When and how must I declare income as a cross-border commuter?
The cross-border commuter tax return raises questions for many employees: If you live in Germany but regularly work in a neighbouring country, you are not automatically correctly classified for tax purposes. The special regulations of the double taxation agreements are decisive. The following article explains clearly when income as a cross-border commuter must be declared, which forms are required for the tax return, and when the progression clause applies.
Who is considered a cross-border commuter for tax purposes?
Cross-border commuters are employees who have their residence in Germany and regularly commute to work in a neighbouring country, such as France, Austria, or Switzerland. The relevant double taxation agreements and the actual return to the German residence are decisive.
Important: Cross-border commuter status does not arise automatically, but only if the conditions are met.
Where is the salary taxed?
As a rule, salary is taxed where the work is performed. However, for cross-border commuters, the relevant double taxation agreement often provides for an exception:
The salary is taxed in Germany, even though the work is carried out abroad.
- The entire salary is subject to German income tax.
- In the foreign country, there is usually no or only limited withholding tax.
- There is no progression clause because the salary is not tax-free but is taxed regularly in Germany.
Cross-border commuter tax return: Where do I enter the salary?
If you are a cross-border commuter in the tax sense, the entry is as follows:
- Form N for regular salary
- additional Form N-GRE, only if you live in Baden-Württemberg and work in France, Austria, or Switzerland
Important: You must not use Form N-AUS in this case. The cross-border commuter regulation and Form N-AUS are mutually exclusive.
Cross-border commuter or not – the distinction
You are considered a cross-border commuter if:
- You regularly return to your residence in Germany.
- You comply with the permitted number of non-return days (e.g. Switzerland: maximum 60 days).
- Your salary is taxed in Germany.
Consequence: Entry in Form N (and possibly Form N-GRE), no progression clause.
You are not considered a cross-border commuter if:
- You do not return to your German residence often enough.
- You mainly live or work abroad.
- You have other foreign income that does not fall under the cross-border commuter regulation.
In this case, the following usually applies: Taxation in the country of work. The salary is often tax-free in Germany but increases the tax rate for other income through the progression clause according to § 32b EStG.
=> Entry: Form N-AUS.
Special features depending on the country
- France and Austria: Cross-border commuters generally tax their salary in Germany.
- Switzerland: The employer may withhold 4.5 percent withholding tax. This is usually credited against German income tax.
Special case: Civil servants and public service
For civil servants and public service employees, a special rule applies: Income is generally taxed in the employer's country, even if the other conditions of a cross-border commuter situation are met.
Conclusion
The cross-border commuter tax return depends crucially on where the salary is assigned for tax purposes. Those who meet the cross-border commuter regulation declare their income as domestic salary and avoid the progression clause. If the conditions are not met, Form N-AUS is required. A clear distinction reduces queries from the tax office and prevents unnecessary tax disadvantages.
Elektronischen Steuererklärung ohne Anlage N-GRE
In practice, it may happen that Form N-GRE is not separately supported in some electronic tax programs, for example when using Lohnsteuer kompakt. In these cases, this does not automatically mean that the cross-border commuter information is lost.
If your salary is fully taxable in Germany, it will still be correctly declared in Form N. The additional information relevant for cross-border commuters (e.g. about the foreign employer or cross-border commuter status) should then be added in the designated free text or explanation field of the tax return.
It is also advisable to include a short written explanation stating that the conditions of the cross-border commuter regulation are met. This makes it easier for the tax office to classify and reduces queries.
Important: Even if Form N-GRE cannot be selected technically, the material tax obligation remains unchanged. It is crucial that the salary is correctly declared as taxable in Germany.
When and how must I declare income as a cross-border commuter?
Who is covered by the cross-border commuter regulation (CH)?
The cross-border commuter regulation for Switzerland applies to anyone who lives in Germany and regularly commutes to their workplace in Switzerland. The following regulations apply:
- The taxpayer must not return to their place of residence on more than 60 working days per year.
- The distance between home and workplace is irrelevant.
- Switzerland may levy a payroll tax of up to 4.5% on wages. Allowances and work-related expenses are not taken into account.
- The employee must prove their place of residence to the employer with a so-called certificate of residence from their local tax office (form Gre-1).
- The employer will issue a payroll tax certificate upon request for the withheld payroll tax.
- When taxed in the country of residence, Germany, the payroll tax withheld in Switzerland is credited against German income tax.
Special features and equitable regulations
Please note that there are special features and equitable regulations for cross-border commuters due to the COVID-19 pandemic, as daily commuting was often not possible. Further information can be found on the Federal Ministry of Finance website.
In addition, double taxation agreements are now being amended, or so-called amending protocols have been agreed, whereby home office days are increasingly considered harmless. In individual cases, it should be carefully checked where the taxation right lies.
Who is covered by the cross-border commuter regulation (CH)?
Who qualifies for the cross-border commuter regulation (AUT)?
The cross-border commuter regulation with Austria applies to anyone who lives in Germany and regularly commutes to their workplace in Austria. Two conditions must be met:
- The place of residence and work must be in the border zone, i.e. within an area of 30 km on either side of the border.
- You must return to your place of residence every day in principle.
If you do not return to your place of residence on a maximum of 45 working days per year or work outside the border zone for your employer, this is not a problem (so-called non-return days).
Activities outside the border zone also include activities in a third country.
Lohnsteuer kompakt
Please note that there are special and discretionary regulations for cross-border commuters due to the coronavirus pandemic, as daily commuting was often not possible. Further information can be found on the Federal Ministry of Finance website.
Who qualifies for the cross-border commuter regulation (AUT)?
What is the "Special Cross-Border Commuter Regulation"?
These regulations apply to commuters who live in Germany and commute to work in France, Austria, or Switzerland. This is governed by the respective double taxation agreements. If you work in one of these countries, you must pay tax on your income in Germany, not in the country where you work. However, this only applies if your place of residence and work is in the border zone of the respective country. For France, the border zone is 20 km on either side of the border, for Austria it is 30 km. In Switzerland, there is no such border zone.
There was also a special cross-border commuter regulation with Belgium until 2003. However, since 2004, the general regulation has applied. This means for cross-border commuters to Belgium: The salary is no longer taxed in the country of residence, Germany, but in the country of employment, Belgium. In Germany, the income is exempt from tax but included in the calculation of the tax rate. However, there is a special tax regulation for commuters from Belgium to Germany: Belgium, as the country of residence, exempts the wages taxed in Germany as the country of employment and only includes them in the calculation of the tax rate. However, this income is included in the Belgian municipal tax, which is an additional tax on income tax. To offset this Belgian municipal tax, German income and wage tax on this income is reduced by a flat rate of 8%.
What is the "Special Cross-Border Commuter Regulation"?
Why should I enter my income as a cross-border commuter in the local currency?
If you receive income in a currency other than Euro as a cross-border commuter, please enter this amount in the foreign currency in your tax return (Form N-Gre). This only applies if you work in Switzerland.
The tax office will convert your income from the foreign currency into Euro using an average exchange rate. The reference rate of the European Central Bank (ECB) or the official VAT conversion rate may also be used. However, you are not permitted to convert your income yourself using an exchange rate.
Why should I enter my income as a cross-border commuter in the local currency?
What is tax-free wages under DBA/ATE?
This refers to tax-free wages under a double taxation agreement (DTA) or foreign employment decree (FED). A DTA stipulates how employees working abroad must tax their income to avoid double taxation. Wages for work abroad can be tax-free under the foreign employment decree if there is no double taxation agreement with the relevant country and the work lasts for at least three consecutive months. Illness or holiday does not affect the duration of employment but is not counted towards the three-month period.
If your salary is taxable abroad, you will be exempt from tax in Germany under a DTA or FED. However, income taxed abroad is included in the progression clause in Germany. This means that a total income is calculated from the foreign income and other income in Germany. This total income results in a higher tax rate, but only the income earned in Germany is taxed at this rate.
Exceptions:
- For France, Austria, and Switzerland, a special cross-border commuter regulation applies under the double taxation agreement. If you work in these countries, the wages are taxed in the country of residence, Germany.
- In Switzerland, the employer may deduct a wage tax of 4.5 percent, which is credited against the tax in Germany.
- Civil servants and public sector employees always tax their income in the country where they work, as the principle of the paying state applies.
Note: The foreign employment decree has recently been revised. We would like to draw your attention to a particularly important new provision: employees must prove that their wages abroad were subject to a minimum taxation. If you cannot provide proof or if there is no minimum taxation, the foreign employment decree and thus the tax exemption in Germany do not apply. The new regulations apply to wages and other remuneration paid after 31.12.2022 or received by the employee after this date.
Note: More and more double taxation agreements are currently being amended to give special consideration to home office days. In individual cases, it should therefore be carefully checked where the right of taxation lies.
What is tax-free wages under DBA/ATE?
How is employment income in foreign currency converted?
If you receive your wages in a foreign currency, you must convert them into Euro for your income tax return. This also applies if taxes have been withheld abroad on the wages and are to be credited against your German tax liability.
Conversion principles:
- Cash basis accounting (§ 11 para. 1 EStG): The conversion is made at the time of receipt. This means that the wages are converted into Euro as soon as the salary is credited to your account (BFH ruling of 03.12.2009, BStBl. 2010 II p. 698).
- Euro reference rate of the European Central Bank (ECB): The conversion is based on the Euro reference rate published monthly by the ECB. These rates correspond to the VAT conversion rates, which are also set monthly by the Federal Ministry of Finance and published in the Federal Tax Gazette.
- Monthly conversion: Wages must be converted using the monthly ECB reference rate. You can view the current conversion rates on the Federal Ministry of Finance website (see BMF conversion rates).
Facilitation: Annual conversion
It is not objected if wage payments in foreign currency are calculated based on an annual conversion rate. This rate is derived from the monthly VAT reference rates, rounded down to the nearest 50 cents (BMF letter of 14.12.2014).
Special regulation for cross-border commuters to Switzerland
A special regulation applies to cross-border commuters to Switzerland:
- You must enter the wages and the tax withheld in Switzerland in the "Anlage N-Gre" in Swiss Francs. The tax offices will then automatically convert them on an annual basis.
- The tax authorities use an average rate for the entire year, which is specified.
Current conversion rates for Switzerland:
- 2022: 100 CHF = 99,00 EUR
- 2023: 100 CHF = 102,50 EUR
- 2024: 100 CHF = 104,50 EUR
- 2025: 100 CHF = 106,00 EUR*
Source: Baden-Württemberg tax offices, *Note: The rate for 2025 has not yet been officially confirmed.
Conclusion:
The conversion of wages in foreign currency is generally done using the monthly Euro reference rates of the ECB. Alternatively, the annual conversion rate can be used for facilitation. For cross-border commuters to Switzerland, the tax office handles the conversion with a specified annual average rate.
How is employment income in foreign currency converted?
