So that special characters can be handled on the Internet, a procedure is used which converts the special characters used and thus makes them “machine-readable”.
For example, “müller” becomes “xn--mller-kva”. (see What is an ACE String?)
Since this procedure is unfortunately not yet supported by all browsers and mail servers, the use of umlauts in DOMAINs and email addresses is not yet recommended.
Should you nevertheless consider using umlauts in your DOMAIN and mail address, please use a converter such as