As a cross-border worker, you will be assigned to a tax class for income tax purposes, just like people living in Germany. This tax class determines how much income tax is withheld from your income. The tax classes in Germany are based on marital status (married or unmarried) and, in the case of married persons, on the income of the partner. Each tax class is accompanied by a tax table which takes into account the amount of income. Germany has a progressive tax system, which means that the tax burden increases with income.
Another decisive factor in determining your tax bracket is whether you are subject to limited or unlimited tax liability with regard to German taxes. Since you do not live in Germany, you always have limited tax liability in Germany and are assigned to tax class 1. In order to be treated the same as a person living in Germany and to be able to choose tax classes, you must fulfil certain conditions in order to be treated as having unlimited tax liability upon request. These conditions are dealt with here.
If you meet the conditions and have applied for unlimited tax liability, you must file a tax return in Germany – as if you were living there.
Under the conditions listed below, you can also be taxed in tax class 3 as an unlimited taxpayer. This is the case, for example, if you are married and together fulfil the requirements for unlimited tax liability.
Please note when classifying in tax class 3:
If you meet the requirements for unlimited tax liability and wish to be assessed jointly with your partner in Germany, the Belgian income of your partner will be included in your German tax return. Although this income is not taxed in Germany, it can still increase the tax rate (progression proviso). This means that you may have been withheld too little income tax and have to pay tax in arrears if you have been assigned to tax class 3. If you want to avoid this, you can also choose the individual assessment with tax class 1. You will then pay more tax each month, but you will receive a refund of any excess tax paid after you file your tax return. The classification in tax class 3 usually only makes sense if you have worked the whole year in Germany and your partner has no or little income.
- If you are classified in tax class 1 in principle, but meet the requirements for tax class 3, you can also be classified in this tax class.
- The classification into a tax class only determines how much income tax is to be withheld each month. In the case of a tax return, the final tax burden is determined retrospectively.