Citizenship taxation as last recourse

[sriracha]

Is taxation based on citizenship as a last recourse real?

So let’s say I am a German who:

- has not lived in Germany for 10 years, officially (un-registered from city records and the tax office)
- can prove not having been in Germany for that time

So maybe I keep an account with Sparkasse in Germany with the address of my ex girlfriend in Stuttgart, and last year I got lucky with crypto while I was splurging with champagne and women in Sri Lanka, and I received 300k euro on my Sparkasse account.

The German tax office become suspicious. Can they say “either you prove that you were in Sri Lanka and paid taxes in Sri Lanka, or you pay taxes in Germany”.
I can prove that I was in Sri Lanka, but my mind was obfuscated by women and champagne so I forgot to pay taxes.
What happens then? It seems to me that being Germany a residency-based tax system, they still couldn’t claim taxes.

 

[Don]

In Germany, individuals are deemed to be residents if they have a dwelling in Germany that they use or that is at least available to them (irrelevant if rented or owned – even a room at a friend’s house could be enough if always accessible).

If you qualify as a dual resident in both Germany and Sri Lanka, then your tax residence should be determined by a double tax treaty between Germany and Sri Lanka.

Better set up a non-reportable structure, bank somewhere else and live in peace?

 

[Sols]

Is taxation based on citizenship as a last recourse real?

Aside from a few citizenships (such as US and Hungary), no. It can be a tie breaker in some cases, though, especially if there's genuine doubt about your residence.

So maybe I keep an account with Sparkasse in Germany with the address of my ex girlfriend in Stuttgart, and last year I got lucky with crypto while I was splurging with champagne and women in Sri Lanka, and I received 300k euro on my Sparkasse account.

Why would you do that? Stop doing that. Just tell Sparkasse that you live in Sri Lanka and declare yourself tax non-resident in Germany. It's easy. The bank will probably let you keep the account.

The German tax office become suspicious. Can they say “either you prove that you were in Sri Lanka and paid taxes in Sri Lanka, or you pay taxes in Germany”.

Yes, that is possible. Not very likely but things like that can and do happen.

I can prove that I was in Sri Lanka, but my mind was obfuscated by women and champagne so I forgot to pay taxes.

You've declared/paid taxes in Sri Lanka, right?

What happens then? It seems to me that being Germany a residency-based tax system, they still couldn’t claim taxes.

It does not sound like Germany would have any case against you. But change your address with Sparkasse and notify them of your new tax residence.

 

[wellington]

UK politicians are financed by offshore British citizens (wealthy ones) - hence lots of titles go to such.

So in the UK i don't see that, and if they did well... as it stands...

- Not entitled to social help
- Not entitled to health/medical
- Not entitled to state support outside the UK (except a liaison - non employee connected to embassy - usually charity work).
- Not entitled (for many countries) for pension rises
- In some cases not entitled to pensions
- Children (when mixed nationality) born become British, but their Children don't (by default).
- Not entitled to financial support/kids like if in the UK.
- Not entitled to vote

So what are they gonna do? If they did that i'd imagine some chunk of the 2-4m non residence would just give up their citizenship, as the passport holds very little weight - even in Europe!!! (you have to apply for a ESTA like thing now).

On the plus side - no tax if no business/interests in the UK.

 

[Larin]

As @Don mentioned, Germany has a dwelling based definition of tax residency. Your passport (and your other possible tax residencies) have no bearing on whether you are a German tax resident.

That being said, could the German tax office see your payment of 300k and see that you do not file taxes as a resident, but challenge that and issue a tax bill? Its possible, but not particularly likely (although if you troll around this forum long enough you will hear such stories).

Since your original question is about citizenship, it would have no bearing on this case in Germany. It will likely revolve around whether you have an accessible dwelling in Germany. For example, they might ask about the address on your bank account. Then again, there would be quite a few investigative steps that they would have to do to get there, so someone would have to get very curious about this case to investigate.

 

[Revoltec]

Germany can still tax you based on citizenship if you cannot prove that you live in any other country and are not a tax resident of another country.

 

[wellington]

UK now allowing voting for non residents…

I guess taxation for non residents will come sooner than expected

 

[Revoltec]

As @Don mentioned, Germany has a dwelling based definition of tax residency. Your passport (and your other possible tax residencies) have no bearing on whether you are a German tax resident.

That being said, could the German tax office see your payment of 300k and see that you do not file taxes as a resident, but challenge that and issue a tax bill? Its possible, but not particularly likely (although if you troll around this forum long enough you will hear such stories).

May I ask how you know that they wouldn't be interested in transactions of 300k?

 

[jafo]

I received 300k euro on my Sparkasse account

Is the money still there? If affirmative, get it out quickly.

 

[Revoltec]

Is the money still there? If affirmative, get it out quickly.

Exactly, because if Germany argues that you in fact did had a dwelling in Germany (God forbid you do not have an official registration in the new country) things will get ugly. Then they will look at the tie-breaker rules if there is a treaty between the countries. If there is not, only proof of registering in the new country and living there will save you. Also, keep in mind Germany does not tax crypto held for longer than 12 months.

 

[zzzzzz]

Is taxation based on citizenship as a last recourse real?

So let’s say I am a German who:

- has not lived in Germany for 10 years, officially (un-registered from city records and the tax office)
- can prove not having been in Germany for that time

So maybe I keep an account with Sparkasse in Germany with the address of my ex girlfriend in Stuttgart, and last year I got lucky with crypto while I was splurging with champagne and women in Sri Lanka, and I received 300k euro on my Sparkasse account.

The German tax office become suspicious. Can they say “either you prove that you were in Sri Lanka and paid taxes in Sri Lanka, or you pay taxes in Germany”.
I can prove that I was in Sri Lanka, but my mind was obfuscated by women and champagne so I forgot to pay taxes.
What happens then? It seems to me that being Germany a residency-based tax system, they still couldn’t claim taxes.

Just become a tourist in your country of citizenship and don't bank there. Otherwise nasty surprises can happen.

 

[JohnLocke]

Is the money still there? If affirmative, get it out quickly.

I can only agree, get the money out there as fast as you can.

 

[zzzzzz]

Btw. is there any difference in above scenario if he deposited 300k to a bank account in i.e. Austria (opened with German address)? In that case German taxman would be notified next year via CRS, but can they do anything about it? He is tax non-resident in Germany, money is not in Germany, the only tie is that account was opened with German residency details.

 

[nasdaqtradfiguy]

@Don
Would you please elaborate a bit about non-reportable structures?

 

[Don]

@Don
Would you please elaborate a bit about non-reportable structures?

I appreciate your interest! This is worth a separate thread sometime. Note that with certain exceptions, such structures are feasible for the wealthy. It's for asset management/investment vehicles.

To provide you with some hints, have a look at this one:
https://www.pwc.lu/en/newsletter/2022/loophole-preventing-the-fatca.html
We can use more or less the same approach without classifying the structure as a bank like these clowns.

 

[Revoltec]

Btw. is there any difference in above scenario if he deposited 300k to a bank account in i.e. Austria (opened with German address)? In that case German taxman would be notified next year via CRS, but can they do anything about it? He is tax non-resident in Germany, money is not in Germany, the only tie is that account was opened with German residency details.

Where the money is located is his smallest problem here (for tax purposes that is, he should still move them out of Germany ASAP). Within EU there is good collaboration on confiscating assets so I wouldn't play with that. Even within the OECD there is a standard for collecting such tax debt if the person is not a resident of another country. The main problem here is that the German tax man is trying to establish where he is a tax resident.