France-Germany tax treaty: cross-border workers, pensions, dividends

The rules that come up in our files

• Residence (Article 2(1)(4)). A person resident in both States is allocated, in order, to the State of their permanent home, then their centre of vital interests, their habitual abode and their nationality; failing that, the two administrations decide by mutual agreement. The Conseil d'État treats as a permanent home any dwelling available on a lasting basis, including a house made available by a child, without comparing the length of stays (CE 21 October 2016, no. 392997). Being taxed in Germany on German-source income is not enough to be resident there (CE 24 January 2011, no. 316457, Moghadam).
• Income from immovable property (Article 3). Rents are taxable only in the State where the property is located, within the meaning of the treaty. For a French resident, rents from a German flat are nevertheless included in the French base with a credit equal to the corresponding French tax: they count towards the rate. A German rental loss is not taken into account in France (CE 19 December 2019, no. 428443).
• Dividends (Article 9). The State of the company may levy at most 15% of the gross amount. A company holding at least 10% of the capital throughout a 365-day period including the payment date suffers no tax in France on dividends from a French subsidiary, and at most 5% in Germany on those from a German subsidiary. Dividends from tax-exempt real estate vehicles (SIIC, OPCI) paid to a holder of 10% or more remain taxable at the domestic rate (paragraph 10).
• Interest and royalties (Articles 10 and 15). Taxable only in the State of residence of the beneficiary, unless attributable to a permanent establishment in the other State. Tax wrongly withheld at source gives no credit in France: it must be reclaimed from the State that levied it.
• Capital gains (Article 7). Gains on immovable property are taxable in the State where it is located (paragraph 1), as are disposals of shares or interests which, at any time during the 365 days before the sale, derive more than 50% of their value from immovable property in that State, excluding property used in the entity's own business (paragraph 4). Other gains on shares are taxable only in the seller's State of residence (paragraph 5).
• Treaty exit tax (Article 7(6)). The State that a person leaves after being resident there for at least five years may tax, under its domestic law, the gain accrued during that residence on a shareholding in a company resident in that State. The new State of residence then uses the value at the date of departure as the acquisition cost. France applies Article 167 bis of the French Tax Code here, Germany section 6 of its Foreign Tax Act (AStG).
• Employment and secondments (Article 13(1) and (4)). Taxable in the State where the work is performed, unless the assignment meets three conditions: stay not exceeding 183 days in total in the calendar year, employer not resident in the State of activity, remuneration not borne by a permanent establishment in that State. Under the mutual agreement of 16 February 2006, Sundays, public holidays, leave and sick days connected with the current employment contract count as days of presence.
• Directors and board members (Articles 11 and 13(7)). Management functions in a company subject to corporate tax are treated as employment: they are taxable where they are performed, not in the State of the company. Directors' fees are taxable in the State of residence, but the State of the company may withhold tax, offset by a tax credit.
• Agency workers (Article 13(6)). Pay of an employee placed by a temporary employment agency is taxable in the State of activity and in the State of residence, which grants a credit equal to the tax paid in the former, unless the employee meets the cross-border worker conditions.
• Wealth (Article 19). The treaty covers the former French wealth tax (ISF). The French administration states that a treaty applicable to the ISF does not necessarily apply to the real estate wealth tax (IFI): each provision must be examined case by case. In practice, property located in France remains within the IFI base of a German resident under French domestic law.
• Exchange of information and recovery (Articles 22 and 23). Article 22 provides for the exchange of information; according to French administrative guidance, an agreement of 18 October 2001 also provides for the automatic exchange of information on changes of residence, transfers of real estate, salaries and directors' fees. The 2015 protocol extended recovery assistance to all tax claims.

Five decisions on cross-border workers, pensions and residence

Between France and Germany, litigation concerns cross-border worker status, the treatment of pensions and residence. Each decision below states whether it was given before or after the 2015 protocol.

• Cross-border worker in Moselle. An employee who lives in Moselle and works for a German company in the border zone falls under Article 13(5): the salary is taxable only in France, he had claimed the cross-border regime but filed no French return despite formal notices, and the court upholds the ex officio assessment (CAA Nancy, 27 March 2014, no. 12NC00985).
• Assignment in Germany and tax credit. A bonus paid by a sports federation to a professional player placed at its disposal, who remains an employee of his club, is a salary taxable only in France where the three conditions of Article 13(4) are met; the Article 20 credit, which presupposes income taxable in both States, does not apply (CE, 19 December 2018, no. 413033).
• Social security pensions, before 2016. Retirement pensions paid by French social security bodies to a French national living in Germany were taxable in France under the former Article 14(2), which explains the double taxation of statutory social insurance pensioners before the 2015 protocol (CAA Versailles, 3 April 2012, no. 11VE00142).
• Public salary paid to a resident of Germany. A salary paid by the French State to an employee living in Germany remains taxable in France, by withholding, under Article 14(1) of the treaty (subject to its exception for nationals of the other State only) and Article 182 A of the CGI (CE, 25 April 1990, no. 58034).
• Residence: habitual abode. A taxpayer who had homes in Roquebrune-Cap-Martin and Baden-Baden, with close ties to both States, is resident in France: her stays in Germany, about forty days a year in stays of three nights, are not a habitual abode (CAA Marseille, 7 November 2024, no. 21MA02682).

The same pension is not taxed in the same place depending on its origin

• Private and statutory pensions (Article 13(8)). Since 2016 income, pensions and annuities, including payments under statutory social insurance, are taxable only in the beneficiary's State of residence. A Deutsche Rentenversicherung pension received by a French resident is therefore taxed only in France; a French basic or Agirc-Arrco pension received by a German resident is taxed only in Germany. For sums paid by the statutory social insurance, the State of residence pays compensation in return to the State from which the payments originate (Article 13 c).
• Before 2016. Statutory social insurance payments were taxable only in the State of the payer, which often led to double taxation of former cross-border workers. A special claim procedure, open until 30 June 2017, allowed the tax credit to be obtained for 2005 to 2015; that deadline has passed.
• Public pensions (Article 14). Paid by one of the States, a Land, a local authority or a public law body for administrative or military services, they are taxable only in the paying State, unless the beneficiary is a national of the other State without being a national of the paying State: they are then taxable only in the State of residence. A retired German civil servant of German nationality living in France remains taxed in Germany; the pension enters their French income with a credit equal to the corresponding French tax.
• Public commercial bodies. Pay for a public commercial or industrial activity follows the rule for private employment; according to administrative guidance published in 2012 (BOI-INT-CVB-DEU-10-40), the two administrations nevertheless placed SNCF, La Poste, Banque de France and the Bundesbank under the public remuneration rule, which should be checked in light of changes in the status of these entities. Public hospitals, schools, kindergartens and universities are not regarded as commercial activities.
• CSG and health insurance. The treaty does not mention the French CSG. For a German pension received in France, liability to French social levies depends first on which health insurance scheme covers you under the European rules: that is the first point to establish.

What the treaty produces, in figures

• The Strasbourg cross-border worker. An employee lives in Strasbourg and works in Kehl for €60,000 gross a year. She spent 30 working days outside the border zone and works from home two days a week. She remains a cross-border worker: her salary is taxable only in France, at the progressive scale, and her German employer does not withhold German tax once it holds the exemption certificate.
• The Rentenversicherung pensioner. A former cross-border worker living in Sarreguemines receives €15,000 a year from the Deutsche Rentenversicherung. Since 2016 this pension is taxable only in France, after the 10% allowance for pensions; Germany should no longer tax it. If German tax is still withheld, it must be reclaimed from the German administration, not through a credit in France.
• The Siemens dividend. A French resident receives €10,000 of dividends from a listed German company. The standard German withholding, solidarity surcharge included, is 26.375%, i.e. €2,637.50; the treaty limits it to 15%, i.e. €1,500, and the excess of €1,137.50 is reclaimed from the Bundeszentralamt für Steuern before the end of the fourth calendar year following the year of payment (Article 25 b). In France, under the flat tax, the €1,500 credit is first set against the 12.8% income tax (€1,280), which it cancels. According to French administrative guidance, the remaining €220 can be set against the 18.6% social levies (€1,860) only if the treaty covers those levies, which the 1959 text does not expressly provide; otherwise it is lost. This point should be checked before filing.
• The Berlin flat. A French resident sells a Berlin flat held for twelve years with a gain of €200,000. Germany does not tax a private gain on property held for more than ten years, outside a property dealing activity. France does: after a 42% holding period allowance, income tax at 19% comes to €22,040, plus social levies at 17.2% after their own allowance and, where applicable, the surcharge on large gains. The tax credit equals the German tax actually paid, here nil: the treaty therefore removes nothing.