Overlapping Taxation ' A Special Aspect Of The Double Taxation Agreement Between Germany And Switzerland

• Published date: 20 July 2021
• Subject Matter: Tax, Tax Treaties, Tax Authorities
• Law Firm: CONVINUS
• Author: Ms Norma Reynov

The double taxation agreement (DBA) between Germany and Switzerland contains a series of deviations from the OECD Model Tax Convention and hence also unpleasant surprises with regard to cross-border taxation between the two countries. One particular aspect is without doubt "overlapping" taxation, which grants Germany unilateral taxation advantages.

Generally, there are two variants of overlapping taxation. Both "fictitious residency" as well as the emigrant provision can be found in Article 4 of the double taxation agreement between Germany and Switzerland, and will be explained in greater detail in the following.

Fictitious residency

he special rules for fictitious residency in Art. 4 (3) of the double taxation agreement between Germany and Switzerland applies to persons resident in Switzerland who specify a residence in Germany that they could use regularly and/or where they have their habitual residency in Germany for a minimum of 6 months in each calendar year.

Permanent residenceThe "residence" is to be distinguished from the actual "domicile". While the domicile is defined under Swiss law as the location "where a person intends to remain indefinitely" (Art. 23 (2) (a) of the Swiss Civil Code (ZGB)) and under German law as the location which allows one to surmise that the "apartment is maintained and utilized" (Section 8 of the German Tax Code (AO)), a residence is not defined in the double taxation agreement between Germany and Based on the existing rulings of the Federal Financial Court (BFH), it can generally and systematically be said that a residence is probably Switzerland, nor under German law. not considered to exist in Germany if a person utilizes an apartment irregularly on a maximum of 73 days per year, does not perform employment activities in Germany, and does not have any other economic interests in Germany, i.e. does not have any assets or other income in Germany

However, a permanent residence is considered to exist if the apartment is used on more than 50 days per year in conjunction with occupational or economic interests, i.e. if a person pursues employment in Germany or owns large assets in Germany.

Habitual residence Pursuant to Section 9 of the German Tax Code (AO), a habitual residence exists when a person "remains at a particular location for a duration that is not merely temporary" and there exists a contiguous residence period of more than 6 months. Short-term interruptions (e.g. for trips home over the weekend or vacations)...