Foreign Income Tax Impact Calculator

When you have foreign income that's exempt from German tax under a treaty, Germany doesn't tax it directly — but it does use it to calculate a higher tax rate on your German income. Think of it this way: Germany looks at your worldwide income to decide which "tax bracket" you belong in, then only charges you on the German portion. The foreign income pushes your rate up, even though it's not taxed itself. You don't pay tax on the foreign income — you pay more tax on your German income because of it. Germany does this because its progressive tax system means higher total income should mean a higher rate (§32b EStG).

No. It only applies to income that is specifically exempt from German tax under a double taxation agreement (DTA). If your foreign income is taxed in Germany — for example, because no treaty applies or the treaty assigns taxation rights to Germany — Progressionsvorbehalt doesn't come into play. German-source income like domestic rental income or freelance earnings is taxed normally and is not subject to this rule.

The most common types are: employment income earned abroad (for example, if your spouse works remotely for a foreign employer), rental income from property outside Germany, self-employment income from foreign clients while you're tax-resident in Germany, and certain foreign pensions. The specific treatment depends on the double taxation treaty between Germany and the country where the income originates.

Yes — this is called negative Progressionsvorbehalt. If your foreign income source results in a net loss (for example, a foreign rental property where deductible expenses exceed rental income), that loss can reduce the tax rate applied to your German income. It's less common, but it works in your favour when it applies. This calculator models positive foreign income only — for loss scenarios, consult a tax advisor.

These are two ways Germany avoids taxing the same income twice. Under the exemption method (Freistellungsmethode), Germany doesn't tax the foreign income but uses it to calculate your rate — that's Progressionsvorbehalt. Under the credit method (Anrechnungsmethode), Germany taxes your worldwide income but gives you a credit for the tax you already paid abroad. Which method applies depends on the type of income and the specific treaty. Most treaties use exemption with progression for employment and rental income, and the credit method for investment income like dividends and interest. Your tax advisor (Steuerberater) can confirm which method applies to your situation.

It depends on the treaty method. Under the exemption method — which applies to most employment and rental income — your foreign income is not part of your German taxable income. It only affects your tax rate through Progressionsvorbehalt. That means German deductions like property depreciation (AfA) can only reduce your German income, not the exempt foreign income. Under the credit method — which typically applies to dividends and interest — the foreign income is included in your German taxable income. In that case, German deductions could reduce your overall liability, including the portion attributable to foreign income.

The calculator currently estimates foreign income tax for Austria, Belgium, France, Italy, Spain, and the United Kingdom using simplified national tax brackets. For any other country, you can select "Other" and enter the treaty method and tax paid abroad manually. If you'd like us to add a specific country, let us know at info@financemate.de.

The foreign tax figures are rough estimates based on simplified national income tax brackets — designed to give you a directional sense of the combined tax picture, not a precise liability. What's included: national income tax rates for the selected country, applied to the income amount you enter. What's not included: regional or municipal taxes (which can add significantly in Belgium, Italy, and Spain), social security contributions, local deductions and allowances, family-based adjustments (such as France's quotient familial), special tax regimes, and any other country-specific rules. The German tax calculation uses the official §32a EStG progressive formula and is more precise. For an accurate picture of your full tax position, consult tax advisors qualified in the relevant jurisdictions.