Germany Non-Resident Tax Guide (Beschränkte Steuerpflicht)
A guide to the German tax rules for non-residents (beschränkt Steuerpflichtige). Non-residents are taxed only on German-source income: rental income from German property, employment income for work performed in Germany, business income from a German permanent establishment, dividends from German companies (withholding tax 25% + Soli, often reduced under DBAs), and German-sourced pensions. The extended limited tax liability (erweiterte beschränkte Steuerpflicht) applies to individuals who moved abroad but retain strong economic ties to Germany.
Non-residents of Germany are not subject to German tax on their worldwide income, but they are liable for German tax on certain types of income that originate from German sources (beschränkte Steuerpflicht under §49 EStG). This affects foreign investors, cross-border workers, retirees receiving German pensions, and former residents who still generate German income. For related reading, see our Cross-Border Tax Guide → and Tax Treaties Guide →.
Taxable German-Source Income for Non-Residents
- Rental income (Vermietungseinkünfte): Income from real estate located in Germany is taxable in Germany regardless of the owner's residence. The income is the net rental profit (rent received minus expenses and depreciation). Non-resident landlords must file Anlage V with their Steuererklärung. The purchase price of German property is depreciated at 2%–3% per year (linear Abschreibung).
- Employment income (Arbeitslohn): Income from employment physically performed in Germany is taxable in Germany, even if the employer is foreign. The key factor is where the work is actually carried out. Short-term assignments (typically up to 183 days under most DBAs) may be exempt if the employer is non-resident and no German PE exists. The 183-day rule varies by treaty.
- Business income (gewerbliche Einkünfte): If a non-resident has a permanent establishment (Betriebsstätte) in Germany, the profits attributable to that PE are taxable in Germany. The PE definition follows §12 AO and the applicable DBA. See our Permanent Establishment Guide →.
- Dividends (Kapitalerträge): Dividends from German companies (Kapitalgesellschaften) paid to non-residents are subject to withholding tax of 25% + Solidaritätszuschlag (5.5% of the 25% = ~26.375% total). Under most DBAs, the withholding rate is reduced to 15% (EU) or 5%–10% (most other treaties). The reduced rate may require a Freistellungsbescheinigung from the BZSt.
Extended Limited Tax Liability and Compliance
- Extended limited tax liability (erweiterte beschränkte Steuerpflicht — §2 AStG): Applies to individuals who moved to a low-tax country (below 25% effective tax rate) and still have substantial German-source income or assets (e.g., they still derive >30% of their total income from German sources, or receive >30% of their capital income from German sources, or have German-source assets worth >30% of total assets). In such cases, certain items of income not normally taxable for non-residents may become taxable.
- Withholding tax refunds: If German withholding tax was deducted at the standard rate (25% + Soli) but the applicable DBA provides for a lower rate, the non-resident can file a refund claim with the Bundeszentralamt für Steuern (BZSt). Form: Antrag auf Rückerstattung von Kapitalertragsteuer. The refund process typically takes 3–12 months.
- Non-resident tax return obligation: Non-residents with German-source income that is not subject to final withholding tax (e.g., rental income, business income) must file a German tax return (Steuererklärung für beschränkt Steuerpflichtige). The return is filed with the Finanzamt responsible for the area where the income arises or the property is located.
- Pension income: German-sourced pensions (gesetzliche Rente, company pensions, Rürup) paid to non-residents are generally taxable in Germany under §49 EStG. Most DBAs give Germany the exclusive taxing right over government pensions. For private pensions (Rürup, Riester), the treatment depends on the specific treaty. Non-residents may also be entitled to the Grundfreibetrag in limited circumstances.