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Posting of employees: tax compliance and right of residence

Anyone who wants to move to Germany from abroad as an employee, who will have to deal with a number of tax issues in terms of tax compliance. Regardless of how one assesses the tax burden, one thing must be clear - tax compliance is an important aspect of the considerations that a foreign employee, as well as his employer, has to make.

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Tax compliance: the obligation to report taxes correctly

The idea of ​​gaining advantages by cleverly designing the remuneration model and using special standards from the DBA is obvious. But be careful - the criminalization of tax offenses anchored in Germany not only affects the direct perpetrator, aiding and abetting is also a punishable offense. In Germany, tax evasion is a criminal offense according to Section 370 AO, which is also punishable by imprisonment. 

Normally, the employer is responsible for correctly registering and paying income tax. However, this obligation only applies to the domestic employer. Anyone who works for a foreign company in Germany must therefore declare the tax themselves and pay it to the tax office. 

The law obliges anyone who participates in a foreign company or has a source of income abroad (e.g. a rented property) to register this with the tax office. Failure to register is an administrative offense.

High penalties for tax evasion

There are also further consequences for a non-EU foreigner if they do not observe tax compliance. Section 53 of the Residence Act provides for mandatory expulsion if a foreigner with a residence permit is sentenced to a prison sentence of at least 3 years. As a general rule, if you exceed 1 million in evaded taxes, a sentence can no longer be suspended. This will not necessarily affect the simple mechanic to this extent. For a new manager, however, the outcome can quickly turn out differently.

Jürgen Bächle
Jurgen Bachle

has been working as an independent tax consultant and expert in international tax law since 1989 and has been a member of the board of the German Association of Tax Consultants Baden-Württemberg, DSTVBW, for over 20 years.

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