Cross-border commuters commuting from France to Germany:
If an employee commuting from France meets the requirements as a cross-border commuter, their salary can only be taxed in France. The salary is then tax-free in Germany. However, if an employee moves their place of residence from Germany to France, it should be noted in the year of departure that although the salary attributable to the cross-border commuter activity is tax-free, it is still subject to the progression proviso in Germany, i.e. the tax-free salary then increases the tax rate on the taxable income in Germany (Section 32b para. 1 sentence 1 no. 2 EStG).
The German employer can only refrain from withholding German wage tax if he has received an exemption certificate from the German tax office responsible for him. The exemption certificate must be applied for by the cross-border commuter using form no. 5011 (for temporary workers form no. 5011 A). The application must be submitted in good time so that the employer is already in possession of the exemption certificate before payment of the remuneration for the first wage payment period.
The cross-border commuter submits the form, completed in triplicate, to the German employer, who must make the appropriate entries. The cross-border commuter then submits the three copies in France to the competent Center des impôts. This confirms the residence within the border zone and returns two copies with the confirmation note to the cross-border commuter. The cross-border commuter must in turn submit the second copy to the German employer. The employer then submits the form to the German tax office, which then sends him a certificate of exemption.
The exemption certificate is generally issued for 3 years. However, the employee must submit a form no. 5011 completed by the employer to the French tax authorities every year. It should be noted that a new exemption certificate must be applied for when changing employer, even if the employee remains a cross-border commuter.
Cross-border commuters commuting from Germany to France:
In this case, Germany has the right to tax the cross-border commuter's wages. The cross-border commuter must apply for exemption from French tax using form S 2-240. This form must be completed by the employee and submitted in triplicate to the French employer, who must add the relevant information to the form. The cross-border commuter then submits the application in triplicate to the German tax office responsible for him/her. The tax office confirms the residence within the border zone and returns two copies with the confirmation note to the cross-border commuter. The cross-border commuter must submit one of these certificates to the French employer, who will then make the necessary arrangements with the French tax authorities. The application must be submitted annually. However, it should be noted that a new application must be submitted if the employee changes employer, even if the employee remains a cross-border commuter.
Note
All the forms mentioned above (No. 5011, No. 5011 A, S 2-240) are available from both the German and French tax offices.