Unlimited income tax liability and residence: What you should know as a taxpayer

Importance of residence for unlimited income tax liability and tax obligations.

Unlimited income tax liability is closely linked to a person’s domicile. This means that individuals domiciled or ordinarily resident in a particular country are generally liable for tax on their worldwide income. It is important to understand tax obligations and take advantage of tax planning opportunities.

Income tax liability and residency,
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Unlimited income tax liability is a significant concept in tax law that is closely related to a person's residence

It states that a person who is domiciled or habitually resident in a particular country is in principle liable to tax on his worldwide income in that country. This means that all income, whether domestic or foreign, must be declared in the tax return and taxed accordingly.

Residence plays a crucial role in determining unlimited income tax liability. In most countries, residence is determined by objective criteria, such as the number of days a person spends in the country, or by subjective criteria, such as the center of life and family ties. It is important to note that the definition of residence may vary from country to country.

As a person subject to unlimited income tax, you are required to declare your worldwide income on your tax return and pay tax accordingly. This includes income from employment, self-employment, rent and capital gains. Assets such as real estate and investments may also be taxable. It is important to fulfill all tax obligations and declare income correctly to avoid potential tax risks.

To avoid double taxation, many countries have entered into double taxation agreements (DTAs). These treaties regulate how income is allocated and taxed between the countries involved. They can help ensure that taxpayers are not taxed twice and receive certain tax relief. With unlimited income tax liability, it is therefore important to pay attention to DTAs and take advantage of possible tax benefits.

The unlimited income tax liability and the domicile have a decisive importance for the taxation of individuals. In order to optimize one’s own tax situation and take advantage of possible tax structuring opportunities, it is advisable to understand the tax regulations and possibilities. An experienced tax advisor who specializes in international tax law can provide valuable support in this regard.

From practice

Ms. Schmidt has lived in Germany for several years and has unlimited income tax liability here. Due to a professional opportunity, she decides to move to the USA for a period of five years. Before her move, she wants to understand the tax implications and obligations in detail. She consults a specialized tax advisor who informs her about the unlimited income tax liability and explains the relevant tax regulations in the USA.

The tax advisor explains to Ms. Schmidt that she remains subject to unlimited income tax liability in Germany during her stay in the USA. She must therefore declare her worldwide income both in the USA and in Germany. The tax advisor helps her analyze the double taxation agreements between the two countries to ensure that she is not taxed twice and receives possible tax relief.

In addition, the tax advisor explains to Ms. Schmidt that she can use certain tax structuring options to minimize her tax burden. For example, she can examine whether it makes sense to sell certain assets before she moves or to use tax-optimized investment strategies. The tax advisor assists her in preparing her tax returns in both Germany and the U.S. and ensures that she meets all tax obligations and takes advantage of potential tax benefits.


Unlimited income tax liability in connection with residence is an important factor in the taxation of individuals. It is of great importance to know the tax obligations and to use possible tax structuring options in order to optimize one’s own tax burden. The support of an experienced tax advisor who specializes in international tax law is essential in order to obtain sound advice and to manage the individual tax situation in the best possible way.

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