Hey there,
I am working on my taxes declaration for 2023 in Germany. I live in Taiwan and one of the things I need to state is whether Taiwan is a “Niedrigsteuerland”. I have calculated manually the tax burden and compared Taiwan and Germany and I think Taiwan does not meet the criteria to be considered “Niedrigsteuerland”. But I can’t find any official document. Does any German here has experience with this and can share their experience?
Yes - quite many countries in the world meet the German definition of a “low tax country”. That’s because taxes on labor income in Germany are one of the highest world wide.
For more details, see here for example:
Ein Niedrigsteuerland aus deutscher Perspektive ist ein Land, in dem die Besteuerung von natürlichen Personen bei einem Einkommen von €77.000 mindestens um ein Drittel niedriger ist als in Deutschland.
According to that article, a country is a low tax country (according to the German definition) if the tax rate on an income of €77,000 is lower than 19%.
Using the official tax calculator:
Quick Calculation of Alien Individual Income Tax-eTax Portal,Ministry of Finance and entering 77k€ (around 2.7 million NT$) yields a tax payable of 315,400 or around 12%.
That’s less than 19%, so Taiwan counts as a low tax country according to the German definition.
Good news, however, is that Taiwan and German have a double taxation agreement. So the only result of Taiwan being a low-tax-country is that you need to check the box that you’ve moved to a low-tax-county in your last tax return.
And to be on the safe side, you should make sure to keep less than 154k€ in German bank accounts and other German investments (funds domiciled in another country held in a German brokerage don’t count!) when moving away so that you don’t fall into the Erweiterte beschränkte Steuerpflicht…
If you own a significant part of a company in Germany, you should speak to a German tax professional focused on Wegzugsbesteuerung etc. - but in that case, it would have been better to so this before your move.
Thanks for your answer
I also saw that page and then talked with the tax bureau about Taiwan being a low tax country. They were quite surprised and asked me to detail in the taxes declaration how I came up with that result.
So by calculating the tax burden for an income of 77000€ I always come up with around 16000€ which is close to 22%, of course there are other items to be deducted from the salary, but they are not taxes (even solidarity surcharge does not have to be counted)
In Taiwan, since I am a resident, I use the official table for residents here: Rate Applicable-National Taxation Bureau of Taipei
with that table the income tax for 77000€ is around 15.8%. So it is very close to be less than one third, but by my calculations it is not that low.
This page you posted is from a law firm specialized in helping people save taxes when moving to a foreign country, they don’t really explain how they came up with 29% tax burden in Germany. But if you add 9.3% for pension, 8.2% for health insurance and 1.3% for unemployment insurance you end up with 49% of your salary being withheld which seems too high, even for Germany. So I think it is reasonable to doubt their calculation…
I doubt that the tax bureau in Taiwan will be of any help navigating German tax codes.
I just put the numbers into the Lohn- und Einkommenssteuerrechner from the BMF for 2023:
The result is €21,037 - that is roughly 27% (since the article has been written, the tax progression has probably been updated slightly, so I think the 29% should be plausible if the article is already some years old.
Anyway, two thirds of 27% is still more than the 15.8% you came up with (and that number is ignoring all possible deductions - although I am not sure if the BMF calculator includes the Pauschbetrag für Werbungskosten or not).
Except those are partially tax-deductible. So if you pay those, your effective tax rate will be lower. To my understanding of the German law, they are not talking about “net salary” or something, but perform the calculation purely looking at taxes.
Another website (seems to be a tax lawyer) also gives a tax rate of roughly 30% (for 2020) at 77k zu versteuerndem Einkommen (I think that would be the right comparison - so probably after all deductions have already been applied. So yes, it would probably make sense to also ignore the deductions on the Taiwan side although I’m not sure about this… - especially the exemption for the taxpayer as this concept is basically already “built-into” the German tax rate):
Bei einem Einkommen i.H.v. 77.000 Euro beträgt die Einkommensteuerbelastung in Deutschland in 2020 ca. 30,3 Prozent. Damit wird aktuell eine niedrige Besteuerung im neuen Ansässigkeitsstaat des Auswanderers angenommen, wenn die dort erhobene Einkommensteuer zu einer Belastung von unter 20,2 Prozent führt.
Yes you are right.
In the page you posted, the result of 16000€ also appears, but only if you add the payments to the pension.
Anyway, now I know how it is calculated. Thanks for your help
- Eine niedrige Besteuerung im Sinne des Absatzes 1 Nr. 1 liegt vor, wenn die Belastung durch die in dem ausländischen Gebiet erhobene Einkommensteuer - nach dem Tarif unter Einbeziehung von tariflichen Freibeträgen - bei einer in diesem Gebiet ansässigen unverheirateten natürlichen Person, die ein steuerpflichtiges Einkommen von 77 000 Euro bezieht, um mehr als ein Drittel geringer ist als die Belastung einer im Geltungsbereich dieses Gesetzes ansässigen natürlichen Person durch die deutsche Einkommensteuer unter sonst gleichen Bedingungen
So you would also need to factor in the exemption and standard deduction in Taiwan to my understanding!
This will give you a much lower tax rate of around 12%:
Yeah, exactly, but to my understanding, you cannot factor those in as those would act as tax-deductibles and lower the amount of taxes to be paid.
But again - are you truly worried about being notably affected by the erweiterte beschränkte Steuerpflicht? Because only then it would actually be relevant if Taiwan counts as a low-tax country or not. For most people, this shouldn’t really have any effect.
To be honest, yes I am a bit worried. Because I established a company in Taiwan after moving here and my main customer is in Germany. So I don’t know how this would affect me.
If your company is located in Taiwan (and is not “substanzlos”, i.e. a “Briefkastenfirma” - which should not be the case if you as its managing director reside here), all the income derived from it, should count as “ausländisches Einkommen” which is not relevant for the erweiterte beschränkte Steuerpflicht:
Unterfällt ein Stpfl. der erweitert beschr. Steuerpflicht, so wird im Jahr des Wohnsitzwechsels bzw. der Aufgabe des gewöhnlichen Aufenthalts und für die nachfolgenden 10 Jahre die beschr. Steuerpflicht erweitert. Zum einen unterliegen nicht nur die inländischen Einkünfte der beschr. Steuerpflicht, sondern alle Einkünfte, die nicht ausl. sind.
The erweiterte beschränkte Steuerpflicht only affects income which is not Auslandseinkünfte (from a German point of view!).
Your company in Taiwan should fall under this point and should clearly be Auslandseinkünfte for Germany:
Einkünfte aus Gewerbebetrieb (§§ 15 und 16),
a) die durch eine in einem ausländischen Staat belegene Betriebsstätte oder durch einen in einem ausländischen Staat tätigen ständigen Vertreter erzielt werden, und Einkünfte der in den Nummern 3, 4, 6, 7 und 8 Buchstabe c genannten Art, soweit sie zu den Einkünften aus Gewerbebetrieb gehören,
And again, Germany and Taiwan have a double-taxation agreement which includes rules about when a company is a tax resident of Taiwan (and thus all its generated income is Auslandseinkünfte for Germany).
But as always, when in doubt, better ask a licensed tax professional and not some strangers on the internet
Thank you very much for your explanations! I really appreciate it
Just FYI (I’m not sure whether this is common knowledge — it might well be), I believe you can claim an additional deduction for having moved from Germany to Taiwan on account of the different electricity voltages.
I’m reluctant to spend too much time trying to google in German, but I think it falls under Umzugskostenpauschale — there looks to be some info below:
This is how it appeared on my tax return (for 2012, so the values are probably outdated by now):
The only issue about this is that the reason for the move has to be job-related. So one would need to be able to make a convincing argument for that.
If that’s the case, then I think (as an alternative to the Pauschale), the full cost of the move can be deducted as expenses. Which could be quite some sum if one is really moving the entire household over.
But be aware that trying to claim a job-related move could also cause some questions from the authorities about the new job. At this point, one might need to reveal the fact that they started a new company abroad etc. (which otherwise one wouldn’t need to inform the tax authorities in Germany about).
Personally, I am not a fan of sharing more info than absolutely required with the tax authorities - I feel the more hints and information you give them, the higher the chance of an over ambitious worker to keep looking for further details and hoping to find something wrong in the tax return. So that could be a reason to skip that part in the tax return, although it might sound beneficial at first…
(Personally, I didn’t claim any moving expenses when moving to Taiwan as I moved in October and then was unemployed for the rest of the year. So kinda hard to argue for a job-related move in that case
The real reason I stayed unemployed for the rest of the year was mainly that I didn’t want to be bothered to declare income earned in Taiwan in Germany again under the Progressionsvorbehalt which I feared would be another bureaucratic nightmare, possibly including some notarized translations and such…)
But maybe I am just a bit “overly careful” in those situations - with international taxation, there are (as the OP found out, too) many laws and regulations in place in Germany which might in the end not really cause any tax liability, but just by existing and being looked into by the authorities can cause lots of headaches and bureaucracy if one has bad luck with the official handling their case…
I don’t know (/remember) much about this besides what I’ve already written, so I’m happy to defer to your greater knowledge. I just wanted to point it out in case it wasn’t well known.
For my case I had actual postdoc positions I’d moved to in both Germany and China, though I was also doing some freelance work in Germany during my final year (and registered as a freelancer there). Both of the moves were optional, i.e., I hadn’t been sent there as part of my job, I’d just chosen to look for/take a job elsewhere. As far as I remember, I wasn’t asked for further information about my job in China or why I’d moved — they just accepted my claim.
I was also a UK citizen now living in China at that point, I owed the Finanzamt money not the other way around, and I didn’t have the patience for writing too much stuff in German, so I just kind of had the attitude of “well, what are you gonna do about it?”
Yeah, I think you’re right about that, IIRC. It wasn’t applicable in my case since I didn’t really have many significant moving expenses, and the few I did have (flights etc.) were already paid for by the new employer.
Yeah, that’s probably what will happen in 90% (or more?) of all cases. Nowadays, they often don’t even want to see receipts if all the things overall seem plausible. Mostly, the Finanzamt is not out there to get people. Probably still more so than the tax authorities in Taiwan, but overall most of them still also don’t have any interest in unnecessarily dragging a case for just a couple of Euros.
Yeah - the thing that the OP is worried about, the erweiterte beschränkte Steuerpflicht, only applies to German citizens.
But it seems to be a rather special case meant against some really special cases of tax-avoidance in the past. Although I personally doubt that the authorities would investigate this for us “average” (read: non-multi-millionaires) people, I can understand why the OP has some worries about this topic. When I moved to Taiwan, I also came across this topic and it also lead me to do some research.
My personal take-away is that there is a very small chance that the German tax authorities have the possibility to launch an investigation which would require me to submit lots of documents - and in the end, they would probably just tell me that it was all for nothing…
Also, there is one guy that seems to have a very clear opinion of the erweiterte beschränkte Steuerpflicht being mostly a “paper tiger” (not sure if that’s a saying in English or not…):
I don’t like the way the article is written (basically a sales pitch), but he does make some convincing points why even for digital nomads without any residence, the law is not really an issue.
He even links to a government statement that in 2020 there were less than 125 (!) tax payers in total for which this rule applied. Given how many Germans live abroad and have started businesses there, I would say that’s only a fractional percentage…
If one is truly a tax resident of Taiwan (which even has a DBA with Germany), then there is even less to worry about:
See the (linked) document page 8: https://www.bundesfinanzministerium.de/Content/DE/Downloads/BMF_Schreiben/Internationales_Steuerrecht/Allgemeine_Informationen/2023-12-22-grundsaetze-zur-anwendung-des-aussensteuergesetzes.pdf?__blob=publicationFile&v=5
I would say with a real company and Taiwan and being a Taiwan tax resident, one is 100% safe in terms of erweiterte beschränkte Steuerpflicht regarding the income of said company. It could affect you if you have real estate in Germany or other investments which generate significant profits over the threshold (€16k, I think), but the company income should be “safe”.
(Personally, I don’t have a company in Taiwan, but in Estonia. So my personal risk might be a bit higher than in OP’s case - but even there, that business either has a Betriebsstätte in Estonia or in Taiwan - so it cannot fall into the category of “betriebsstättenloses Einkommen” - which the linked article actually argues cannot really exist for most businesses - the reason behind that addition to the law was actually a professional athlete who performed in Germany…)