When should I declare income as a cross-border commuter?
If you live in a border area and commute daily to work in a neighbouring country, you are a so-called cross-border commuter. Regarding your income, the following applies in most neighbouring countries: you must pay tax on your salary in the country where you work; the income remains tax-free in the country where you live. However, your foreign income is included in the progression clause and thus increases the tax rate for your other income.
The information must be provided in "Form N" and "Form N-AUS" or Form N-Gre. Form N-Gre concerns foreign income from employment for cross-border commuters from Baden-Württemberg to Austria, Switzerland, and France.
If you are single, work as a cross-border commuter, and have no additional income in Germany, you do not need to worry about the progression clause in Germany.
Exceptions: For France, Austria, and Switzerland, a special cross-border commuter regulation applies under the respective double taxation agreement.
If you work in France or Austria, you do not have to pay taxes there but must declare the wages in your German tax return and pay tax as normal. Civil servants or public sector employees, however, pay tax on their income in the country where they work, as the principle of the paying state applies here.
If you work as a cross-border commuter in Switzerland, your employer may deduct a wage tax of 4.5 percent, which is credited against the tax in Germany. If you are a civil servant or public sector employee, you must pay tax on your income entirely in Germany.
Please note that during the coronavirus period, there are special regulations for cross-border commuters, as many employees are or were working from home and do not or did not commute daily (see also: Double taxation agreements and other agreements in the tax sector).
(2022): When should I declare income as a cross-border commuter?
What is the double taxation agreement (DTA)?
A double taxation agreement (DTA) determines where and how income is taxed when work is carried out in a foreign country. To avoid double taxation, Germany has concluded such agreements with over 70 countries.
If you are taxable in the neighbouring country, you will be exempt from tax in Germany. If you pay taxes on your cross-border employment in Germany, you do not have to pay tax on the income again in the neighbouring country. However, the income taxed abroad is included in the progression clause in Germany. This means that a total income is calculated from the income as a cross-border commuter and other income in Germany. This total income results in a higher tax rate, but only the income received in Germany is taxed at this rate.
Exceptions: For France, Austria and Switzerland, a special cross-border commuter regulation applies under the respective double taxation agreement. If you work in France or Austria, you do not have to pay taxes there, but must declare the wages in your German tax return and pay tax on them normally. Civil servants or public sector employees, however, pay tax on their income in the country where they work, as the principle of the paying state applies.
If you work as a cross-border commuter in Switzerland, your employer may deduct a wage tax of 4.5 percent, which is credited against the tax in Germany. If you are a civil servant or public sector employee, you must pay tax on your income entirely in Germany.
Please note that there are special regulations for cross-border commuters during the coronavirus period, as many employees are or were working from home and do not or did not commute daily (see also: Double taxation agreements and other agreements in the tax sector).
(2022): What is the double taxation agreement (DTA)?
