German resident: moving away but family stays

[Marzio]

in practice, you might end up fighting with the tax authorities about this specific part of the tax law

I don't know what the fight would be about because in his case:
- he will move to Italy
- form an Italian company
- manage the company from Italy

it's pretty clear that business revenue is going to be taxed exclusively in Italy.

 

[JohnLocke]

Yes, you are probably right, but I don't believe that the German tax authorities will accept this without scrutiny. I haven't had this situation with the German authorities, but I have experienced it with another EU country, and I ended up having to pay.

At a minimum, I would get it cleared with a German accountant and have them provide you with written confirmation that what you intend to do will work for the German tax authorities. This way, you can always hold them accountable through their liability insurance if things go wrong.

 

[Marzio]

I have experienced it with another EU country, and I ended up having to pay.

Whoa, was the situation similar? Which country? Another EU tax hell most likely

 

[JohnLocke]

Whoa, was the situation similar? Which country? Another EU tax hell most likely

No secret after all I have posted here. Denmark of course

 

[Marzio]

No secret after all I have posted here. Denmark of course

I probably missed that post/thread

 

[paterke]

It sounds really good when you read it in the tax regulations, but in practice, you might end up fighting with the tax authorities about this specific part of the tax law. If you're up for it, then go for it, and tell them that you read it in the tax rules they published and that you will adhere to them. But don't be surprised if you first have to pay a lot in taxes plus a fine, and then find a lawyer (whom you also have to pay) who might, or might not, be able to get back the money you paid but shouldn't have.

It's a battle like no other and you're asking for trouble. It sounds fruitfully smart when you read it, but in practice, it's different.

Of course, there is always a 50% chance that no one notices or says anything and you get away with it.

I just want to point out that tax authorities are more aggressive and inventive than ever before.

Absolutely. I personally know someone who spent almost 2 years in jail for tax fraud. I'm playing by the book (even though, every day I regret moving to Germany). Now I'm in a situation so that I need to move for some time to Italy and I'm trying to figure out the best way to deal with the situation, from a fiscal point of view.

Really, really appreciating your help and support.

Yes, you are probably right, but I don't believe that the German tax authorities will accept this without scrutiny. I haven't had this situation with the German authorities, but I have experienced it with another EU country, and I ended up having to pay.

At a minimum, I would get it cleared with a German accountant and have them provide you with written confirmation that what you intend to do will work for the German tax authorities. This way, you can always hold them accountable through their liability insurance if things go wrong.

Actually, it should be possible to get a binding confirmation from the Finanzamt itself. I do not remember the exact term in German, but it should be possible to ask these type of questions and get a binding reply (or so I was told by another tax consultant some time ago).

 

[daniels27]

Yes, I would recommend getting a binding tax ruling, called Verbindliche Auskunft:
https://www.bzst.de/DE/Unternehmen/...rbindliche_auskuenfte_node.html#js-toc-entry5It is not free, you can see the fees here
https://www.gesetze-im-internet.de/gkg_2004/__34.htmlhttps://www.gesetze-im-internet.de/gkg_2004/anlage_2.html
You will have peace of mind as long as you adhere to what you described in the request.

 

[JustAnotherNomad]

You are 100% German tax resident.

Not only you have wife and kids but you also own an apartment.

If he stays 180+ days in Italy, probably the tax treaty should place his tax residency in Italy. But I'm not sure.

 

[Marzio]

If he stays 180+ days in Italy, probably the tax treaty should place his tax residency in Italy. But I'm not sure.

He ows a house in Germany and family is in Germany.

Even if he stays 183+ days in IT, by having a house & center of vital interests in Germany treaty will award tax residency to Germany.

 

[JustAnotherNomad]

Not necessarily. Some old treaties usually have spending 183+ days in either country as the first tie-breaker, taking precedence over all other criteria.
Newer treaties have a vague "the tax authorities will agree on something" (MLI) wording.

But it seems like the DE-IT treaty indeed has a "center of vital interests" check as the first criteria, so I would agree that he will probably be tax resident in Germany even under the treaty.

 

[Marzio]

I have analyzed a bunch of treaties and i always found that having an accomodation in your name is the first criteria considered to award tax residency.

If for example he sells his DE house to his wife and rents an apartment in Italy, he becomes IT tax resident if he spends 183+ days in Italy (even if center of vital interests is in Germany) because the first criteria of the treaty will award tax residency to the country where he has a permanent accomodation at his disposal.

Moral of the story: better not to buy a house in a tax hell.

 

[369]

He doesn't even need to own a house.
Its enough if he has keys to a housing where he will have always access (parents for example) and its considered tax residency in germany

 

[Marzio]

He doesn't even need to own a house.
Its enough if he has keys to a housing where he will have always access (parents for example) and its considered tax residency in germany

Right!

He first needs to divorce from his wife

 

[JustAnotherNomad]

He doesn't even need to own a house.
Its enough if he has keys to a housing where he will have always access (parents for example) and its considered tax residency in germany

There's no question whether he is tax resident under Germany's domestic rules. The question is whether the tax treaty could change this. But it doesn't seem like it.

 

[Mike Forman]

Why incorporate a business in Italy instead of Germany?
It is clear and confirmed you will remain a tax resident in Germany in nay case. Hence you just keep declaring and paying your taxes as before, in Germany. If you want to incorporate a business do it in Germany, keep your funds on your German bank accounts and pay from those accounts/cc your expenses in Italy.

In Italy I would stay under the radar, don't move too much money and don't declare anything nor incorporate any business, even you stay there over 6 months. If this situation is temporary and for no more than 2 years, chances that Italian tax authorities get aware of anything are negligible.

If you plan to continue doing this for a longer period it's another story and rather complex one.

As some have mentioned, even you believe you declare your income correctly in both countries and use DTT as guidance, tax authorities might still go after you and demand you to pay the tax they believe you own them + interest + fines.
From then on it's legal battle against the tax authorities that have unlimited funding and time. Don't believe tax authorities play the game correct or fair, hence a good tax lawyer (that will cost you 400-1000 eur per hour) will be required.

So keep quiet in Italy and after two years make sure you don't spend too much time there anymore (or move your family to there) in the following two years you stayed there. Keep your residence anywhere (banks, id, ..) registered in Germany.