Are the income-related expenses in Form N-AUS the same as in Form N?

If wages are tax-free in Germany due to a double taxation agreement or the Foreign Employment Decree, expenses related to the tax-free foreign income cannot be deducted as business expenses when calculating income taxable in Germany (due to Section 3c EStG). Therefore, they must not be entered in "Form N".

However, since the tax-free wages are subject to the progression clause, you may deduct your expenses "as if they were business expenses" from the relevant foreign income. This reduces the amount of foreign income included in the progression clause, which increases the taxable income. Enter these expenses in "Form N-AUS".

(2023): Are the income-related expenses in Form N-AUS the same as in Form N?

How should income-related expenses be entered in Form N-AUS?

If you receive both domestic and foreign income during your stay abroad, it must be determined to what extent business expenses are attributable to taxable and tax-free income. The causation principle applies:

• If the expenses are related to taxable domestic income, they are deductible as business expenses, e.g. meal allowances.
• If the expenses are related to tax-free foreign income, they can be deducted "as" business expenses from the income, and only the reduced amount must be included in the progression clause.
• If it cannot be clearly determined that the business expenses are solely caused by taxable or tax-free income, the expenses must be allocated accordingly.

The expenses must therefore be allocated to the tax-free income in the proportion that the tax-free income bears to the total income received during the period abroad. The portion to be deducted as business expenses is determined by the ratio of taxable to tax-free income. This applies, for example, to work equipment, work clothing.

(2023): How should income-related expenses be entered in Form N-AUS?