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Rental income from real property located in the United States and the gain from its sale will always be U.S. source income subject to tax in the United States regardless of the foreign investor's personal tax status and regardless of whether the United States has an income treaty with the foreign investor's home country
The method by which rental income will be taxed depends on whether or not the foreign person who owns the property is considered "engaged in a U.S. trade or business." Ownership of real property is not considered a U.S. trade or business if it consists of merely passive activity such as a net lease in which the lessee pays rent, as well as all taxes, operating expenses, repairs, and interest in principal on existing mortgages and insurance in connection with the property
If, on the other hand, the foreign investor is engaged in a U.S. trade or business such as the developing, managing and operating a major shopping center, the rental income will not be subject to withholding and will be taxed at ordinary progressive rates. Expenses such as mortgage interest, real property taxes, maintenance, repairs and depreciation (accelerated cost recovery) may then be deducted in determining net taxable income. The nonresident must make estimated tax payments for the tax due on the net rental income, if any. The only way these expenses can be deducted, however, is if an income tax return Form 1040NR for nonresident alien individuals and Form 1120-F for foreign corporations is timely filed by the foreign investor.
It sounds as if this is all passive ... and therefore, is not considered a U.S. trade or business... hence you re not subject to as a foreign peron
As a a foreign person for US tax purposes, the income earned is treated as earned directly by the foreign person. Such income is not subject to U.S. taxation so long as the foreign person did not perform his services or sales activity in the U.S. himself or through an employee or agent.
Firther, from the US/Germany double taxation treaty:
A person who is liable to tax in a Contracting State only in respect of incomefrom sources within that State or capital situated therein or of profits attributable to apermanent establishment in that State will not be treated as a resident of that ContractingState for purposes of the Convention.
Hence, if you are paying tax on this income in Germany, you are not liable for tax in the US, given the information you have provided.
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The IRS office in Frankfurt will accept tax returns, tax payments, W-7 applications, and taxpayer correspondence. Their mailing address is as follows:
U.S. Consular General FrankfurtInternal Revenue ServiceGiessener Str. 3060435 Frankfurt/MainTel: 49 69 7535-3834 or 3823Fax: 49 69 7535-3803Email: [email protected]
For immediate assistance from a taxpayer specialist, you can call, fax or email the International Customer Service Site located in Philadelphia. The Service Site is open Monday through Friday, for 17 hours each day, from 6:00 AM to 11 PM, Eastern Time. The customer service representatives there can be contacted as follows:
Tel: 001 215 516 2000Fax: 001 215 516 2555
Inquiries regarding taxpayer identification numbers should be made atTel: 001 215 516 4846 Fax: 001 215 516 3271