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Many Germans believe that they can leave Germany and then travel the world as perpetual travelers or digital nomads without a permanent residence (or at most with a "compliance residence") and are therefore not liable to pay tax anywhere on activities carried out abroad for foreign clients, such as consulting, software development, e-commerce and affiliate marketing. But this is not the case.
In a sensational letter from the Federal Ministry of Finance under Christian Lindner to the tax authorities dated 22.12.2023, the authority once again makes it explicitly clear: non-resident emigrants, i.e. perpetual travelers or digital nomads with German citizenship, must continue to pay tax on their worldwide commercial income in Germany for 10 years after emigration if it exceeds 16,500 euros per year. It does NOT matter whether the person concerned still has assets in Germany or not. This is referred to as extended limited tax liability.
This legal position has been in force since 01.01.2009, but as the last major Federal Ministry of Finance letter on the Foreign Tax Act with procedural instructions to the tax offices dates back to 2004, there has been little official information available on this regulation to date. It did not help that the positions of the BFH and the BFM differed fundamentally. The Federal Fiscal Office always spoke of so-called "income without a permanent establishment" that was affected by the regulation, while the Federal Tax Court made it clear that there was no such income. In its letter of December 2023, the Federal Fiscal Office has now aligned itself with the position of the Federal Fiscal Court.
This new clarity should now help lawyers, tax advisors and expatriates to better assess their tax position and avoid potential tax problems. In most cases, this will mean establishing a permanent, long-term residence after emigration ("compliance residence" is not sufficient), ideally in a treaty state, even if you plan to travel extensively.
00:00 - The Federal Office of Migration letter dated 22.12.2023
00:25 - None of this is really new
01:16 -What is this letter about?
01:50 - Importance of the letter
03:08 - Who does it concern?
03:28 - A little journey through time
04:28 - Heinz-Harald Frentzen is to blame!
04:52 - A found food
06:20 - Decision of the Federal Fiscal Court in the Frentzen case
08:03 - Change in the law as a consequence
12:15 - Missing adjustments and contradictory statements
13:28 - "Application of the Foreign Tax Act" in the 2023 version
16:11 - Our good advice for a long time: find a permanent residence abroad
17:40 - Advantages of a double taxation agreement with Germany
18:54 - Your home as a permanent establishment
21:16 - It's not without complications
= Our websites =
www.perspektiveausland.com/
www.wohnsitzausland.com/
uskanzlei.com/
www.auslandsunternehmen.com/
stmatthew.de/
www.nullsteuer.llc/
www.malta1.de/
www.nullsteuer.llc/
www.assetprotection.plus/
= Background =
👉 Letter from the Federal Ministry of Finance Principles for the application of the Foreign Tax Act of 22.12.2023 (see page 12/13)
www.bundesfinanzministerium.d...
👉 The extended limited tax liability in accordance with § 2 AStG
www.wohnsitzausland.com/fachw...
= About Perspektive Ausland (perspective abroad) =
Anyone who wants to move as an entrepreneur or freelancer from German-speaking countries to (tax-efficient) foreign countries or become a digital nomad has a lot of tax and legal questions.
Country selection, international tax law, setting up a company abroad, exit tax, visas, capital investments and asset protection - these are just some of the topics that you now have to deal with.
Perspektive Ausland (perspective abroad) is a German podcast from London that deals with exactly such questions. No matter what your motivation for moving abroad is - less taxes, more freedom or a higher quality of life - you've come to the right place.