Ukrainian Income in a German Tax Return: How to Avoid Paying Twice
If you’ve moved to Germany and still own an apartment, hold a deposit, draw a salary, or run a sole proprietorship (Ukrainian: ФОП, “FOP”) in Ukraine, three questions come up fast: what to put in your Einkommensteuererklärung, whether you’ll pay twice, and what to do with tax already withheld in Ukraine. Here are the answers, in the order you’ll need to work through them.
# Who Must File a Tax Return in Germany
If you have a home in Germany or have been there for more than six consecutive months, you’re an unlimited taxpayer under § 1 EStG, § 8, and § 9 AO. The Finanzamt taxes your worldwide income — not just what you earned in Germany.
Whether you must actually file depends on your situation. Employees must file if exempt income subject to the Progressionsvorbehalt — Ukrainian rental income, for example — exceeds €410 per year (§ 46 EStG). Interest from a Ukrainian bank must be reported regardless of amount, because German tax was never withheld on it (§ 32d EStG); that’s also the only way to get the Ukrainian withholding credited. If you have no taxable income in Germany at all, treaty-exempt rental income won’t generate a German tax liability on its own.
If you’re simultaneously a resident of both Ukraine and Germany, the 1995 treaty’s tie-breaker rules under Article 4 assign you to one country: first, where your permanent home is; then the centre of your vital interests; then habitual abode; then citizenship. Which country wins determines all the rules below.
# Which Ukrainian Income Goes in the Return and How It’s Taxed
Salary. This is the most expensive misunderstanding. If you work remotely from Germany for a Ukrainian employer, that salary is taxed in Germany. Under Article 15, what matters is where the work is physically performed — not where the employer is registered. Ukraine can only tax the pay for days you actually spent working in Ukraine. The 23% withheld in Ukraine (18% personal income tax + 5% military levy) is not credited against your German tax on work done in Germany. To recover the excess Ukrainian withholding, you’ll need to work through your employer and the State Tax Service of Ukraine (ДПС) using a German tax residency certificate.
Rental income from a Ukrainian apartment. Under Article 6 of the treaty, Ukraine may tax Ukrainian real estate income; Germany then exempts it under Article 23 — but still pulls it into the rate calculation via the Progressionsvorbehalt. In Ukraine, the rules depend on your status. Ukrainian tax residents pay 18% personal income tax plus 5% military levy, either through a legal-entity or FOP tenant acting as withholding agent, or by self-filing within 40 days after the quarter ends and submitting an annual return by 1 May. Non-residents may only rent out property through a Ukrainian FOP or legal entity that acts as their representative and withholds the tax.
Deposit interest. Germany taxes this; Ukraine’s withholding is capped by the treaty. Article 11 of the 1995 treaty limits Ukrainian withholding on interest to 5% for a standard deposit (the 2% rate applies in specific cases such as loans extended by a bank). To get that reduced rate, you’ll need to give your Ukrainian bank a German residency certificate (Ansässigkeitsbescheinigung) in advance. Without it, the bank withholds 18%, and Germany won’t credit anything above the 5% treaty cap — you’d have to reclaim the excess in Ukraine. The 5% military levy isn’t reduced by the treaty and isn’t credited in Germany either.
FOP profit. If, under the treaty, you’re a German resident and you have no office or permanent base in Ukraine through which you operate, Germany taxes your FOP profit under Articles 7 and 14. Ukraine continues to charge the flat (“unified”) tax for as long as the FOP remains registered — and Germany doesn’t credit it. For a full breakdown of what to do with your FOP when you move to Germany, see the relevant article on this site.
# Progressionsvorbehalt: How Exempt Income Raises Your Rate
§ 32b EStG works like this: exempt foreign income isn’t taxed, but it’s added to your other income to determine the applicable rate. That higher rate then applies only to the income actually taxable in Germany.
Example. Your taxable income in Germany (zu versteuerndes Einkommen) is €30,000. Your net Ukrainian rental income, calculated under German rules, is €6,000. Under the § 32a EStG 2026 scale, the tax on €30,000 is €4,217 (average rate: 14.06%). Adding the rental income brings the base to €36,000, giving an average rate of 16.59%. Applied to the €30,000 taxable income, that produces €4,975 in tax. The exempt rental income costs you €758 per year — before solidarity surcharge and any church tax.
The Progressionsvorbehalt applies to exempt rental income and exempt salary for days worked in Ukraine. It does not apply to interest, which is taxed at the flat Abgeltungsteuer rate.
# When Ukrainian Tax Paid Gets Credited
Article 23 of the 1995 treaty uses two different mechanisms.
Exemption with progression — applies to Ukrainian real estate income and profits through a permanent establishment in Ukraine. Germany doesn’t tax that income, so there’s nothing to credit against.
Credit — applies to interest, dividends, royalties, and certain other income types. The Finanzamt calculates its own tax and reduces it by the Ukrainian tax paid, up to the amount the treaty permits.
The credit doesn’t apply to salary for work performed in Germany or to FOP profit: if Germany is taxing those, any Ukrainian tax paid on them is a cost, not a credit.
Interest example. You receive €2,000 in interest from a Ukrainian bank, and your Sparer-Pauschbetrag (German savings allowance, currently €1,000 per person) is already used up on German savings. Abgeltungsteuer: €2,000 × 25% = €500. With a residency certificate, the Ukrainian bank withheld 5% personal income tax: €100. That’s credited: €500 − €100 = €400. Solidarity surcharge: 5.5% of €400 = €22. Total payable in Germany: €422. The 5% Ukrainian military levy (€100) is not credited. If the Sparer-Pauschbetrag hasn’t been used, it would first exempt up to €1,000 of interest.
To claim the credit, you need documentation of tax paid in Ukraine: a certificate from the bank or the State Tax Service, with a translation or explanation the Finanzamt can follow.
# Where Things Go Wrong
Leaving out “exempt” income. If you don’t report rental income, the Progressionsvorbehalt doesn’t activate — but the Finanzamt will calculate it anyway after a review and issue an amended assessment.
Treating remote work as Ukrainian. Salary for work done from Germany is taxed in Germany, regardless of where the employer is. This is the costliest mistake in this area.
The new 2026 treaty. Signed on 19 May 2026, it will apply from 1 January 2027 if ratification is completed before 31 December 2026. Until then, the 1995 treaty remains in force.
If you receive Grundsicherungsgeld (which replaced Bürgergeld from 1 July 2026): under § 60 SGB I, you must notify the Jobcenter of all foreign income and assets, and of any changes. Rental income and interest count as income (§ 11 SGB II). Savings and assets are disregarded up to age-linked thresholds: €5,000 under age 30; €10,000 from age 30; €12,500 from age 40; €20,000 from age 50 per person (§ 12 SGB II). Assets above that threshold must be drawn down first. For benefit periods that started before 1 July 2026, the old rules still apply. Failing to notify the Jobcenter can result in repayment demands.
Large transfers. If you receive a single payment of more than €50,000 from another person or company abroad, report it to the Bundesbank by the 7th Werktag of the following month (Saturdays count) under § 67 and § 71 AWV. Transfers between your own accounts don’t require reporting.
# Documents to Prepare
- A certificate from your Ukrainian bank or employer showing the income amount and tax withheld, with a translation or explanation for the Finanzamt.
- A German tax residency certificate (Ansässigkeitsbescheinigung) for your Ukrainian bank, so it applies the treaty rate on interest. Order this from your Finanzamt well in advance.
- The rental agreement and property documents if you’re declaring rental income.
- For FOP: income and expense records and proof of flat-tax payments.
All amounts in the return are stated in euros. Agree the conversion method with your Finanzamt upfront: the official NBU (National Bank of Ukraine) exchange rate on the date the income was received is a transparent and verifiable approach.
# See Also
- Deposit Calculator — interest and Ukrainian tax that may then be credited
- FOP Tax Calculator 2026 — flat tax and military levy for each group
- Taxes for Foreigners in Ukraine: 183-Day Residency and Double Taxation — how residency is determined on the Ukrainian side
- All Calculators — salary, deposit, FOP, VAT
Frequently asked questions
Do I have to report Ukrainian income in my German tax return if it's already taxed in Ukraine?
In most cases, yes. Income that's exempt under the treaty — rental income, for example — still affects your rate through the Progressionsvorbehalt (§ 32b EStG). Employees must file if such income exceeds €410 per year (§ 46 EStG).
Will the Finanzamt credit the 18% income tax I paid in Ukraine?
It depends on the income type. For interest, the Ukrainian tax is credited only up to the treaty rate — 5% for a standard deposit. Rental income is exempt in Germany, so there's nothing to credit. Tax withheld on work performed in Germany, and sole-trader flat tax, are not credited.
What is the Progressionsvorbehalt and how much does it cost?
Exempt Ukrainian income is added to your other income solely to determine the tax rate. That higher rate then applies only to your German taxable income. In the example below, €6,000 of exempt rental income raises the tax on €30,000 of taxable income by €758.
Do I need to notify the Bundesbank about transfers from Ukraine?
Yes, if a single payment from another person or company abroad exceeds €50,000: report it to the Bundesbank by the 7th Werktag of the following month (Saturdays count) under § 67 and § 71 AWV. Transfers between your own accounts don't need to be reported.
What changes when the new 2026 treaty comes into force?
The new treaty was signed on 19 May 2026. It will apply from 1 January 2027 if ratification is completed before 31 December 2026. Until then, the 1995 treaty remains in effect.