I have been in Germany less than 183 days, so I don’t need to file a return.

Ah, the classic mistake. You wouldn’t be the first one to fall for it.

We have no idea how this myth came to life. But the 183 days rule is a concept, which exists only in the US-Germany treaty world. Even there it is only one feature (out of a few) used to determine the taxation rights under article 15. It has absolutely no bearing as to whether you need to file a return or not and it certainly does not make an across-the board- decision regarding your income.

German tax law ties your filing requirement while commanding foreign (i.e. non-German) income to your residency in country as under national (i.e. non-treaty) law. This national residency concept comes with two features.

The first is maintaining a dwelling under circumstances which indicate that such dwelling will be maintained and used as such.

The second is having a habitual abode. This means you are in Germany under circumstances indicating that your stay at a place or in an area is not merely temporary. An uninterrupted stay of not less than six months’ duration shall be regarded as a habitual abode from the beginning; brief interruptions are disregarded. This does not apply where the stay is undertaken exclusively for visiting, recuperation or similarly private purposes and does not last more than one year.

As you can see it can be fairly easy to establish “residence” in German and then be on the hook for filing a return and you do not need to be here for 183 days. It is enough to sign a long-term lease or come in country for job-seeking purposes or a brief college stint.

The good news is that even if there is residence under German law, it is possible to push it elsewhere under treaty law. Especially when you have been in country only a relatively short period of time and have not really “put down roots”. However, this requires considering a few work and life aspects under the residence test as per the tax treaty. So don’t be surprised if we ask a few questions about your situation back in the US – or elsewhere.

The residence test is a special tax feature to be tested and considered. For this reason, it will lead to extra costs, but the result most often is that with your treaty residence being relocated, the German taxation rights die. And we think it is worth some extra expense not having to deal with two tax systems in full both at the same time.

If you think your residence situation warrants a closer look or different consideration of some income on a German tax return, please reach out to us and book a consulting session.

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