German skilled workers who work and live abroad are facing a tax problem: A new decree from the Federal Ministry of Finance could lead to double taxation and back payments – and also burden companies.
Sending skilled workers abroad is a key to international success for many German companies. The so-called expatriates – expats for short – leave Germany to fill important positions in countries such as the USA, China or India. These people are now being scrutinized by the German tax authorities, which could have far-reaching consequences.
A new decree from the Federal Ministry of Finance (BMF) by Minister Christian Lindner stipulates that expats who have a promise of return from their employer, keep their German apartment or continue to be active in local clubs should continue to be subject to tax in Germany. “Wirtschaftswoche” reports on this. This definition deviates from the usual rule, according to which taxation takes place in the country of the workplace and place of residence.
This new regulation would represent a significant challenge for companies and their posted employees – and therefore causes a lack of understanding. Jens Goldstein from the consulting company “Ernst
The consequences of the decree are serious: companies could be accused of tax evasion due to incorrect payroll tax statements. Expats are at risk of double taxation if the countries in which they work also impose taxes. Benjamin Koller from the Federation of German Industries emphasizes that foreign postings are commonplace and essential for German industry. What is particularly problematic is that the new regulation should apply retroactively to all cases that are still open. “The BMF letter urgently needs to be revised,” demands Koller.