Credit Method
16.715,57 €
Exemption Method
14.040,00 €
Better Method
Exemption
What is a Double Taxation Agreement (DBA)?
A Double Taxation Agreement (Doppelbesteuerungsabkommen / DBA) is a bilateral treaty between two countries that prevents the same income from being taxed twice. Germany has over 90 such treaties. They specify which country has the right to tax specific types of income and provide relief methods (credit or exemption) to avoid double taxation.
What is the difference between credit and exemption methods?
Under the credit method (Anrechnungsmethode), foreign income is included in German taxable income, but foreign tax paid is credited against the German tax. Under the exemption method (Freistellungsmethode), foreign income is excluded from German taxation but may be used to determine the tax rate on remaining income (Progressionsvorbehalt).
Which method is typically used for which income?
Employment income is usually exempted with Progressionsvorbehalt. Dividends, interest, and royalties typically use the credit method with reduced foreign withholding rates specified in the DTA. Capital gains depend on the type of asset. Business profits from a permanent establishment are usually exempted. Each DTA can have different rules.
Disclaimer: These calculations are estimates based on 2025 German tax rules and should not be considered professional tax advice. Consult a Steuerberater for your specific situation.
How DBA agreements prevent you from paying tax twice on the same income
What is a Doppelbesteuerungsabkommen (DBA)?
A DBA is a treaty between Germany and another country to prevent you from paying full tax in both countries on the same income. Germany has DBAs with over 90 countries. The treaty determines which country can tax specific types of income — such as employment income, dividends, interest, or pensions. Without a DBA, you could pay up to 70% or more in combined taxes.
How does the Freistellungsmethode work?
Under the Freistellungsmethode (exemption method), income taxed in the other country is exempt from German tax. However, it is still used to calculate your German tax rate on other income (Progressionsvorbehalt). If you earn €30,000 in Germany and €20,000 tax-free foreign income, your German tax rate is calculated on €50,000 but applied only to the €30,000.
How does the Anrechnungsmethode work?
Under the Anrechnungsmethode (credit method), Germany taxes your worldwide income but credits the foreign tax against your German tax bill. If you owe €5,000 German tax on foreign dividends and already paid €2,000 tax abroad, you only pay €3,000 to the German Finanzamt. The credit is limited to the German tax on that same income.
How are employment income and remote work handled?
Generally, employment income is taxed where you physically work. If you live in Germany but work 60 days per year in France for a French employer, France can tax the income for those 60 days. The 183-day rule is a common DBA provision: if you spend fewer than 183 days in the other country and your employer is not based there, Germany keeps the taxing right.
How are pensions from abroad taxed?
The taxation of foreign pensions depends on the specific DBA. Most treaties give the country of residence (Germany) the right to tax pensions. If you retired in Germany and receive a UK pension, Germany usually taxes it. Some treaties give the source country limited taxing rights. You must declare foreign pensions in your German Einkommensteuererklärung.
What do you need to do to claim DBA benefits?
To claim DBA benefits on foreign income, report it in your German tax return (usually Anlage AUS). For reduced withholding on German-source income paid to non-residents, the recipient needs a Freistellungsbescheinigung from the Bundeszentralamt für Steuern (BZSt). For dividends, your foreign broker can apply reduced withholding rates if you provide a certificate of tax residence.
Bundesfinanzministerium-Aligned: Based on 2025 Bundesfinanzministerium rates and thresholds. For personal advice, speak to a qualified Steuerberater (tax adviser).
Disclaimer: This calculator provides estimates based on current German tax rates and thresholds for the 2025 tax year. It does not constitute professional tax, financial, or legal advice. Your actual liability may differ depending on your individual circumstances. Always consult a qualified tax adviser before making financial decisions. Read our terms
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