Moved to Swiss - German Tax man is after me.

[Freeman01]

Hi guys,

short story long. Moved from Germany to Swiss. Declared my tax according to the rules in Germany . Without going into the details, had a very profitable thing going on the side (lets say 3MM$ in profits).
In that year 1MM$ were made in Swiss the rest 2MM$ in Germany (on the same year). Now Germany want's to tax everything. In Swiss I didn't pay any taxes on this, because accountant said it should be declared in a way that it is not taxed, especially since no profits (rather a loss) was made the next year.

They throw now everything on me.
- why is it private thing
- are the profits really non German
- how did I calculate the profits
- how about unrealized profits or hidden profits
- how about your residency (how do they check it? Do they ask train and airline companies for data?) I think I'm fine - but still since was visiting a bit my relatives worried here as well

So they basically want to check everything for the year when I moved away. The years before they didn't had any problem to take the money. No questions were asked at all.

Does anyone has similar experiences? Hope it ends soon, because this is very draining. How did they check you? What happens if they ask you when you visited Germany exactly and you can't remember anymore?

I'm also a bit afraid that they might cause more problems, for example when talking to Swiss authorities and point on me for whatever reason (did everything as it was suggested by the accountants - but it is a bit of grey area).
Maybe they already contacted them... I'm afraid.

Guess looking back, the right thing might have been to move to Dubai and to not declare anything, because it feels the tax man doesn't play fair.

 

[jafo]

Guess looking back, the right thing might have been to move to Dubai and to not declare anything, because it feels the tax man doesn't play fair.

Two things to others contemplating what OP did:

(1)

(2)

OP, I wish you lots of good luck and hope you can have an amicable settlement with the German Tax Mafia. The sooner, the better. Time spent wasted on unproductive parasites has a HUGE opportunity cost! Don't waste your time & your life on them. Settle and disappear!

 

[Freeman01]

OP, I wish you lots of good luck and hope you can have an amicable settlement with the German Tax Mafia. The sooner, the better. Time spent wasted on unproductive parasites has a HUGE opportunity cost! Don't waste your time & your life on them. Settle and disappear!

Thanks man. Yeah totally agree. It is just the thing that they are also very slow. Also saying one thing to the accountant (like we agree) and then hand it over to some other department which does more checks.
Is it possible to settle? Actually would be happy to pay the half of the disputed amount. Of course they do not rush because they have something like 6% interest on the disputed amount.
I think right now they even try to increase the amount.

Didn't plan to disappear at least thought after everything is settle I'm free to even come back. Right now not sure about the plan...

PS:

Time spent wasted on unproductive parasites has a HUGE opportunity cost

Totally agree. It is not only the government. Also the accountants try to mess up with you to get more fees. Yeah it sucks.

 

[jafo]

Is it possible to settle? Actually would be happy to pay the half of the disputed amount. Of course they do not rush because they have something like 6% interest on the disputed amount.
I think right now they even try to increase the amount.

Settle! Pay them to go away! It's like "courtesans". They are in your penthouse, and you need to pay them to leave, otherwise, they can become a major liability! Imagine if the b**** jumps from your penthouse. You know the state is going to accuse you of pushing her off the building. The lawyers/vultures will eat you alive "defending" your right. So...the best thing to do is settle! Whatever it takes, settle!

Didn't plan to disappear at least thought after everything is settle I'm free to even come back. Right now not sure about the plan...

What I meant by this is what they call in Dutch: Uit het oog, uit het hart! Which means: Out of sight, out of mind!
Don't post on social media. Have no way they can find you on social media or any other websites.
I've been to a LOT of underdeveloped countries and walked to too many shantytowns! You can't "walk through" these "ghettos" with money hanging from your pockets, a gold Rolex with a diamond bezel on your wrist in a brand new Ferrari. There is NO "legal structure" or law or anything else that will protect you from violent thieves/gang members trying to rob you.
The same thing with gang members in government.
Don't listen to people about "law/legality/justice and other fantasies."
Avoid wasting your time where the risks outweigh the benefits!

Also the accountants try to mess up with you to get more fees. Yeah it sucks.

In their defense and the defense of (most) lawyers also, they have NO idea that (most of) their actions have negative consequences on us. Let's face it: If you and I would get rewarded with €500/hr every time our "client" had a problem with the government, we would (probably) lose "North" too. It takes a HUGE amount of mental energy to know what the right thing to do is and even more mental energy to actually execute. Most people are too busy with "life" to sit and reflect on this mental construct.

Whatever it takes, settle!

 

[Konstanz]

Hi guys,

short story long. Moved from Germany to Swiss. Declared my tax according to the rules in Germany . Without going into the details, had a very profitable thing going on the side (lets say 3MM$ in profits).
In that year 1MM$ were made in Swiss the rest 2MM$ in Germany (on the same year). Now Germany want's to tax everything. In Swiss I didn't pay any taxes on this, because accountant said it should be declared in a way that it is not taxed, especially since no profits (rather a loss) was made the next year.

They throw now everything on me.
- why is it private thing
- are the profits really non German
- how did I calculate the profits
- how about unrealized profits or hidden profits
- how about your residency (how do they check it? Do they ask train and airline companies for data?) I think I'm fine - but still since was visiting a bit my relatives worried here as well

So they basically want to check everything for the year when I moved away. The years before they didn't had any problem to take the money. No questions were asked at all.

Does anyone has similar experiences? Hope it ends soon, because this is very draining. How did they check you? What happens if they ask you when you visited Germany exactly and you can't remember anymore?

I'm also a bit afraid that they might cause more problems, for example when talking to Swiss authorities and point on me for whatever reason (did everything as it was suggested by the accountants - but it is a bit of grey area).
Maybe they already contacted them... I'm afraid.

Guess looking back, the right thing might have been to move to Dubai and to not declare anything, because it feels the tax man doesn't play fair.

My opinion you are in big trouble and you will not be able to avoid German tax. You live very short in Swiss. They will still be trying you consider being German tax resident. Just pay tax and forget it.

 

[BigUnicorn]

accountant said it should be declared in a way that it is not taxed, especially since no profits (rather a loss) was made the next year.

So they basically want to check everything for the year when I moved away. The years before they didn't had any problem to take the money. No questions were asked at all.

I'm also a bit afraid that they might cause more problems, for example when talking to Swiss authorities and point on me for whatever reason (did everything as it was suggested by the accountants - but it is a bit of grey area).
Maybe they already contacted them... I'm afraid.

Guess looking back, the right thing might have been to move to Dubai and to not declare anything, because it feels the tax man doesn't play fair.

You're really not (maybe willingly so) giving enough details about the situation.

Is it capital gains we're talking about?
How much were you declaring "the years before" you moved away?
What's the difference of tax rate net between CH and DE (on that 1m$)?

The best thing you need is a great lawyer. Unfortunately many over promise and under deliver. I'd work at the edges of this: either one which is small law firm/lawyer, knit tight but you get through a well known trusted referral and then you assess & understand is worth the bucks, or go straight/walk in to one of those "famous" and "best" ones (ie: a lawyer who helped Messi but German, high level cases ie: Italians had Uckmar at the time with high profile cases, there might be something similar in Germany). I'd avoid any big firm like KPMG and bla bla

 

[bigdaddyleon]

I can't tell from your text whether the company is still registered in Germany.

If the company (I assume a sole proprietorship) continues to exist and all business was conducted via the company, it is possible that Germany continues to be the taxing country.

Catchword: Economic interests in Germany

If you give up your business in Germany, you are not allowed to continue using your old company bank account and much more.

There are many things to watch out for, it is rather frightening that your tax advisor has apparently not fully informed you?

 

[Sols]

The Swiss should be after you for calling their country (Switzerland) "Swiss". Doesn't matter that it's Schweiz in German. Straight to jail.

In Swiss I didn't pay any taxes on this, because accountant said it should be declared in a way that it is not taxed, especially since no profits (rather a loss) was made the next year.

There's part of your problem. If you had paid tax in Switzerland, you may have had a case for not paying tax in Germany under the tax treaty between the two countries. But in this case, since no taxes apply in Switzerland, the the rules seem clear: you owe taxes in Germany.

Without going into the details, had a very profitable thing going on the side (lets say 3MM$ in profits).
In that year 1MM$ were made in Swiss the rest 2MM$ in Germany (on the same year). Now Germany want's to tax everything.

That just isn't how tax residence works in Germany. Your tax burden doesn't stop upon departure.

Guess looking back, the right thing might have been to move to Dubai and to not declare anything, because it feels the tax man doesn't play fair.

They are following the rules and laws that were always available to you to read and understand (or hire someone to help you with).

The gist of it is to just pay up. It's too late for remedial actions. At best, you might be able to work out payment plan. It might still be a good idea to hire a tax adviser/lawyer to help make sure the tax authority doesn't take more than they are supposed to.

 

[Freeman01]

My opinion you are in big trouble and you will not be able to avoid German tax. You live very short in Swiss. They will still be trying you consider being German tax resident. Just pay tax and forget it.

I'm basically already 3 years in Swiss. It is about an old Tax Declaration in the year I moved away.
They try now three things

-dispute cross check that I really moved to Switzerland (Anyone exprienced which documents do they ask for? Or how they check that? So that I can prepare)​

- argue it is German income​

- cross check the calculations and assumptions to increase the liability.​

Is it capital gains we're talking about?
How much were you declaring "the years before" you moved away?
What's the difference of tax rate net between CH and DE (on that 1m$)?

Can't go into details on the first. But let's say I have done something quite profitable. which could be done from any country (not prostitution ), so I moved to Swiss. Also because it was not well regulated in Germany. The years before I declared about 700k$. The difference is basically 100%, because in Swiss it wasn't taxed at all.

There are many things to watch out for, it is rather frightening that your tax advisor has apparently not fully informed you?

Yes exactly. After I got the notification, I changed the firm. According to the new tax adviser, the old one kind of provoked it to get more fees. He is kind off payed in percentages of the disputed value

The Swiss should be after you for calling their country (Switzerland) "Swiss". Doesn't matter that it's Schweiz in German. Straight to jail.

Lol agree. Schuldig.

There's part of your problem. If you had paid tax in Switzerland, you may have had a case for not paying tax in Germany under the tax treaty between the two countries. But in this case, since no taxes apply in Switzerland, the the rules seem clear: you owe taxes in Germany.

I don't think it is that clear, because Germany is allowed only to tax German income. Let's say the company is somehow offshore, then they are not allowed to tax it after I moved. As far as I understand, they should not care what Switzerland taxed or didn't taxed. But obviously they cross check. But didn't hide anything in the Swiss Tax declaration. Maybe a good example would be income from TikTok or Instagram, you might make a lot of money but the income is not bounded to Germany, for high amounts the Tax Man might say you are a company.

They are following the rules and laws that were always available to you to read and understand (or hire someone to help you with).

The gist of it is to just pay up. It's too late for remedial actions. At best, you might be able to work out payment plan. It might still be a good idea to hire a tax adviser/lawyer to help make sure the tax authority doesn't take more than they are supposed to.

Yeah I think I could have done that at the beginning. Actually asked, three different accountants about their opinion, and every single one said that the Tax Man is not allowed to do that.
So we decided to appeal. The appeal was granted, so it was a good sign and I didn't had to pay the taxes on the 1MM$, but after that they opened the case again and are now checking everything. I would be fine to settle, the question is if the German Tax Man is allowed to settle? Like let's make it 500K$. There is some option, to get a personal talk with them maybe that is a good idea not sure.

As I understand the next steps are:
- provide the Tax Man the documents they asked for (I try to be transparent but would like to avoid things that can be miss-interpreted)
- (optional) ask Tax Man for a talk in person ("Erörterungstermin, § 364 a AO"). Benefit: We might come to a fast and clear understanding, it accelerate the case. Downside: I might have to answer question, and would not have the time to think properly about them.

After that:
- The Tax Man may ask for even more documents or whatever (this would be a nightmare, because always time draining)
- The Tax Man declares his decision. I think this might happen:

1. I have to pay, the amount from the beginning ( or sue them), but they have to explain why - This outcome is kind of fine because brings me back to control​

2. "Verböserung" they kind of say that I should remove the appeal, because based on their opinion I would have to pay more. If I remove the appeal, there is no option to sue them. But in the best case, I would only have to pay the amount from the beginning​

3. They grant it (kind of doubt it right now), but still it is a legal process.​

(4.) Don't want to think about it, but they may just cause more problems and say I tried fraud (which I didn't). That would lead to an investigation​

So not sure how to deal with it. Don't see many options. Maybe just wait. Want to avoid stupid mistakes (some have been already done), but also maybe someone can speak from experience with dealing the the German Tax man.

 

[Konstanz]

From what you write is clear they will challenge your Swiss residency.
They will check many things. Including bank accounts were you spend money. They will send letter to Switzerland with questions about you

 

[Sols]

I don't think it is that clear, because Germany is allowed only to tax German income. Let's say the company is somehow offshore, then they are not allowed to tax it after I moved. As far as I understand, they should not care what Switzerland taxed or didn't taxed. But obviously they cross check. But didn't hide anything in the Swiss Tax declaration. Maybe a good example would be income from TikTok or Instagram, you might make a lot of money but the income is not bounded to Germany, for high amounts the Tax Man might say you are a company.

A company is tax resident in Germany if it's main place of management is in Germany. "Main place" can be defined in different ways. The 3 million USD profits are probably all taxable in Germany under German law. At least, there's a good enough case for the tax authority to claim so and make your life miserable.

Actually asked, three different accountants about their opinion, and every single one said that the Tax Man is not allowed to do that.

Then it's possible you have the law on your side. Did you pay for legal advice? Do you have it in writing?

So we decided to appeal. The appeal was granted, so it was a good sign and I didn't had to pay the taxes on the 1MM$, but after that they opened the case again and are now checking everything. I would be fine to settle, the question is if the German Tax Man is allowed to settle? Like let's make it 500K$. There is some option, to get a personal talk with them maybe that is a good idea not sure.

Unless you've been intentionally malicious, you can very often negotiate with tax authorities. Sometimes that means coming to an agreement about an amount, or agreeing on an instalment plan.

So not sure how to deal with it. Don't see many options. Maybe just wait. Want to avoid stupid mistakes (some have been already done), but also maybe someone can speak from experience with dealing the the German Tax man.

If you think they are genuinely in the wrong, get yourself a very good tax lawyer who will fight for you. Don't DIY this. The tax authority may have overstepped their boundaries. Not always but quite often in such cases, they lose in court.

 

[Freeman01]

From what you write is clear they will challenge your Swiss residency.
They will check many things. Including bank accounts were you spend money. They will send letter to Switzerland with questions about you

That is fine. I mean not sure what Switzerland could answer? Guess the way to go is just being transparent, since they check anyway. So it is fine if they question it, basically that is what they kind of said in the beginning. Although I would argue that I'm a Swiss resident, since live here, pay my bills here and have my apartment here.

A company is tax resident in Germany if it's main place of management is in Germany. "Main place" can be defined in different ways. The 3 million USD profits are probably all taxable in Germany under German law. At least, there's a good enough case for the tax authority to claim so and make your life miserable.

That is not the case, if the company is kind of doing the revenues not in Germany. Let's say it is selling something in Asia. So the income is not German related. The management goes away with me, so it is not longer a German company. They can for sure tax not realized profits - that is fine as well. That is how it should work in theory or according to the law, but agree here might be a catch.

If you think they are genuinely in the wrong, get yourself a very good tax lawyer who will fight for you. Don't DIY this. The tax authority may have overstepped their boundaries. Not always but quite often in such cases, they lose in court.

Got a "good" tax accountant, at least got a tip from a guy from a guy who is basically at the top (coming from investment banking). Also the accountant seems to have some high net worth clients, at least according to him, he has right now also one of the richest clients from Germany (so 100MM> or even 1BB> ) who is also fighting with the Tax Man. Or lets say the Tax Man wants too much.

I'm not sure that they are genuinely wrong, it just seems that right now, after they started digging, there is no obvious way out. So there is still upside, that they will rule in my favor and of course downside that they will try to make the case more complicated. On the other hand, as far as I understand, after they made up their mind, you can kind of still withdraw the appeal and may not have bad consequences.

Was just curious how this process works and what stupid mistakes I could avoid. Right now cooperating 100% with them and providing everything. Also, of course everything is checked with the tax accountant. He suggests to provide rather more than less data. On the other hand, I could also stop cooperating because, basically they have to tell me why they want to tax me so high. I mean I made the complain to "their service", now they have to explain - but of course, since it is the tax man it works the other way around. Now they want me to explain even more, before they even start explaining.... because guess right now they don't have any explanations

 

[swissyj]

Swiss residency is established pretty clearly by having a) a visa that allows to be a resident and b) being registered in a city or town, where you also deposit documents and get a written statement in return.
Show both to the German government and that argument is settled.

Also the laws and treaty are fairly clear too when it comes to taxation. You can get credit for tax paid in the other Country, but by no means you get a tax relief where tax is due.

 

[Freeman01]

Swiss residency is established pretty clearly by having a) a visa that allows to be a resident and b) being registered in a city or town, where you also deposit documents and get a written statement in return.
Show both to the German government and that argument is settled.

Hope you are right, this is very encouraging. Although the German government, ask for bit more. The documents you mentioned I have already provided.
They want bills, rent documents, documents for phone, electricity, water and so on. Basically I have all of that. Especially since it was my only apartment. But you never know, hope they are operating in good faith, and this point can be settled.

 

[peter taradash]

If a person like you with tax or financial problems simply reads my old trusty book P.T., you will probably discover several possible options that will work. I'd be happy to discuss the PT solution(s) you think are best for you. Good Luck!

 

[Freeman01]

reads my old trusty book P.T

Which book? Would love to read and thanks for the kind words. Maybe you have some general advice. I'm even not sure if there is trouble. It seems just that the Tax Man wants to check everything. Like eat up my time and so. Not sure how many days that stuff has cost me. Since you need to find, check documents and so on. Also prepare answers for the questions and so on.

 

[GPT]

From what you write is clear they will challenge your Swiss residency.
They will check many things. Including bank accounts were you spend money. They will send letter to Switzerland with questions about you

100%. The one fortunate part is that the Swiss authorities will actually inform you about what they will disclose (happened not to long ago for me).

I urge TS to track his days in all the countries insofar you can still remember or find out based on statements, pictures, tickets etc.
The main thing in Europe is the days you spend in, in TS case Germany. If you can undeniably proof that you were more than 183 (im not exactly sure how many days are applicable for Germany) outside Germany then you will probably be home free. Also, having said the above - track your days! And speak to a fiscal lawyer.

A thing to keep in mind that travel days can in some cases be counted by both the departure and the arrival country as a full day. This means that a year can have a lot more than 365 days.

Please also keep in mind that tax authorities have unlimited time and resources and they will not hesitate to exhaust them if they think they can tax you. They dont care on whether you think its fair or not. Just prepare for an exhausting journey.

 

[peter taradash]

Here is a summary of the 6 flags recommended in my book PT. Regards,

Just for fun, you might want to watch my blog "Grandpa, 85, How I Almost Became a Mafia Boss" on YouTube. It's a jokey chit-chat about my audition for the wedding scene in The Godfather with Marlon Brando as my co-star.
It is vaguely related to the topics discussed on Offshore Talk. Happy Days! PeterTaradash

whoops, that file I just attached, grandpa's 6 flags
was a mistake. Please delete or disregard it. It was a very old file from 20 years ago, I meant to attach this one.

 

[Freeman01]

100%. The one fortunate part is that the Swiss authorities will actually inform you about what they will disclose (happened not to long ago for me).

This is awesome. Very good to hear. Now got more respect for Swiss authorities.

I urge TS to track his days in all the countries insofar you can still remember or find out based on statements, pictures, tickets etc.
The main thing in Europe is the days you spend in, in TS case Germany. If you can undeniably proof that you were more than 183 (im not exactly sure how many days are applicable for Germany) outside Germany then you will probably be home free. Also, having said the above - track your days! And speak to a fiscal lawyer.

Do you know how the 183 are counted? Is it on a yearly basis or on an 12 months basis. So basically at the beginning I had a bit stuff to finish in Germany, so was a bit there. But if you look forward to 12 months then it is fine and easy to document. If you would look only for the calendar year, it might be on the edge.

Just curious if you mind share, how long did it took you to settle it with the tax man? I'm preparing the documents right now. Hope they will satisfy the tax man.

Please also keep in mind that tax authorities have unlimited time and resources and they will not hesitate to exhaust them if they think they can tax you. They dont care on whether you think its fair or not. Just prepare for an exhausting journey.

Yeah kind of agree. Although they always complain, how "much" stuff they have to do. Obviously if they think they can tax more, it is played slow and is exhausting.

Here is a summary of the 6 flags recommended in my book PT. Regards, PeterTaradash at gmail.com

Thanks a lot for sharing!

 

[GPT]

Do you know how the 183 are counted? Is it on a yearly basis or on an 12 months basis. So basically at the beginning I had a bit stuff to finish in Germany, so was a bit there. But if you look forward to 12 months then it is fine and easy to document. If you would look only for the calendar year, it might be on the edge.

It is counted per tax year which is -if I am not mistaken- calendar year in Germany. It is all written out in the tax laws of Germany. What you need to take into account is the day where you formally deregistered yourself in Germany and the day where you formally registered yourself in Switzerland. The days in between Germany will count as German days. They will claim that regardless of the deregistration you were still subject to German tax as you were not registered anywhere else.

Just curious if you mind share, how long did it took you to settle it with the tax man? I'm preparing the documents right now. Hope they will satisfy the tax man.

Its still work in progress. Two years and counting. I dont think I will end up settling anything as they are chasing a non existent case. Will I ever be informed or acquitted? No. It will just be left alone and archived. At one point time works to my advantage as it gets closer to statue of limitations. 10 full years in my case. I dont know the timeframe in Germany nor do I know when and how the counting starts or for that matter if Germany even has a statue of limitations for tax.