Does a pilot have a permanent residence?

Place of residence (§ 8 AO) and habitual residence (§ 9 AO)

A mandatory requirement for unlimited tax liability in Germany is domicile or habitual residence in Germany. In some cases, however, it is not easy to determine the place of residence or habitual abode. For this reason, some of the special cases will be examined in more detail below.

Particularly in the case of posting, the most varied of case constellations are conceivable in terms of domicile or habitual residence.

The taxpayer can give up his place of residence in his home country and establish a place of residence in the host country. However, he can also keep his place of residence in his home country and also establish a second place of residence in the host country. Instead of a place of residence, it is also possible to establish a habitual residence. There are even cases where the taxpayer is not resident in any country.

Since the place of residence or habitual residence has a direct effect on tax liability in Germany, it is always mandatory to check it. The determination of whether you have a place of residence or habitual abode is always determined by national tax law.

I. Residence

According to Section 8 of the Tax Code (AO), someone has a place of residence where they may have an apartment, which suggests that they will keep and use the apartment.

The definition of a place of residence set out in § 8 AO is linked to actual circumstances. Registration alone is therefore not sufficient to establish a place of residence. It can only be an indication.

The term “apartment” means rooms that are suitable for permanent living. In addition to rental or owner-occupied apartments, the term “apartment” also includes houses or furnished rooms. A hotel room is usually not an apartment. Even an apartment without cooking facilities, but with a shared kitchen, is not an apartment.

A person owns an apartment when he actually has the power to dispose of the apartment. The apartment must be visited with a certain regularity. This can also be done at longer intervals. However, a minimum period of residence per year is not required. If an apartment is only visited occasionally, for example for visiting and recreational purposes, this is not sufficient. In cases of professional stays abroad, the owner of an apartment can be presumed if the apartment is kept in Germany, use is possible at any time and it is appropriately equipped as an apartment. Owning an apartment also has a time component. According to the case law, the period of six months according to Section 9 sentence 2 AO can also be used for § 8 AO, as this period expresses when a stay is no longer only temporary (i.e. no residence for a rental period, which is shorter than six months from the start).

II. Habitual residence

If, on the other hand, the characteristics for a place of residence are missing, then due to the actual circumstances there may be a habitual residence according to § 9 AO. The habitual residence is anything but a “residence of inferior quality”, but rather an independent point of contact.

According to § 9 AO, someone has their habitual residence where they may be staying, which indicate that they are not only staying temporarily at this location or in this area.

First of all, what matters for habitual residence is the actual residence (“presence”) in a place or in an area. However, there is no limitation to just one location. In addition, objective circumstances must lead to the conclusion that the stay is not only temporary.

According to § 9 sentence 2 AO, a habitual stay is always a contiguous stay of more than six months from the start. As an exception, a stay of less than 6 months can establish a habitual residence if a stay of more than 6 months was originally planned.

It should be noted that the 6-month period does not have to be met in a calendar year. However, it must be a contiguous stay. Several short stays may not be added together when determining the period.

The assessment of whether there are a number of short stays or only brief interruptions of a long stay must be made according to the taxpayer's recognizable intention.

III. Special cases

Standby apartment:

The Hessian finance court had to decide on the question of whether a residence is established when a so-called standby apartment is available. In the underlying case, a pilot with family residence in Switzerland was contractually obliged to maintain accommodation near the German airport in order to be able to start his flight service as quickly as possible. In order to fulfill his obligations under the employment contract, he rented an apartment with three other pilots near the airport, which was available to them for mutual use. In the opinion of the Hessian Finance Court, the pilot did not establish a place of residence in Germany (Hessian Finance Court judgment of November 13, 2012, 3 K 1062/09). Since he uses the apartment in constant change with other people, he can only dispose of the apartment to a limited extent in terms of time and space. He can only use the apartment if it is not already being used by his three colleagues. He must therefore always expect to have to look for alternative accommodation. Since a total of four apartment users have access to the apartment keys at the same time, he uses the apartment more like a kind of hotel room.

With its ruling of November 13, 2013, the BFH followed the FG's view that a standby apartment that is only used with other people with limited availability is not a place of residence within the meaning of Section 8 AO.

Nevertheless, the BFH overturned the tax court ruling because, in the opinion of the BFH, the FG had not determined whether a person was habitually resident.

Boarding house / serviced apartment:

A boarding house is a hotel-like accommodation facility, which is characterized by the guest's mostly long-term stay. The scope of services ranges from a small offer to hotel-like room service. So far, there has been little jurisprudence and specialist literature on the boarding house. With the judgment of August 21, 2002 (1 K 3262/00), the FG Munich decided that boarding does not constitute a place of residence within the meaning of income tax law, as these are usually temporary stays.

However, we always recommend checking how long the stay in the boarding house was planned in advance. Because even if you deny a place of residence, the prerequisites for habitual residence can be met if you stay for more than 6 months.

Postings of less than 6 months:

In some cases, taxpayers stay in the sending country for less than six months. It is then to be checked for how long the stay was originally planned. Both the place of residence and the habitual residence have a temporal component of at least 6 months to ensure that the residence is not only temporary. If the posting is only planned for a period of less than 6 months from the outset, the taxpayer does not establish a place of residence or habitual abode.

The situation is different if a posting of more than 6 months is planned at the beginning, but the posting is ended again after a few months. Since the original intention here was to stay in the sending country for more than 6 months (if necessary, an open-ended rental contract was concluded, which is then prematurely terminated), a place of residence or habitual residence is established depending on the type of accommodation.

Posting with a previous business trip:

It is not uncommon for employees to visit the host country for business trips before they are posted. Since the business trips are usually short-term in nature and the employee is often accommodated in a hotel, the employee does not establish a place of residence or habitual abode in the host country for the duration of the business trip.

However, if the business trip is followed by a posting, the employee often exceeds the total duration of six months. This can lead to the taxpayer establishing a habitual residence with the first trip in Germany, which leads to unlimited tax liability.

Postal address or room in the parental home:

In principle, keeping a room in the parents' house is not sufficient for a place of residence. A postal address in the parental home is also not sufficient for establishing a place of residence, as in these cases the owner of the apartment is not given.

IV. Summary

If the determination of the place of residence or habitual abode seems quite simple at first glance, there are a number of situations in which the examination of the prerequisites is not so easily possible. However, since the existence of a place of residence / habitual abode has considerable tax significance, a careful examination is recommended in every case.