The Baden-Württemberg Tax Court (FG Baden-Württemberg vom 12.6.2024 (7 K 1568/22)) has made a significant ruling on the question of unlimited tax liability for persons residing abroad. The case involves a taxpayer who maintained her center of life on a Spanish island despite owning property and making regular family visits in Germany.

The Case in Detail

The taxpayer owned two apartments in Germany. One was rented out, while her parents lived in the other. Additionally, she owned a fully furnished apartment on a Spanish island. Professionally, she worked primarily abroad, with stays in Asia and on a southeastern European island. Her visits to Germany were limited to approximately 40 days per year.

Initially, the tax office assumed unlimited tax liability and estimated the tax base after the taxpayer failed to submit income tax returns.

The Court’s Decision

The court clarified: Neither property ownership nor regular visits automatically establish a tax residence. What matters are the actual circumstances, not subjective intentions. In this specific case, several factors argued against a German tax residence:

1. Visits to the parental apartment were purely of a visiting nature
2. The apartment was exclusively used and inhabited by the parents
3. The taxpayer had consciously chosen to center her life on the Spanish island

Practical Significance

This decision provides important guidance for internationally mobile individuals. A tax residence in the legal sense requires more than just property ownership or occasional visits. It requires use that goes beyond mere visits, short holiday stays, or administrative activities.

As a result, the taxpayer was only liable for tax in Germany on her German rental income. For internationally active individuals, this emphasizes the importance of carefully documenting actual residential circumstances and periods of stay.

Impact on International Mobility

The decision demonstrates that actual lifestyle is crucial in determining tax residence. Neither property ownership nor family ties alone automatically establish unlimited tax liability in Germany. This provides legal certainty for the growing number of people with international mobility.

Key Takeaways

* Property ownership alone does not establish tax residency

* Regular family visits do not automatically trigger unlimited tax liability

* The actual use and circumstances of accommodation are decisive

* Documentation of residence and stay periods is crucial

* Only German-source income (in this case, rental income) remains taxable

Conclusion

The ruling provides a clear framework for understanding tax residency in an increasingly globalized world. For international professionals, it emphasizes the importance of carefully considering and documenting their living arrangements. While maintaining family ties and property ownership in Germany, individuals can maintain their tax residence abroad if their actual life circumstances support this arrangement.

This decision reflects the modern reality of international mobility while providing clear guidelines for tax authorities and taxpayers alike. It’s particularly relevant for professionals working internationally who maintain connections to Germany through property or family ties.