German tax residency for US citizen present in Germany for less than 6 months during tax year with salary paid by US entity

Question

My primary reason for posting is that I've gotten conflicting opinions from 2 different Steuerberater (who specialize in German taxes for expats) about my 2015 tax liability in Germany, and so I'm hoping for some guidance on a tax residency question.

Here's the relevant background:

• I'm a US citizen.

• I moved to Germany from the US in September 2015 and was issued a Blue Card in Germany in November 2015.

• I've lived in Germany continuously since moving here in September 2015.

- I was employed full-time and paid in USD by a US corporation that does not have a German entity between October 2015-July 2016. In July 2016, I changed jobs and started working for a German-headquartered GmbH.

Now for the conflicting opinions from the Steuerberater:

In February 2016, I spoke to Steuerberater #1 about filing taxes in Germany for the tax year 2015, and he informed me that because my salary was paid from the US and had not been present in Germany for more than 6 months during the 2015 tax year, I did not have a tax liability in Germany. Therefore, I filed my 2015 taxes in the US as if it was a normal tax year there. Note that I was detailed in describing to the Steuerberater my Blue Card situation, long-term intentions to stay here, etc, before he gave me this recommendation.

I just had a conversation with Steuerberater #2, who will be helping my wife and me file our 2016 taxes in Germany, and he informed me that I do, in fact, owe income tax in Germany on the salary I earned during the 2015 tax year after I moved here.

After doing more research of my own, I've more or less accepted that Steuerberater #2 is correct, and the best course of action is to file a 1040X on my 2015 US return, reclaim the federal income tax I paid on my 2015 foreign-earned income (I should qualify for the foreign-earned income exclusion under the physical presence test), then pay the relevant 2015 income tax in Germany as well as any penalties for lateness.

Of course, if I don't have a tax liability in Germany in 2015, I don't want to go through the hassle. But if I do have a tax liability in Germany in 2015, then I want to pay it ASAP.

Does anyone know if I was a tax resident in Germany in 2015 and if I owe taxes in Germany on income earned during the ~3 months I worked here that year?

Answer 1

This page on the europa.eu website indicates that if you live in Germany for less than six months, you are not considered tax resident. However, you do need to pay taxes on any income earned in Germany during that year.

That fits with how taxes in the US and Canada work. The new resident pays taxes for what they earned while in the country that year. Germany is not a country to miss any possible tax income, so I would recommend paying taxes .

I'm unsure if you were paid via a German subsidiary of the company or not. If so, the necessary taxes were certainly deducted from your paycheck and you'll have to settle the difference with the Finanzamt between what you paid and what they think you owe. If not, and it was paid by the US company into a US bank account, then you're going to have to pay some taxes.

Edit: Here is the relevant German law which describes who is required to pay taxes: http://www.gesetze-im-internet.de/estg/__1.html. It says that anyone whose primary residence is in Germany is subject to taxation. The first sentence is the important one: the rest of it is all legalese to prevent anyone from using some sort of loophole (like living on a boat or artificial island) to claim that they weren't really a resident.

The German-American tax treaty means that the IRS will give you a credit for taxes paid in Germany, but the taxes still need to be paid. The tax treaty can be found here: https://www.irs.gov/pub/irs-trty/germany.pdf. It's pretty dull reading, but there are some interesting tidbits.