Should I declare my foreign income gross or net?
In Germany, tax-free foreign income is only considered in the calculation of the tax rate applied to your taxable German income (progression clause).
The amount of income to be declared must be determined according to German tax law. To calculate foreign income, deduct the actual foreign income-related expenses in full from the foreign income.
Example: Pavel moves from Poland to Berlin
Pavel worked in Poland from January to April. Since then, he has lived and worked permanently in Berlin. He has been fully liable to tax in Germany since moving in May.
His gross income in Poland was 10,000 Euro. He incurred income-related expenses of 350 Euro (travel expenses) and 60 Euro (work materials). As the actual income-related expenses are below the current income-related expenses allowance of 1,000 Euro, his foreign income in this case is 9,000 Euro.
The foreign income of 9,000 Euro is subject to the progression clause in the year of moving and must be declared in Annex WA-ESt.
To calculate foreign income, the actual foreign income-related expenses must be deducted in full from the foreign income (here: the foreign gross income).
According to § 34d EStG, the sum of foreign income consists of:
- Income from agriculture and forestry conducted in a foreign country,
- Income from business operations abroad,
- Income from self-employment carried out abroad,
- Income from the sale of assets abroad,
- Income from employment carried out abroad,
- Income from capital assets if the debtor has a residence, management, or registered office abroad, or if the capital assets are secured by foreign property,
- Income from renting and leasing abroad, and
- Other income earned abroad.
