US expat taxes in Germany: a complete guide

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Over the years working abroad became more and more popular. So it’s not surprising that there are many people moving to different countries. Although the reasons behind the move were not the same for everyone, the sheer number of people moving is only becoming bigger. And that is also the case for some of the US expats that decided Germany is a good location for work. Due to the rise in people moving, working, and living in their country and not being citizens Germany along with other countries decided that the expats should pay taxes. These are US expat taxes in Germany: a complete guide explaining what and why you need to pay. This is something you should take into consideration long before you arrange international moving quotes.

What are US expat taxes in Germany?

It is only natural for a country to have taxes for expats. It doesn’t make any sense to tax your own people, but let foreigners off. So what are US expat taxes in Germany like? Are there many expats living there as well?

  • Primary Tax Form – Foreigners here pay the primary tax form and not the secondary one.
  • Tax Deadline – All deadlines for paying taxes must be strictly followed.
  • Currency –  Everything in this country is paid in Euros (EUR), which also includes taxes.
  • Tax Treaty: Germany has a tax treaty with the US.
Papers for tax return
All American residents are required to pay Tax Returns no matter where they are. The only exception is if the country they are in has a tax treaty.

Germany has a population exceeding 84 million residents. At the same time, there are many people working from abroad here. The US expat number in Germany should be around 100,000. Although the number does not seem too big it is not small either. Many people from the US, when moving decide to go to English-speaking countries. And Germany is not one of them. If you even consider moving from USA to Germany then learning German is a must. This is the primary language and although you can find people that know English you can’t use it when working. Not to mention you will need it in order to monitor your US expat taxes in Germany, and make your daily life as well as work life easier.

Tax Return

No matter where they live, all USA citizens need to file a US Federal Tax return. But the expats living in Germany are required to file a German Tax Return. This is where the Tax Treaty we mentioned comes into play. The good news about this is that you will not be required to pay taxes twice for the same income! People living in countries without a Tax Treaty usually have to pay both the US and the county they are living in. But that doesn’t mean everything is beautiful in Germany. This country actually has one of the most complicated taxes in Europe. The move is not just packing and calling international moving services. There is so much more you need to learn and adapt to in order to move and live there without a problem.

Does everyone need to File a Tax Return?

We already mentioned that everyone usually needs to file a Tax Return. But sometimes there are cases when it is not needed. US expat taxes in Germany depend on your standing in the country. Do you qualify as a resident or not? If you are a resident of Germany you will be taxed on your worldwide income. But if you are not the only income taxes you have will be from the salary you get from your German employers.

Woman asking about US expat taxes in Germany
When you become employed ask your boss about US expat taxes in Germany.

But if you are employed and regularly paid wages from a German employer there are chances you dont have to file for a Tax Return. The reason for that is that the employer usually withholds your taxes at the source. So you dont have an obligation to file it. But that doesn’t mean you shouldn’t. There are certain perks and credits you might be able to get by doing so.

Do you qualify for US expat taxes in Germany?

You won’t get a residency status only because you intend to stay there long or because of your nationality. Although you won’t become an official resident after certain criteria are met you will be considered a resident. But only when it comes to tax purposes.

  • A home where you will need to live for at least 6 months.
  • A permanent residence (owning a home there). It does not take into account how much time you actually spent living there.
A german building in Berlin
Make sure you are well informed and your residence is arranged before moving to Germany.

If you don’t have any of these while living in Germany you are not considered a resident. And don’t worry cutting ties with taxes in Germany is easy! US expat taxes in Germany are in place only if you are in the country. If you move out and don’t have a permanent residence and don’t maintain financial ties with the country you don’t need to pay taxes. This also applies to Germans leaving the country.

German vs US taxes

If you compare the German tax rate vs US rates, you will notice that Germany’s tax rate is relatively high in comparison. Although you will end up paying more to German tax authorities upfront, there is an upside. You will actually gain a lot of savings on your US tax return.  In Germany, taxable income includes:

  • Wages and salary
  • Your trade or business incomes
  • Rental income 
  • Investment Income 
  • Profit received from independent services 
  • Royalties, agriculture, or forestry 
  • Personal transactions (alimony or annuities)

Of course, there are many more taxes. But this is the rundown of the most basic US expat taxes in Germany and how to qualify for them. Paying taxes in Germany will have a lot of benefits for you.

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