Anyone moving abroad mainly wants one thing above all: not to be taxed on their entire worldwide income in two countries at once. Yet that is exactly what can happen if Germany does not regard the residence as fully given up under Section 8 of the German Fiscal Code (Abgabenordnung, AO) – § 8 AO – despite the move, while the new destination state simultaneously treats the person who has moved as resident there under its own law. Two states, two tax returns covering worldwide assets, one conflict – so-called dual unlimited tax liability. A central document in this context is the certificate of tax residence (Ansässigkeitsbescheinigung, internationally also known as a “Certificate of Residence”), by which a tax authority officially confirms where a person is tax resident. This article explains what a certificate of tax residence is, how it is applied for at the German tax office, how dual residence can arise, and how the tie-breaker rule of the double taxation agreement (Doppelbesteuerungsabkommen, DBA) resolves this conflict.
What Is a Certificate of Tax Residence – And What Is It Needed For?
A certificate of tax residence is an official confirmation from the competent tax office that a natural or legal person is tax resident in Germany – as a rule because they have a residence there (§ 8 AO) or their habitual abode there (§ 9 AO), and are therefore subject to unlimited income tax liability under Section 1(1) of the German Income Tax Act (Einkommensteuergesetz, EStG) – § 1 Abs. 1 EStG. It is issued exclusively on an official form: either on a form provided by the foreign contracting state itself, or – where no such form exists – on a form of the German tax administration.
The certificate is needed wherever it must be shown to a foreign body that a double taxation agreement with Germany applies, and which of the two contracting states counts as the state of residence. In practice, this is chiefly required by:
- foreign banks or custodian institutions, which check before paying out interest or dividends whether a reduced withholding tax rate applies under the relevant DBA,
- foreign tax authorities, which require proof of residence as part of an exemption or refund procedure,
- contracting partners or authorities abroad, who need to know, for purposes of a DBA, in which state a person is taxed on their worldwide income.
The certificate is not a mere formality: it is valid only in the original, may contain no deletions, and must bear the signature and official seal of the issuing tax office. In most German federal states – for example North Rhine-Westphalia – issuance is free of charge; it generally applies only to the year in which the relevant income was earned and must be applied for afresh each year if it continues to be needed.
How to Apply for the Certificate of Tax Residence at the German Tax Office
The competent authority is the tax office responsible for the person in question – for natural persons, generally the tax office of their place of residence. The application must be made in writing, usually in duplicate, and should include, alongside personal details, information on the type of income and the paying foreign body (for example, the bank or account number), where the certificate is needed for a specific withholding tax procedure.
The tax office examines, on the basis of the file it holds, whether the requirements for residence in Germany are actually met – that is, whether a residence under § 8 AO or a habitual abode under § 9 AO (still) exists. If these requirements are met, the tax office confirms residence directly on the form submitted. This already reveals a point that is regularly underestimated in practice: the tax office only certifies what emerges from its own file. Where it is unclear or disputed in a given case whether a residence in Germany still exists at all, issuance may be delayed, or the tax office may first demand further evidence, for example as to the actual use of a retained dwelling.
The Core Problem: Dual Unlimited Tax Liability
The real challenge does not arise on applying for the certificate itself, but a step earlier – on the question of in which state, or states, residence exists at all. Under Section 1(1) EStG – § 1 Abs. 1 EStG – a person is subject to unlimited income tax liability if they have a residence in Germany (§ 8 AO) or their habitual abode there (§ 9 AO). German law, contrary to what many emigrants intuitively assume, draws no tax distinction between a “primary” and a “secondary” residence: even a single dwelling that someone holds under circumstances suggesting it is retained and used establishes a residence within the meaning of § 8 AO – regardless of how it is classified for registration purposes.
If a person now formally moves abroad, registers there, and is treated as tax resident under the local national law there, while at the same time retaining a dwelling in Germany over which they can still freely dispose, the German residence under § 8 AO generally continues to exist. The result: Germany continues to treat the person as subject to unlimited tax liability on their worldwide income, and the new state does the same under its own law. This creates dual unlimited tax liability – two states, both wanting to tax the entire worldwide income because both see themselves as the state of residence.
The order of examination matters here, as it does for other delimitation questions in international tax law: whether residence exists in Germany is decided initially on a purely domestic basis under §§ 8 and 9 AO – independently of any DBA. Only once it is established that a person counts as resident in more than one state under the respective national rules does the question even arise of how an existing double taxation agreement resolves this conflict.
The Resolution: The Tie-Breaker Rule of Article 4(2) of the OECD Model Convention
Where a double taxation agreement exists between Germany and the destination state that, like most German DBAs, follows the OECD Model Tax Convention (OECD-Musterabkommen, OECD-MA), Article 4 OECD-MA applies to precisely this conflict. Under Article 4(1) OECD-MA, initially every state is “entitled to residence” under whose domestic law a person is liable to tax there by reason of domicile, permanent residence, place of management, or a similar criterion – which corresponds to the dual tax liability described above under each respective national law. Where a natural person is accordingly resident in both contracting states, Article 4(2) OECD-MA determines, in a fixed order of examination, which of the two states counts, for purposes of the agreement, as the sole state of residence. The first four criteria are examined in sequence; where a higher-ranking criterion is clearly met, the lower-ranking criteria no longer matter. Only if the conflict cannot be resolved even by reference to nationality does no further independent criterion apply, and instead the fallback mechanism of the mutual agreement procedure applies.
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| Stage of examination (Article 4(2) OECD Model Convention) | What matters |
|---|---|
| 1. Permanent home | In which state does the person have a dwelling available to them on a permanent basis? If such a dwelling is available in both states, proceed to stage 2. |
| 2. Centre of vital interests | To which state do the closer personal and economic relations exist – for example, family, social ties, assets, professional activity? |
| 3. Habitual abode | If the centre of vital interests cannot be determined clearly, or if no permanent home exists in either state, it is decisive where the person habitually resides. |
| 4. Nationality | If the person habitually resides in both states or in neither, nationality is decisive. |
| Fallback mechanism: mutual agreement procedure | If the person holds the nationality of both states, or of neither, and the fourth criterion is likewise exhausted, the competent authorities must then reach agreement by mutual consent (mutual agreement procedure), rather than any further independent criterion deciding the matter. |
This cascade has been applied essentially unchanged since the first version of the OECD Model Convention and is found, in substance, in a large number of the double taxation agreements concluded by Germany. As soon as the tie-breaker test determines one of the two states as the sole state of residence within the meaning of the agreement, the other state becomes, for DBA purposes, a mere source state – its unlimited tax liability under national law formally continues to exist, but the DBA correspondingly restricts the taxing right associated with it.
Practical Pitfalls
Several points are regularly underestimated in practice:
The dwelling retained in Germany. The classic pitfall is the dwelling that is kept “just in case” or out of emotional attachment when emigrating – for example the parents’ owner-occupied flat that remains available for the person’s own use, or a rented flat that is formally not given up. For registration purposes, such a dwelling may appear as a secondary residence; for tax purposes, it is sufficient to establish a residence under § 8 AO. Anyone who genuinely wants to end unlimited tax liability in Germany must no longer actually have power of disposal over the dwelling – the keys must be handed over, and a rented-out property must be let long-term and without any access for the owner.
The certificate of tax residence does not automatically resolve dual residence. A German certificate of tax residence only confirms what applies from the perspective of the German tax office, on the basis of §§ 8, 9 AO. If the destination state simultaneously also regards itself as the state of residence, this does not yet amount to a tie-breaker test having been carried out; that must be addressed separately, and if in doubt vis-à-vis both tax administrations involved. Some foreign authorities additionally require their own examination or their own evidence as to the centre of vital interests.
Timing. If the certificate of tax residence is applied for before the residence question in Germany has actually been resolved, the tax office may refuse to issue it, or issue it only with reservations – for example, if the file shows that a move abroad has simultaneously been notified. It is advisable to work through the residence question and the tie-breaker test mentally before applying, rather than treating the certificate as an isolated formality.
An Example for Illustration
The following example is entirely fictional and serves solely for illustration; it does not describe an actual case or a real person. An employee moves permanently to Portugal with their family, registers there, and becomes tax resident there under Portuguese law. However, the couple’s jointly owned flat in Germany is not sold, but remains available for their own use for occasional visits. From a German perspective, a residence under § 8 AO therefore continues to exist – the family remains subject to unlimited tax liability in Germany, even though the centre of their life has genuinely shifted to Portugal. Because a double taxation agreement exists between Germany and Portugal, the tie-breaker rule of Article 4(2) OECD-MA applies: since a permanent home exists in both states, stage 2 is decisive – the centre of vital interests. If the spouse and children live permanently in Portugal, the children attend school there, and the profession is carried out from there, much suggests that Portugal counts as the state of residence within the meaning of the agreement – the German unlimited tax liability under § 8 AO formally continues to exist, but the taxing right over the worldwide income is restricted by the DBA in favour of Portugal.
Emigration Is No Marginal Phenomenon
According to figures from the Federal Statistical Office (Statistisches Bundesamt), around 288,579 German nationals left Germany in 2025 – with around 193,000 returnees at the same time, resulting in a net migration loss of around 97,000 people. The most common destination countries for German emigrants are Switzerland, Austria, and Spain.
Each of these moves potentially raises the same question: has the German residence actually been fully given up – and if not, how is any resulting dual residence resolved via the relevant DBA?
When Is Legal Advice Worthwhile?
The combination of the certificate of tax residence, dual unlimited tax liability, and the tie-breaker rule is one of those subjects where seemingly simple everyday decisions – such as keeping the parents’ flat, or not terminating a rented flat – can trigger significant tax consequences. Anyone emigrating, needing a certificate of tax residence for a foreign bank or authority, or unsure whether their German residence is actually treated as given up, should clarify the position before applying, not only once a dispute arises with the tax office.
The Fiala law firm has published extensively on international tax law and supports clients in cleanly resolving their residence in the interplay between German law and the relevant double taxation agreement, thereby avoiding double taxation.
Are you planning to emigrate, do you need a certificate of tax residence, or are you unsure whether your residence in Germany is actually treated as given up for tax purposes? Contact the Fiala law firm to have your individual situation assessed from a legal perspective.
