NRI, German tax resident having foreign income

Question

I am working in Germany in an it company last 3 years and paying tax as normal.

Now I am getting some earnings as website advertisement and it is coming from US/UK through paypal account and credited to my indian bank account.

Could you please tell me this earning is taxable in Germany?

Answer 1

Probably, yes:

Germany uses the world-income principle. I.e., if you are tax resident in Germany, you have to declare all (world-wide) income you have.

• Some other countries tax certain types of income at the source, though. To avoid double taxation, Germany has tax treaties with many other countries. They usually work the way that any taxes paid in the other country can either be deducted from the German tax or that income is taken out of the calculation of income tax due in Germany. However, that income will usually be included in the calculation of the income tax rate for income taxable in Germany (Progressionsvorbehalt).

• The fact that the money was paid to your bank account in yet another country shouldn't change anything. You'll need to convert that income from Rupees -> € (The Federal Tax Ministry publishes official exchange rates for VAT, I also use them for income tax declaration: https://www.bundesfinanzministerium.de/Web/DE/Themen/Steuern/Steuerarten/Umsatzsteuer/Umsatzsteuer_Umrechnungskurse/umsatzsteuer_umrechnungskurse.html)

• There's a limit to how much income you can have this way and still be treated as private person (AFAIK 410 €/a). Above that limit, you become a business owner and need to do more paperwork (taxes will be different, but usually add up to [approximately] the same final amount).

• Here's some information I found on the subject: https://jurarat.de/alles-steuerrechtliche-zu-einnahmen-aus-online-werbung-mit-google-adsense-youtube-co

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Practical recommendation:

• Talk to the German tax office and ask them how to deal with this. They are by law required to explain to you how to correctly declare your taxes, where to fill in what etc.
  I've had quite good success with going to their service desk brining all possibly relevant paperwork and then asking them to explain to me what is needed. (I'm told, though, that not all tax office service desks deliver the same level of service to the tax payer...). If this is feasible, it is much cheaper than paying a tax advisor. It may hinge on your German being business fluent, though.
• If you suspect that you have already been running foul of some regulations (e.g. did not do the paperwork for starting a business but are above the limit for private persons) it may be better to talk to a tax advisor first.

Answer 2

1. You can always ask the Finanzamt.

2. If the amount is small (say you make €100 a year) they might tell you "forget it" because the work handling your case costs more than the tax income. In the UK I think it is actually a low four digit number that you don't need to declare, Germany either has a similar limit, or there will be an amount where they are rather not told (because it just causes them pointless work).

3. It doesn't matter which bank account your money goes in. Anyone with a job in Germany probably could convince their employer to pay the money into a bank account in India, and they still have to pay tax. What matters is where you made the money. If you created the website in Germany, most likely it would be German income. No matter what, it's income, so unless (2) applies, they will want to know about the income to calculate the correct percentage of your income that you need to pay as tax.

4. If you don't pay tax on the money elsewhere, that's a good indication that the money was German income. If you pay tax on the money elsewhere, that is a good indication that the money was not German income. If you are in the unfortunate situation that say both India and Germany demand taxes for the same money, then things like double taxation treaties become important. If you are in the lucky situation that nobody wants taxes, you are lucky.