Tax Interfaces for Remote and Cross-Border Work

By Dr. Theresa Rath, Attorney at Law

Identifying potential tax issues early

Living in one country while retaining professional links to Germany or another country may raise tax issues alongside residence and social-security questions. The permitted place of residence or work does not by itself determine where tax obligations may arise.

The issues that may become relevant depend on the person’s particular living and working arrangements. The tax analysis is carried out separately by qualified tax advisers and may then be coordinated with the migration and social-security conclusions.

Legal advice is limited to German law, including the EU-law rules applicable in Germany. Tax advice is not provided.

Residence and physical presence as possible connecting factors

A tax review may, for example, consider whether a home remains available in Germany, where the person is physically present and which links exist to the new country of residence. Deregistration for registration-law purposes does not conclusively answer those questions.

Where more than one country may treat a person as tax resident under its domestic law, the applicable double taxation treaty may provide the next stage of the analysis. Qualified tax advisers must determine which provision applies to the countries and facts concerned. Common shorthand references such as the 183-day rule are frequently misunderstood.

For self-employed professionals, physical working locations, professional infrastructure in the countries concerned and the organisation of the activity may be relevant for tax purposes. Whether tax obligations arise can only be assessed under the applicable rules and on the specific facts.

Double taxation treaties as part of the tax review

Potential issues should be identified early, for example where work is regularly performed from a home office abroad or professional links to Germany remain. The substantive tax assessment and any tax structuring remain the responsibility of qualified tax advisers.

Double taxation treaties may be relevant to the allocation of taxing rights and the avoidance of double taxation. Their application will usually require the potential tax position under the domestic law of the countries concerned to be examined first.

Coordinating tax advice with the other legal issues

The relevant treaty and provision depend on the countries concerned, the category of income and the particular activity. This analysis is carried out by appropriately qualified tax advisers, not by RATH HAGEN.

The migration and free-movement questions are addressed first. Where a potential need for tax review emerges, the facts and relevant information can be prepared for consideration by tax advisers.

When early coordination may be useful

The involvement of suitable tax advisers may be coordinated. Their conclusions can then be aligned with the residence and social-security issues without blurring the respective areas of professional responsibility.

Potential tax issues should be identified before a move, before regular remote work from another country or when a self-employed activity changes materially. For an existing arrangement, the points requiring review by qualified tax advisers can also be identified.

When a review is useful

Early awareness is particularly useful before a move, before regular remote work abroad begins or when a self-employed activity changes materially. For an arrangement already in operation, the first step can be to identify which tax questions actually need to be referred to specialist advisers.