Indian-Employer ESOPs / RSUs in Germany

How Germany taxes it

When ESOPs or RSUs vest while you're a German tax resident, the FMV at vest is taxable as employment income (Lohn) under § 19 EStG — taxed at your marginal rate plus social security if relevant. When you later sell the shares, the gain over the vest-FMV cost basis is a capital gain (foreign-source, marginal rate, no Abgeltungsteuer for non-EU shares).

DTAA treatment

Vesting income: DTAA Article 15 (employment income) — primary taxation right by where the employment was performed, with credit. If you earned the grant during India-resident time, India retains primary right; if you earned it during Germany-resident time, Germany retains primary right. Sale gain: DTAA Article 13.

Where it goes on your return

Vesting income goes on Anlage N (foreign employment income box) plus Anlage AUS for the foreign-tax credit. The sale gain goes on Anlage AUS as foreign capital gain. Two separate sections, one underlying transaction.

Common gotchas

• Pro-rata vesting allocation — if a 4-year vesting period spans both countries, only the Germany-vested portion is German-side income
• TDS at vest in India (typically 30% perquisite tax) is creditable in Germany via DTAA Article 15
• Sale-side STCG/LTCG distinction in India doesn't affect German treatment — Germany taxes the gain at marginal rate regardless of holding period (other than § 23 EStG one-year rule for direct shares)