German resident: moving away but family stays

[paterke]

Hello,
I'm an EU citizen resident in Germany (I'm not German).
For personal reasons, I want to move out to Germany (back to Italy). In Germany I have a wife and two kids, and I own an apartment.
I will be traveling between Germany and Italy, but I will definitively spend more time in Italy (over 180 days).
My German accountant confirmed that I should not be tax liable in Germany, even though my family stays here. But I have read of various cases, where the German tax office considered also the "centre of life" (family, house, etc.) as a criteria for tax liability.

Does anyone have any experience around this topic?

Thanks

 

[Marzio]

Does anyone have any experience around this topic?

You are 100% German tax resident.

Not only you have wife and kids but you also own an apartment.

My German accountant confirmed that I should not be tax liable in Germany,

You should fire your accountant as fast as you can.

 

[bigdaddyleon]

You should fire your accountant as fast as you can.

agreed

Not only you have wife and kids but you also own an apartment

the apartment wouldn't be the problem if its rented out.

 

[koohl]

You should fire your accountant as fast as you can.

So true, fire this ******** he does not know what he talk about and will bring you lot's of money troubles to the door. The German tax office will hunt you down like an evil pig.

 

[Marzio]

the apartment wouldn't be the problem if its rented out.

True but i assume that wife and kids live there.

 

[koohl]

True but i assume that wife and kids live there.

maybe he rents them out too

 

[369]

both points are a big problem.
germany is very strict and their rules sometimes insane

 

[paterke]

One consideration: Italy is not a tax heaven compared to Germany, even though I qualify for the "brain drain" tax break, which, in my specific case, is almost useless.

 

[hlepic211]

Run while you still can. I once bought a car from a German friend and they blocked his account because I've sent the funds from Liechtenstein (sent them all SoF docs etc). Took him 8 months to get the funds back and he ended up getting his account closed for no reason. Btw the bank was Commerzbank.

 

[daniels27]

I think we need more information before we (and the accountants) can give any advice. What taxes are we talking about (income from self employment, income from employment, dividends, interest)?

You can read the taxation agreement.

https://www.bundesfinanzministerium.de/Content/DE/Standardartikel/Themen/Steuern/Internationales_Steuerrecht/Staatenbezogene_Informationen/Laender_A_Z/Italien/1990-08-18-Italien-Abkommen-DBA-Gesetz.pdf?__blob=publicationFile&v=1

While for passive income, it is simple and they can only be taxed in Germany, active income (self-employment Art. 14 and employment Art. 15) is a more delicate matter but probably indeed taxable only in Italy as his accountant indicated. We would need to know more about the actual income, whether it is self employment or employment and where the work is performed and for which company. Without this information any opinion you are being given by any lawyer or here is basically useless as we do not know what we are talking about. (Yes, you are tax liable in Germany for sure, but you may be tax liable on 0 EUR interest in Germany while you may be tax liable on 1M EUR income from Italy in Italy.)

It is as usual with lawyers, their advice cannot be better than the information you give them. Be careful. And we should be nicer to the lawyers, before accusing them, we should know what the matter to be discussed it exactly.

 

[JohnLocke]

Run while you still can. I once bought a car from a German friend and they blocked his account because I've sent the funds from Liechtenstein (sent them all SoF docs etc). Took him 8 months to get the funds back and he ended up getting his account closed for no reason. Btw the bank was Commerzbank.

Yes, in that regard, Germany can indeed be very bureaucratic and too slow.

 

[paterke]

I think we need more information before we (and the accountants) can give any advice. What taxes are we talking about (income from self employment, income from employment, dividends, interest)?

You can read the taxation agreement.

https://www.bundesfinanzministerium.de/Content/DE/Standardartikel/Themen/Steuern/Internationales_Steuerrecht/Staatenbezogene_Informationen/Laender_A_Z/Italien/1990-08-18-Italien-Abkommen-DBA-Gesetz.pdf?__blob=publicationFile&v=1

While for passive income, it is simple and they can only be taxed in Germany, active income (self-employment Art. 14 and employment Art. 15) is a more delicate matter but probably indeed taxable only in Italy as his accountant indicated. We would need to know more about the actual income, whether it is self employment or employment and where the work is performed and for which company. Without this information any opinion you are being given by any lawyer or here is basically useless as we do not know what we are talking about. (Yes, you are tax liable in Germany for sure, but you may be tax liable on 0 EUR interest in Germany while you may be tax liable on 1M EUR income from Italy in Italy.)

It is as usual with lawyers, their advice cannot be better than the information you give them. Be careful. And we should be nicer to the lawyers, before accusing them, we should know what the matter to be discussed it exactly.

Yes, I'm talking about income from self-employment. My plan is to have my own company in Italy (SrL) and invoice my clients from that company.

Yes, in that regard, Germany can indeed be very bureaucratic and too slow.

In which regard, Germany is NOT bureaucratic and slow?

 

[JohnLocke]

In which regard, Germany is NOT bureaucratic and slow?

haha I lived there for many years, I know Germany and how things work there. The wording, " Was du heute kannst besorgen, das verschiebe nicht auf morgen. " is changed to Was du heute kannst besorgen, verschiebe auf den nächsten Monat oder bis du sonst noch Zeit hast.

It makes more sense to put in the original language otherwise I would have translated it.

If it comes to Taxes, Health Insurance or whatever you have to deal with of authorities in Germany, it is slow, takes lot of time and I have even experienced some people just hanging up the phone when they didn't want to or couldn't answer one's questions. I have never experienced that before.

 

[Marzio]

My plan is to have my own company in Italy (SrL) and invoice my clients from that company.

Amazing, this will be taxation gangbang!

Company will probably be considerd tax resident in Italy because of place of incorporation and management.

As for personal income taxes you will be liable both in Italy and Germany (for the remaining part) and you will have to present tax declaration both in Italy and Germany but in Germany you will have to ask for credit for taxes paid in Italy.

WTF are you putting yourself in that shitshow?

Instead of moving to Italy move somewhere near the Swiss border (either alone or with family), form a Swiss company and commute daily to Switzerland for work.

 

[paterke]

Amazing, this will be taxation gangbang!

Company will probably be considerd tax resident in Italy because of place of incorporation and management.

As for personal income taxes you will be liable both in Italy and Germany (for the remaining part) and you will have to present tax declaration both in Italy and Germany but in Germany you will have to ask for credit for taxes paid in Italy.

WTF are you putting yourself in that shitshow?

Instead of moving to Italy move somewhere near the Swiss border (either alone or with family), form a Swiss company and commute daily to Switzerland for work.

I wish I could follow your suggestion. As I mentioned, this is not a tax optimization move but more a family emergency situation, that forces me to move back to Italy.

taxation gangbang! > LOL!

 

[Marzio]

this is not a tax optimization move but more a family emergency situation, that forces me to move back to Italy

That's unfortunate, i feel for you.

 

[JackAlabama]

Amazing, this will be taxation gangbang!

Company will probably be considerd tax resident in Italy because of place of incorporation and management.

As for personal income taxes you will be liable both in Italy and Germany (for the remaining part) and you will have to present tax declaration both in Italy and Germany but in Germany you will have to ask for credit for taxes paid in Italy.

WTF are you putting yourself in that shitshow?

Instead of moving to Italy move somewhere near the Swiss border (either alone or with family), form a Swiss company and commute daily to Switzerland for work.

both tax % are equally high, that will be the saving grace in front of Germany, since he pays equal or more to Italy, where he will be considered tax resident but they wont have much left to claim after Italy has run thru.

 

[daniels27]

Self-employment and a company in Italy. The tax treaty in this case says that:

• Dividends and interest can only be taxed in Germany. Please be careful with withholding taxes levied in Italy and how you can get them back. (Art. 10 of the treaty)
• Company profits can only be taxed in Italy where the company operates. If you work from Germany, Germany can tax as much as it can be attributed to the work done in Germany. (Art. 7 of the treaty)
• Employment income can only be taxed in Italy unless you work from Germany. (Art. 15)
• Self-employment income is taxed in Germany, only the work performed in a permanent establishment in Italy is taxed in Italy. (Art. 14)

Accordingly, it is best not to work from Germany if you do not want to be taxed there. Also, you better take employment income as it is taxed in Italy by default.

@Marzio why would he be taxable in Germany and Italy for income? What am I missing here? (I mean unless he works from Germany.)

 

[Marzio]

why would he be taxable in Germany and Italy for income?

According to article 4 he will be considered German tax resident (his centre of vital interests is Germany because of wife and kids)

The company will be taxed in Italy because of incorporation and management.

His salary will be taxed in Italy by default but since he is German tax resident by virtue of article 4 he needs to declare in Germany everything earned in Italy and, depending on the salary amount, he could end up paying taxes in Italy and Germany.

So if for example in Germany his tax bracket would be 30% and in Italy his tax bracket would be 28% he will pay 28% in Italy and the remaning 2% in Germany.

Dividends will be taxed in Germany minus Italian WHT on dividends.

Best thing would be to calculate the most tax efficient salary where he will pay the minimal amount of taxes in both countries.

It could also be worth considering forming a German holding to avoid the italian WHT on dividends by leveraging the parent-subsidiary directive.

 

[boomy]

It could also be worth considering forming a German holding to avoid the italian WHT on dividends by leveraging the parent-subsidiary directive.

you forget about the costs to do all this! OP don't realize what he try to do and doubts are he has the money to establish what he want. Better just to pay taxes in Germany to don't mess up the rest of your life with the german tax authorities.