Last updated: July 2026 · Giulia Uggias-Sproß, German Tax Advisor (Steuerberaterin, M.A. Taxation)
Anyone with unlimited tax liability in Germany is taxed here on their entire worldwide income — including income already taxed abroad. The key question is not whether it must be declared, but how it is captured in the German tax return.
In brief
- All foreign income must be declared — regardless of whether tax has already been paid abroad
- It is reported in the Anlage AUS — a separate schedule for each source country
- The double taxation treaty decides: exemption (with progression proviso) or credit for the foreign tax
- The credit is capped at the German tax attributable to that income — any excess is not refunded
- Conversion into euros uses the rate at the time of receipt, not an annual average
- Without documentation the tax office may refuse the credit or estimate the income — regularly to your disadvantage
What counts as foreign income for tax purposes?
Anyone with unlimited tax liability in Germany is taxed here on their entire worldwide income. This includes income earned abroad:
- from employment
- from self-employment
- from capital assets
- from letting and leasing
- from commercial activity
This income must generally be declared in the German tax return — even if it has already been taxed abroad.
What is the Anlage AUS — and why do I need it?
Foreign income and taxes paid abroad are reported in the Anlage AUS to the income tax return. A separate Anlage AUS generally has to be completed for each country from which income originates.
It serves two purposes:
- documenting the amount of foreign income
- documenting the tax paid abroad on that income
On this basis the tax office examines whether the foreign tax can be credited or whether the income must be exempted under a double taxation treaty.
Exemption or credit — which applies to me?
The applicable double taxation treaty determines which method applies to the respective income.
- Exemption method: the foreign income is not taxed in Germany. It must still be declared, because through the progression proviso it influences the tax rate applied to the remaining German income. In the Anlage AUS it is entered as exempt income.
- Credit method: the foreign income is taxed in Germany, but the tax paid abroad is credited. The credit is capped at the German tax attributable to that income. An amount paid abroad that exceeds the German tax is not refunded.
What documentation does the tax office require?
- Employment income from abroad: a certificate from the foreign employer stating the amount of remuneration and the tax withheld — ideally with an official translation.
- Capital income: annual tax certificates from the foreign custodian bank showing dividends, interest and withholding tax deducted.
- Rental income from foreign property: an income-and-expenditure statement plus evidence of the tax paid abroad.
Without this documentation, the tax office may refuse the credit or estimate the income — both regularly to the taxpayer's disadvantage.
What applies specifically to foreign capital income?
- In Germany it is generally subject to the flat capital gains tax of 25 percent plus solidarity surcharge.
- Foreign withholding tax can be credited — but only up to a maximum set by the applicable treaty. Many treaties cap the creditable withholding tax at 15 percent.
- With a German bank, the credit is often applied automatically.
- With foreign custody accounts, manual reporting is required — including conversion into euros at the rate on the date of receipt.
Can I deduct foreign losses in Germany?
Only to a limited extent. Foreign losses from countries with which Germany has a treaty using the exemption method are generally not deductible in Germany — unless there is no positive income in the source state against which the losses could be offset (the so-called negative progression proviso).
The three most common mistakes in practice
- Income is not declared because it has already been taxed abroad. That is incorrect — the duty to declare exists regardless of whether actual double taxation arises.
- Withholding tax is not claimed even though a credit would be possible — often because the documentation was never obtained.
- The wrong exchange rate is used: the decisive rate is generally the one at the time of receipt, not an annual average.
Frequently asked questions
Must I declare foreign income even if I have already paid tax there?
Yes. With unlimited tax liability you are obliged to declare all worldwide income in your German tax return. The tax paid abroad is then — depending on the treaty — credited, or the income is exempted.
What is the Anlage AUS?
The form for declaring foreign income and taxes paid abroad. A separate schedule must be completed for each source country.
How is foreign income converted into euros?
The decisive rate is the one at the time of receipt. The German Federal Ministry of Finance publishes official annual conversion rates that may be used for tax purposes.
Can I deduct foreign losses in Germany?
Only to a limited extent. For income from treaty states where the exemption method applies, foreign losses are generally not deductible in Germany. Exceptions apply under the negative progression proviso.
Your tax situation is individual
Capturing foreign income correctly requires knowledge of the applicable treaty, the relevant forms and the documentation requirements. Mistakes usually feed straight through to your tax burden. We advise in German, English, Russian and Italian.
