What is the difference between cross-border commuters and cross-border workers?
Cross-border commuters are individuals who live abroad and earn and pay tax on the vast majority of their income in Germany. Under certain conditions, they can apply to be treated as fully liable to income tax in Germany. Whether this is possible depends solely on certain income limits (§ 1 para. 3 EStG).
- The domestic income taxed in Germany must account for at least 90% of the total income (relative limit). Or
- the foreign income not taxed in Germany must not exceed the basic tax allowance (absolute limit). The basic allowance in 2023 is 11,784 Euro for single persons and 23,568 Euro for married couples.
Cross-border workers are employees who live in Germany and commute daily to their workplace in a neighbouring country. Conversely, there are cross-border workers who commute daily from abroad to Germany.
The double taxation agreements with France, Austria, and Switzerland contain a special tax regulation for cross-border workers: For cross-border workers residing in Germany, the right to tax the wages earned abroad is assigned to the country of residence, Germany, rather than the foreign country of employment. The same applies in reverse for cross-border workers residing abroad who are employed by a German employer. The place of residence and work must be in a border zone:
- For France, a border zone of 20 km on either side of the border applies to German cross-border workers.
- For Austria, a border zone of 30 km on either side of the border applies.
- For Switzerland, there has been no border zone since 1994. The special cross-border worker regulation under the DBA-Switzerland applies to anyone who lives in Germany and regularly commutes to their workplace in Switzerland - and vice versa.
For these cross-border workers, the wages are taxed in the country of residence. This means: German cross-border workers must submit an income tax return in Germany (mandatory assessment under § 46 para. 2 no. 1 EStG). In addition to "Anlage N", you must also complete "Anlage N-Gre".
For Luxembourg, Belgium, the Netherlands, Denmark, Poland, and the Czech Republic, there is no special cross-border worker regulation for German cross-border workers. Instead, the general tax rule applies: they must pay tax on their wages in the country of employment. The country of employment has the right to tax. The wages earned and taxed abroad remain tax-free in Germany but are included in the progression clause, leading to a higher tax rate for other income.
Note: Please note any special regulations for cross-border workers and commuters during the Corona years if you have spent a longer period working from home. In addition, the double taxation agreements are now being amended, or so-called amendment protocols have been agreed upon, whereby home office days are increasingly considered harmless. In individual cases, it should be carefully checked where the right to tax lies.
