CONVINUS Global Mobility
CONVINUS Global Mobility Insights - Frühling / Spring 2025Apportionment of taxation in the USA and Germany:Irrespective of the submission of the full salary in 2023 with German income tax, Kmust file a tax return in the USA and declare his pro rata income, i.e. incomeattributable to the USA, and pay tax in the USA. Since both HR and K did notassume that they were liable to pay tax in the USA, the U.S. income tax return wasonly submitted in the USA after the filing deadline had clearly expired and theadditional payment was imposed accordingly with late payment penalties andinterest.The working days are set in relation to each other as the allocation benchmark. Forthe calendar year 2023, there were a total of 230 working days. Consequently,130/230 days of his gross salary are declared and taxed in the USA on a pro ratabasis.However, since K received his annual bonus from 2022 in calendar year 2023 andthis is not economically related to the activity in the USA, this bonus must bededucted from the income to be apportioned for the purposes of apportioning thetax base.130/230 * 200,000 EUR = approx. 113,000 EURK must subject the EUR 113,000 to taxation in the USA and declare it in Germany inhis income tax return as tax-free progressive income in accordance with Section32b (1) no. 3 EStG. In order to obtain tax exemption, he needs proof of taxation ofthis income in the USA. If he cannot provide this, Germany will tax this income,§ 50 (8) EStG.However, this does not mean that K has completed his tax obligations in the USA.Irrespective of whether he will also be working in the USA in 2024, he must also paytax on his annual bonus from 2023, which he will receive in 2024, on a pro ratabasis in the USA and declare it in Germany as tax-free progression income inaccordance with Section 32b (1) no. 3 EStG. The allocation of the 2023 annual bonusis also based on the circumstances of the 2023 calendar year. As a result,approximately EUR 56,500 must be declared in the USA for 2024.The treatment ofthis income in Germany is analogous to 2023.40
CONVINUS Global Mobility Insights - Frühling / Spring 2025Conclusion:This case shows how important it is for the HR department to obtain informationabout the employee's days of residence in the country of employment so that anappropriate wage tax deduction can be made.If the employer is not sure whether an income tax deduction should have beenmade, the employer could apply to the relevant permanent establishment taxoffice for a notification of income tax deduction in accordance with § 42e EStG.If the correct amount of tax had been withheld, the employee would not havesuffered a liquidity disadvantage due to the gap between the income tax to bepaid in the US and the income tax refund in Germany, which is not issued untillater.Contact:Stahl | Yönden | Witt - SteuerberaterEschenburgstrasse 16D-23568 LuebeckGermany+49 (0) 451 3886030info@stahl-steuer.destahl-steuer.de41
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