How are stock options taxed in germany

Where was your income paid? All of these factors come into play when determining where American expats in Germany will pay taxes. As an American living in Germany, educating yourself on the requirements and regulations regarding taxes for American expats can help maximize your savings and prevent missing important deadlines. And, of course, consulting with a tax professional can go a long way toward understanding your expat taxes while enjoying your time abroad!

In the meantime, check out our tax guide for Americans working overseas for helpful tax information. Contact us today!

Good to know:

Definition of a German Resident You are considered a tax resident of Germany if you arrive in the country intending to stay for a period longer than six months. Germany Tax Rate vs. US When you look at Germany tax rate vs. German Tax on Foreign Income All individuals who are considered tax residents of Germany will pay taxes on their worldwide income whether to Germany or another country.

Losses on investments and the sale of assets can be deducted from the income earned on other investments or assets. The system is set up so that taxation is deducted at the source. There is no wealth tax. Capital Gains Tax on Real Estate — This tax is only levied if the real estate was not self-occupied and held for less than 10 years. In Germany, rental income is only taxed by the country in which the rental is located. I'm Living In This field is for validation purposes and should be left unchanged.

• How Employee Stock Options Are Taxed!
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Share via. Send this to a friend. Generally, capital gains tax is always 25 percent. Only in a few exceptional cases is a different capital gains tax rate applied. The solidarity surcharge is applied in addition to the capital gains tax. Unlike "normal" income tax, capital gains tax exists from the point in time when the capital gains are paid, and not only at the end of the calendar year. The entity paying out the capital gains withholds the tax for the recipient of the capital gains and pays this to the tax office.

If the capital gains are covered by regulations about definitive flat-rate tax on capital gains Abgeltungssteuer , which is a source tax on capital gains, then the recipient of the capital gains generally need not submit a return as part of his income tax assessment. However, there is the option to apply for a special assessment.

This makes sense primarily if exempted amounts have not fully been made use of, if it is possible to deduct foreign source tax, or if the personal tax rate is less than 25 percent. The part which relates to times of working activity abroad might be taxed in the country where the work has been carried out.

For the split the actual exercise date is irrelevant. The relevant period vesting period starts at the date of granting the options and ends at the earliest possible exercise date. In January his employer granted stock options for 10, shares. The vestion period starts in January and ends in December Since the employee was working in the vesting period for 12 months in the USA and for 12 months in Germany the benefit has to be split on equal terms.

This part of the benefit has to be declared in the German income tax return Benefits have also to be declared on US-income tax returns. The employer must withhold wage income tax on benefits in the month of exercising the options. The benefit does not lead to a cash transfer to the employee. Consequently the wage income tax must be paid out of the normal net wage of the month. This might result in a very low payment to the employee in the respective month. The employee should be prepared. Either he can survive the month without any significant payment from his employer or he can sell shares in order to outbalance the cash deficit.

Experience shows that often payroll departments withhold income wage tax on the total amount. This is due to the fact that especially in relation to the USA a special certificate from German tax authorities is required to avoid withholding tax on the total amount of benefits. This certificate must be in the hand of the employer before exercise date. The employer or the employee can apply for this certificate at the Federal Central Tax Office.

In general the employer should apply for it well before exercise date. Experience shows that this is not always the case. The consequences of a missing certificate are the following. The employer has to withhold income wage tax on the total amount. The employee has to declare the correct benefit in his German income tax return. The tax authorities will refund the unjustified amount.

The problem is that the unjustified amount will be refunded months or years after exercise date and often this strains the cash situation of the employee. This is the case for extra payments such as bonuses or compensions for unused vacation days. If these payments are granted for times when the employee was not working and living in Germany in general these payments are not taxable in Germany. If above mentioned certificate is not available, the employer has to withhold income wage tax on these payments. Again the employee has to seek for refunding the unjustified tax in his German income tax return.

They might also require proof that these payments or benefits have been taxed abroad.

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In general it is much easier to apply for the above mentioned special certificate than to provide evidence that benefits are not taxable in Germany. If shares are exercised while the employee is not tax resident in Germany he has to tax the benefits as non-resident.

Normally employees sell parts of the shares after exersicing the options. Kommentar von Matt Allie