under the treaty (Art. 4), and then on where the work was physically performed and who the employer is (Art. 15). As a US citizen, you remain taxable in the US on your worldwide income in any case.
A US citizen lives and works in Germany and has employment income from both a German and a US employer. The client asks how the German tax office applies the treaty.
Whether Germany may tax your US employment income depends first on where you are resident under the treaty (Art. 4). A US citizen is treated as US resident only with a substantial presence, permanent home or habitual abode in the US (Protocol No. 2).
If you are treaty-resident in the US and work in Germany for a limited time, your employment income remains taxable only in the US under Art. 15 (2) if three conditions are met: you stay in Germany no more than 183 days in the calendar year, your employer is not resident in Germany, and the pay is not borne by a German permanent establishment. The employer condition is not met if a German company bears or reimburses the cost. We review employer structure, days of presence and the tie-breaker rules for dual residents.
If you are treaty-resident in Germany, Germany taxes employment income for work performed in Germany. Income for work physically performed in the US may be taxable in the US under Art. 15 (1). Germany then generally exempts it under Art. 23 (3) a) but takes it into account for your tax rate, provided taxation in the US is proven (§ 50d (8) EStG).
As a US citizen you remain taxable in the US on your worldwide income; the treaty only determines how both countries share the taxing right.
We determine your treaty residence first, then where the work was performed, and then which article applies (Art. 15 (1) or (2), Art. 23).
US withholding is considered sufficient.
Employment contracts, payslips, proof of US tax, days of presence.
For US employment income, the treaty answer depends on three facts: treaty residence, place of work and the employer’s role. US citizenship does not change the US tax liability.
Need your German tax return with US income? We prepare it for you.
Request Your Personal Free OfferFour Situations at a Glance
| Situation | German tax treatment | Main pitfall | Legal basis |
|---|---|---|---|
| Moving to Germany during the year | Tax liability starts with residence or habitual abode; earlier foreign income is generally not taxed | Determining the start date; treaty-exempt income can still raise the tax rate | § 1 EStG, §§ 8, 9 AO, § 32b EStG |
| Rental property abroad | Declaration in Germany; exemption or credit of foreign tax | German recalculation; the progression clause generally applies to property in countries such as the US | § 32b, § 34c EStG |
| RSUs and stock options | Taxed when the benefit is received; allocated by work performed in the earning period | Working days per country | BMF letter of 12 December 2023; § 49 EStG |
| US employment income | Depends on treaty residence, place of work and employer | Art. 15 (2) protects only treaty residents of the US; reimbursement by a German company can defeat the exemption | Art. 4, 15, 23 DBA-USA; § 50d EStG |
What We See in Practice
These patterns come up again and again in our client work.
Problems rarely come from a single rule
Most issues arise from the interplay of tax residence, type of income, tax treaty and place of work. Looking at one rule in isolation often leads to the wrong result.
US withholding does not replace German tax
Tax withheld in the US does not by itself settle your German tax obligations. German tax law decides what is taxable in Germany, and US tax matters for relief under the treaty or a foreign tax credit.
Exempt foreign income still has to be reported
Income that Germany exempts under a tax treaty must still be disclosed, and it can raise the tax rate on your other income.
For equity compensation, documents decide
The plan terms, the vesting schedule and a record of working days per country are the basis for allocating RSUs and stock options. Without them, the allocation between countries is difficult to support.
For dual nationals, treaty residence often decides
People with ties to both countries can be tax resident in both under domestic law. The treaty tie-breaker rules then determine which country is the state of residence, and the rest of the analysis follows from that.
Do you need assistance with similar or other tax questions?
Get professional help from our experienced tax consultants. If you are unsure about your tax residency, filing requirements, or cross-border income, professional guidance from Prinz.tax can help ensure compliance and avoid unnecessary tax burdens.
Legal basis: Income Tax Act (EStG) and Fiscal Code (AO) as linked above; Germany–US tax treaty of 1989 as amended by the protocol of 2006 (consolidated text, BGBl. 2008 II p. 611); BMF letter of 12 December 2023 on the taxation of employment income under tax treaties. This page provides general information only and does not constitute tax advice.
