The claimant had been employed in Germany. His employment relationship was terminated as of 30.9.2016 by mutual agreement. A financial settlement was agreed as compensation, however, this was only supposed to be paid out on 31.1.2017. The claimant deregistered his residence in Germany as of 21.10.2016. On 15.12.2016, the German embassy in London certified a copy of his passport pursuant to which the claimant was no longer domiciled in Germany but in the UK. The financial settlement was paid out to the claimant on 30.1.2017 without any payroll tax deduction because he had applied for the appropriate certificate from the local tax office. In his application he had stated that he wanted to live in the UK from 31.10.2016 and that the financial settlement was taxable there. However, the local tax office cancelled the exemption certificate that it had granted because it had been issued unlawfully and subsequently demanded payment of the payroll tax.
In the opinion of the Münster tax court (ruling of 23.8.2022 – 15 K 791/19 L) the claim was unfounded. The local tax office was able to cancel the certificate retroactively. The financial settlement that was paid led to income that was subject to limited taxation and, despite the place of residence being in another country, the income was subject to the deduction of payroll tax in Germany. The judges were not able to establish that, after ceasing his work in Germany, the claimant had been deemed to be a tax resident in the UK. He had not provided a certificate of tax residence from the UK authorities. Under UK law, simply having an address would not be sufficient to be deemed a tax resident. Yet, even tax residency in the UK would not hinder taxation in Germany. Germany’s right to tax is not restricted by the law.