Unlimited or Limited Tax Liability in Germany — What Applies to Me as an Expat?

Last updated: July 2026 · Giulia Uggias-Sproß, German Tax Advisor (Steuerberaterin, M.A. Taxation)

Whether you are taxed in Germany on your worldwide income or only on income earned here comes down to two concepts: residence and habitual abode. The distinction has far-reaching consequences — and it often turns out differently from what people expect.

In brief

• Unlimited tax liability applies to anyone with a residence or habitual abode in Germany (§ 1 (1) EStG) → worldwide income
• Limited tax liability applies to anyone with neither, but who earns German-source income (§ 1 (4) EStG) → German sources only
• Tax residence is not the same as your registered main address — even a second home can trigger unlimited liability
• 183-day rule: more than six months uninterrupted → habitual abode — measured over any twelve-month period, not the calendar year
• Deregistering with the residents' office does not end tax liability — what counts is actually giving up the residence

What does unlimited tax liability mean?

Anyone with a residence or habitual abode in Germany is subject to unlimited income tax liability here — governed by § 1 (1) EStG. “Unlimited” does not mean boundless; it refers to the scope of taxable income: your entire worldwide income is captured, regardless of the country in which it was earned.

Careful with the definition of residence: tax residence is not identical to your registered main address. What matters is whether someone holds a dwelling under circumstances suggesting they will keep and use it. A second home in Germany can therefore already trigger unlimited tax liability — even if your centre of life is abroad.

What does limited tax liability mean?

Anyone with neither a residence nor a habitual abode in Germany, but who earns German-source income, has limited tax liability (§ 1 (4) EStG). Only income from German sources is taxed, for example:

• rental income from a German property
• income from a German permanent establishment
• remuneration for activities carried out in Germany

Limited liability is considerably narrower in effect: many allowances and reliefs fall away or can be used only to a restricted extent. At the same time, global income remains out of scope.

How does the 183-day rule work?

Alongside residence, a habitual abode also triggers unlimited tax liability. § 9 AO defines it as a stay that is not merely temporary. The tax authorities generally assume that an uninterrupted stay of more than six months establishes a habitual abode.

Two details that are regularly overlooked:

• The 183 days are not calculated by calendar year, but over any twelve-month period.
• Short interruptions — such as holiday trips — count towards the total.

Anyone planning to stay below this threshold through frequent travel should have the calculation checked carefully.

Which situations typically affect expats?

• Moving to Germany: unlimited tax liability begins on the day you arrive and establish a residence. From that point your worldwide income is taxable in Germany — including income still being earned abroad.
• Leaving Germany: unlimited tax liability ends when you give up your last German residence. Anyone who keeps a dwelling in Germany — even one rarely used — remains subject to unlimited tax liability. A clean tax departure requires giving up all domestic residences entirely.
• Dual residence: anyone with a residence both in Germany and abroad has unlimited tax liability in Germany. The double taxation treaty then decides, through so-called tie-breaker rules, which country holds the primary taxing right.
• Cross-border commuters: those living in a neighbouring country and working in Germany are subject to special rules. For commuters between Germany and Switzerland, France or Austria, specific treaty articles apply that depart from the general rule.

Two special cases hardly anyone knows

• Extended unlimited tax liability (§ 1 (2) EStG): this applies to German nationals living abroad but employed by a domestic legal entity under public law — diplomats or staff at foreign missions, for instance. They are treated as if resident in Germany.
• Unlimited tax liability on application (§ 1 (3) EStG): those with limited liability can apply to be treated as having unlimited liability. This can be advantageous where at least 90 percent of worldwide income is subject to German tax, or where the income not subject to German tax does not exceed the basic tax-free allowance.

Frequently asked questions

From when am I liable to tax in Germany?

Unlimited tax liability begins on the day you establish a residence in Germany or stay here uninterrupted for more than six months. From that point your entire worldwide income is taxable in Germany.

Can I have unlimited tax liability in two countries at once?

Yes. Both states can establish unlimited tax liability under their own national law. The applicable double taxation treaty then determines, through tie-breaker rules, which state holds the primary taxing right.

Does tax liability end automatically when I deregister with the residents' office?

No. Tax deregistration is independent of registration law. What matters is actually giving up the residence. Anyone keeping a dwelling in Germany remains tax resident — regardless of whether they have deregistered.

What is the difference between residence and habitual abode?

Residence presupposes a dwelling that can and will be used on a lasting basis. A habitual abode arises from an actual stay of more than six months — even without a fixed dwelling. Both give rise to unlimited tax liability.

Your tax situation is individual

Whether arrival, departure, cross-border commuter status or dual residence — the question of tax liability has far-reaching consequences and should be clarified early. Learn more about our international tax advisory, or read our related guides on leaving Germany and double taxation. We advise in German, English, Russian and Italian.