1. Capital Income and Taxation in Germany

In Germany, all worldwide capital income is subject to income tax or withholding tax, even if it has already been taxed abroad. This includes:

• Interest
• Dividends
• Share gains
• Gains from ETFs or other funds

2. Double Taxation Agreements (DTA)

Germany has concluded double taxation agreements (DTA) with many countries to avoid double taxation. The following should be noted:

• Tax credit: Taxes paid abroad can often be credited against your German tax liability.
• Withholding tax limitation: DTAs can limit the amount of foreign withholding tax and thus reduce your tax burden.
• Check the DTA: Inform yourself about the DTA between Germany and the country in which you earned income in order to understand the exact regulations.

3. Reporting Foreign Capital Income

a. Categorise Income

Create an Excel spreadsheet to record and categorise your income:

• Type of income: Interest, dividends, etc.
• Date of receipt: The date on which you received the income.
• Amount: In the foreign currency and in euros.
• Foreign tax paid: All taxes paid or withheld abroad.

b. Apply the Receipt Principle

• Tax year: Income is taxed in the year in which you receive it, even if the tax year abroad differs.
• Exact details: Ensure that all data reflect the actual date of receipt.

4. Evidence of Foreign Taxes Paid

• Keep documentation: Retain copies of all foreign tax certificates and statements.
• Apply for tax credits: These documents are necessary to enable the crediting of foreign tax against your German tax liability and to avoid double taxation.

5. Share-Based Compensation: RSUs and ISPPs

a. Restricted Stock Units (RSUs)

• Before the vesting period: RSUs are subject to income tax, which is normally withheld by the issuing company.
• After the vesting period: Dividends are subject to capital gains tax after the vesting period.

What to do:

• Provide the vesting schedules.
• Document all dividends after the vesting period.

b. International Stock Purchase Plans (ISPPs)

• Dividends: Are taxed upon receipt.
• Speculation gains: These are taxable when the shares are sold after the vesting period.

What to do:

• Note purchase and sale dates.
• Document dividends and sale proceeds.

6. Practical Hints

a. Inform Foreign Financial Institutions

• Notify tax residency: Inform your foreign banks or brokers that you are tax resident in Germany.
• Certificate of residence: Obtain a certificate of residence from the tax office and present it to the foreign institutions.

b. Currency Conversion

• Use exchange rates: Use the daily exchange rate to convert foreign income into euros.
• Consistent method: Apply the same conversion method for all income.

7. Submission Checklist

Ensure that you have the following documents ready: