Court Case. Place of Residence as a Basis for Taxation in Germany

17.07.2025

• Essence of the Case
• Facts of the Case
• Position of the Tax Authority
• Position of the Court (last instance)
• Main Findings of the Court
• Contact our lawyer for more details

To begin with, it should be noted that under the provisions of the German Tax Code, an individual is considered a tax resident in the following cases:

1. Residence in Germany for more than 6 months, or
2. Having a permanent place of residence (property owned or under long-term lease). Herewith, the individual maintains the property, can use it at any time and for any purpose.

Essence of the Case

Did the individual, who was on an overseas business trip from October 2008 to June 2011, have a place of residence in Germany and was he subject to unlimited income tax liability in Germany during that period?

Facts of the Case

• The plaintiff and his family lived in their own house in the city of B in Germany before and after the business trip.
• During the business trip, the house was put up for sale based on an agency agreement. However, the sale was not finalized. The house was partially rented out (one floor). The main furniture remained in the house.
• The plaintiff himself visited Germany irregularly during the business trip: 22 days in 2009, 26 days in 2010, and 1 day in 2011.
• His wife and children visited the house more frequently.

Position of the Tax Authority

The plaintiff did not lose his place of residence in Germany, and he was subject to unlimited taxation.

Position of the Court (last instance)

The court recognized the presence of the plaintiff's place of residence in Germany throughout the business trip, despite his rare visits, based on the following circumstances:

1. The plaintiff did not lose control or the intention to use the house in city B in Germany:
   • The house was accessible to the entire family throughout the business trip.
   • The house contained furniture.
   • Despite the agency agreement, the house was not actually sold, nor were there any viewings by potential buyers.
2. The intention to sell the house through an agent does not mean abandoning the place of residence, as it was merely a tax maneuver and not a real intention to sell the house (the house was listed on an online platform, but there were no viewings).

Main Findings of the Court

1. Having another place of residence abroad does not exclude the retention of a German residence. The law allows for multiple places of residence. There is no distinction between "primary" and "secondary" residence in the law.
2. The centre of vital interests does not matter for the purpose of unlimited tax liability. The decisive factor is the presence of a place of residence.
3. Each case is individual.
4. Individuals with a place of residence or habitual abode in Germany are subject to unlimited taxation. This includes income from employment and rental activities, regardless of whether the activities are carried out in Germany or abroad.
5. The presence of a place of residence is determined as follows: The individual must have a residential property under conditions that suggest it will be maintained and used.

Recommendations from REVERA Private Clients Lawyers

This case demonstrates that to be recognized as subject to unlimited taxation, it is sufficient to have a residence in the country under long-term lease.

To avoid being recognized as a resident of a country based on a place of residence, we recommend:

1. If owning real estate, to lease it out entirely. This will prevent the landlord from having the ability to visit the apartment/house at any time.
2. Not to enter into long-term lease agreements for housing.

For short-term stays, for example, use hotels or short-term rental services.

Author: Yaroslavna Zadesenskaya

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