Double Tax Treaty and the 183-day Rule
Nowadays, it’s pretty unlikely that to stay employed with the same company for 40 years. In today’s economy, employment changes are almost certain due to various reasons. Lots of people also work abroad thanks to the EU and globalization – it also has the benefit of looking nice on your resume.
If you work abroad, you might be wondering how this affects your taxes – in which country are you liable to pay them? We’ll fill you in here and let you know what the famous 183-rule is all about.
What is a double tax treaty (Doppelbesteuerungsabkommen/DBA)?
Germany has established double tax treaties with over 70 countries (see list below) to regulate how one’s income is taxed when working abroad. If you work in one of the countries where an agreement has been made, your work income is only liable to taxes in the country where you work and is tax-exempt in Germany. On the other hand, if you continue to pay tax in Germany, it must not be paid a second time abroad.
While income earned in another country (with the treaty) is not taxed in Germany, it is still subject to the Progressionsvorbehalt. This is offset against your domestic income and can possibly lead to a higher tax rate – you can read more about the Progressionsvorbehalt here.
Note: There are special rules for cross-border commuters in Austria, France, and Switzerland.
The 183-day rule
The duration that you have (or are) working abroad determines whether your income must be taxed abroad or in Germany and to which extent. Generally, income is taxed in the country where the employee is subject to taxation, but the 183-day rule ensures that those who have been working abroad for 183 days or less are taxed in the country in which they reside. There are, of course, exceptions to this rule.
Various applications of the 183-day rule
The double tax treaty doesn’t always refer to the time you’ve stayed abroad while working, sometimes the specific amount of days you’ve worked is considered. It’s important to pay attention to the country-specific double tax treaty between your main country of residence and the country you’re temporarily working in.
For example, in some countries such as France and Italy, the amount of time the employee has spent abroad is the decisive factor, meaning vacation, illness, arrival, and departure days also count towards the double tax treaty. In other countries such as Denmark, only the days spent working are considered and non-working days are not counted towards the 183-day rule.
The 183-day rule can apply to different periods:
- A calendar year
- A different tax year if applicable (Great Britain)
- A period of twelve months
List of countries with double tax treaty (DBA) with Germany:
|Armenia||India||Mongolia||Trinidad and Tobago|
|Belgium||Ivory Coast||North Macedonia||United Arab Emirates|
|Bosnia and Herzegovina||Jamaica||Pakistan||United Kingdom|
|Bulgaria||Japan||The Philippines||United States of America|