How do Germany's double tax treaties with the UK and Australia work?

Germany has Doppelbesteuerungsabkommen (DBA) — double tax agreements — with both the UK and Australia. These treaties determine which country has the right to tax specific types of income and prevent the same income from being taxed twice.

Under the Germany-UK treaty, employment income is generally taxed where the work is performed. A German resident working for a UK employer on UK soil pays UK tax; if working remotely from Germany for a UK employer, Germany has the primary taxing right. Dividends are taxed in the residence country with a maximum withholding rate at source; the Germany-UK treaty typically limits dividend withholding to 15% (5% for significant shareholdings). Pension income is generally taxed in the residence country.

Under the Germany-Australia treaty, similar principles apply. Employment income is taxed where the work is performed. Australian-source dividends paid to German residents are subject to Australian withholding tax at a treaty-reduced rate. The agreement includes a provision called Progressionsvorbehalt: even if income is exempt from German tax, it is still added to your German income for the purpose of determining the rate at which your other income is taxed.

Both treaties require filing returns in both countries in some scenarios. The tax adviser or Steuerberater familiar with cross-border situations is worth consulting if you have income from both countries.