Tax Interfaces for Remote and Cross-Border Work

By Dr. Theresa Rath, Attorney at Law

Why cross-border work raises tax questions

A person who lives in one country while working for clients or through a professional structure in another will usually be connected to more than one legal system. Permission to reside and work in a country does not automatically determine where income is taxable or where filing and registration obligations arise.

The social-security classification does not answer the tax question either. Tax, social security and residence law use different connecting factors. A workable cross-border arrangement requires these layers to be assessed separately and then coordinated.

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

Residence and physical presence

From a German perspective, retaining a dwelling that remains available for use may establish a tax residence. Habitual presence can provide a separate connecting factor. Moving abroad or deregistering an address therefore does not necessarily remove every German tax connection.

At the same time, the new country of residence may treat the person as tax-resident under its domestic law. If both countries assert relevant connections, the applicable double taxation agreement must be examined. It allocates taxing rights and seeks to prevent double taxation, but does not replace the prior analysis under each country’s domestic law. Common rules of thumb, including the 183-day rule, are frequently misunderstood in this context.

For remote work, actual working days normally need to be recorded by country. A digital assignment, a German contract or payment into a German bank account does not automatically relocate the physical place of work to Germany.

Self-employed work across several countries

For self-employed people, the analysis may extend beyond personal tax residence to where the work is physically performed, what professional infrastructure exists in the countries involved and how client relationships are organised. These issues should be identified early so that qualified tax advisers in the relevant countries can assess them.

A tax review may become necessary where work is regularly performed from a home office abroad, a German professional structure remains in place or income and working days may be connected to more than one country. This page is intended to raise awareness of those interfaces, not to anticipate their substantive tax treatment.

Double taxation agreements coordinate – they do not harmonise

Germany has concluded double taxation agreements with numerous countries. They can determine which state may tax a particular category of income and how the other state must relieve double taxation. The rules nevertheless vary by country, type of income and factual arrangement.

An arrangement involving Italy, Spain, Portugal or another country must therefore be assessed under the agreement that actually applies. General online information or a solution developed for a different country cannot replace a case-specific review.

Tax questions within a coordinated cross-border project

A cross-border living and working arrangement brings together several workstreams. Migration and free-movement law provide the starting point, while social-security, tax and, where relevant, professional-regulation questions are organised as separate parts of the overall project.

Overall coordination can be centralised with RATH HAGEN. The relevant facts, the sequence of the required reviews and the interfaces between the advisers involved are organised centrally. Substantive tax assessment and structuring remain with qualified tax advisers, whose conclusions are then integrated with the other parts of the arrangement.

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.