US Citizens & Green-Card Holders in Germany

The two tax systems most US expatriates underestimate.

Why US-Germany Cases Are Different

A US citizen resident in Germany is subject to both tax systems, indefinitely. The first is familiar. The second catches most people by surprise. The interaction of the two — particularly around investments, retirement accounts, and equity compensation — is where the genuine work begins.

Reporting & FATCA Compliance

The Work

FATCA compliance is the baseline: annual filing of Forms 1040, 8938, FBAR (FinCEN 114), and where relevant 3520 for foreign trusts and gifts. These obligations do not end at the German border. They continue for as long as US citizenship does.

Investments & PFIC Pitfalls

PFIC reporting is where the German investment landscape becomes hostile. Non-US mutual funds, most UCITS ETFs, and many insurance-wrapped investments are classified as Passive Foreign Investment Companies for US tax purposes. The punitive default treatment under Section 1291 can be mitigated by a Qualified Electing Fund election or a mark-to-market election — but only if structured correctly and reported annually on Form 8621.

Retirement Accounts (401(k), Roth IRA, IRA) in Germany

Retirement accounts require particular care. Roth IRA distributions are generally tax-free on the US side, but their treatment in Germany depends on whether the account qualifies as a privileged pension vehicle under the relevant article of the DBA-USA — a question that is not always settled. Traditional IRA and 401(k) distributions are taxable in both systems, with credit mechanics that do not always align. Inherited IRAs form their own category, with German inheritance tax, US income tax, and the ten-year distribution rule all running in parallel.

Equity Compensation (RSU, ESPP, Stock Options)

Equity compensation — RSUs, ISOs, ESPPs — is the area where most US technology professionals in Germany receive poor advice or none at all. The sourcing rules, the vesting mechanics, the interaction of the grant-to-vest period with a change in residence, and the § 19 EStG treatment of the resulting income all require careful coordination with the US-side filing.

For clients who arrive with historic US compliance gaps — three, five, sometimes ten years of unfiled returns — the IRS Streamlined Filing Compliance Procedures remain the usual path. These filings must be done correctly the first time; a flawed streamlined submission is materially worse than no submission at all.

Typical Mandates

Scenario 1 — PFIC portfolio.

A German-based software engineer, dual citizen, holds a German brokerage account with ten EU-domiciled ETFs accumulated over six years. Each position is a PFIC for US purposes. We coordinate a Qualified Electing Fund election where possible, assess the mark-to-market alternative for the remainder, and align the US reporting with the German capital-gains treatment.

Scenario 2 — RSUs across a relocation.

A US citizen receives a Restricted Stock Unit grant from a US employer, vesting over four years. She relocates to Germany mid-grant. The sourcing analysis determines what proportion of each vesting tranche is taxable in each country; the § 50d Abs. 9 EStG analysis determines whether German taxation is exclusive or shared.

Scenario 3 — US-German Tax Compliance: Correcting Past Filings

Incomplete tax filings in Germany—such as unreported US dividends or capital gains—can lead to audits and penalties. We specialize in synchronized clean-ups for US-German households.

German Tax Correction: We file official rectifications (Nacherklärung) to the Finanzamt for missing income.
US Alignment: We coordinate with US CPAs to ensure your German and US filings match exactly.
Audit Prevention: We ensure data consistency to protect you during international information exchanges.

Get compliant on both sides. We bridge the gap between German and US tax law to secure your financial peace of mind.

How We Work

Every engagement begins with a written diagnostic: which accounts exist, which are reportable where, which elections have been made, and which deadlines apply on both calendars. For ongoing clients we maintain a compliance schedule that tracks the German June and September deadlines alongside the US April and October deadlines. US-side preparation is handled by established colleagues with whom the practice has worked for years; the coordination is built into the engagement rather than left to the client to arrange.

If you are a US citizen or Green-Card holder in Germany, an initial review is usually the quickest way to identify where the material risks and opportunities lie. A 15-minute call, confidential and without obligation, is the right place to start.