What impact do double taxation treaties have on my tax return?
January 21, 2022 | 125,00 EUR | answered by Isabel Zimmermann
Dear tax advisor,
My name is Max Kraftner and I am facing a complex tax situation that I would like to have more clarity on. I work as a freelance consultant and have clients both in Germany and abroad. In my tax return, I have to declare income from both countries and I am concerned that there may be a risk of double taxation.
So far, I have found that there are double taxation agreements in place to prevent income from being taxed twice. However, I am unsure of how exactly these agreements work and what impact they may have on my tax return. I want to ensure that I do not pay more taxes than necessary while also complying with all relevant laws and regulations.
My concern is that I may end up paying too much in taxes due to double taxation, leading to financial losses. Therefore, it is very important for me to understand how to correctly fill out my tax return to benefit from the double taxation agreements and take advantage of any tax benefits.
Could you please explain to me the specific implications of the double taxation agreements on my tax return and what steps I can take to avoid double taxation? I appreciate your support and expertise in this matter.
Sincerely,
Max Kraftner
Dear Mr. Kraftner,
Thank you for your detailed inquiry regarding double taxation in relation to your freelance work with clients in Germany and abroad. It is understandable that you are concerned about potentially paying too much taxes and therefore seek more clarity in this complex tax situation.
Double taxation agreements are international treaties between two countries that aim to prevent the income or assets of a person or company from being taxed in both countries. These agreements specify which country has the right to tax certain income and how double taxation can be avoided. Typically, double taxation is avoided through either offsetting or exemption of taxes paid abroad.
In your case as a freelance consultant with clients abroad, you should first check if there is a double taxation agreement between Germany and the respective country where your clients are based. These agreements detail exactly which income is taxed in which country and how double taxation is avoided. Generally, you will need to declare the income from abroad in your tax return and then either offset the taxes paid there against German tax or exempt these incomes from taxation in Germany.
To avoid double taxation and benefit from potential tax advantages, it is important that you carefully fill out your tax return and declare all relevant income and tax payments. You should also consult with an experienced tax advisor who can assist you in correctly structuring your tax return and help you apply the double taxation agreements.
I hope this information is helpful to you and provides you with more clarity on the impact of double taxation agreements on your tax situation. If you have any further questions or need assistance, please do not hesitate to contact me.
Best regards,
Isabel Zimmermann, Tax Advisor
