I apologies if this has already been covered. At the last moment before starting my contract, my client has asked me if I could base myself in Germany for 6 months. I am happy with that as they are covering expenses but I am not sure about things like if I can continue to use my UK based company and invoice and report taxes as if nothing had happened. Or do I now need to use a different company??
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Originally posted by AnthonyQuinn View PostI apologies if this has already been covered. At the last moment before starting my contract, my client has asked me if I could base myself in Germany for 6 months. I am happy with that as they are covering expenses but I am not sure about things like if I can continue to use my UK based company and invoice and report taxes as if nothing had happened. Or do I now need to use a different company??
If the client is UK based and you are being charged out then there are no tax implications provided you don't stay longer than 6 months.
If the client is German based and the agency invoices a German company you would then be taxable in Germany. Probably this isn't the case but you need to be careful.
I would advise spending 50 EUR in a consultation with a German accountant when you're there. You don't have to register anything before you start working Germany you can sort it out when you get there, the main thing is you sort it out before the first invoice i.e. where you're charging VAT: There is no legal requirement to register as a freelance in Germany other than obviously for tax purposes, i.e. don't worry about things being set up before you start work.
The reverse i.e. taxing yourself in Germany even though the client is UK based, provided you are working in Germany is legal, i.e. taxing yourself where you work is the safe way, you can't be wrong, but you can be wrong if you don't tax yourself where you work.
Cross border taxation is a mine field, so better safe than sorry.Last edited by BlasterBates; 23 April 2015, 10:55.I'm alright Jack -
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Hi Anthony Quinn,
if you are based for more than 6 months in Germany, it is usually not a good idea to continue working through your UK LTD. It can happen that not only you as an individual will be seen as tax resident in Germany and pay income tax here. It can also happen that your LTD will be seen as tax resident in Germany. Why is that? Well, under German law a company is tax resident in the place where the company is registered (not Germany) OR where it has its centre of management and control! Now, this is where the problem potentialy starts. If you own 100% of the company, you are the director, you are the only employee of the company and you effectively ARE the company, well then it will become hard to argue that the company has its centre of management and control NOT where you are. So, you tax resident in Germany can very quickly then make the company tax resident in Germany.
Is this a problem? Well, not really so much as far as tax rates etc. are concerned. Main problem: the admin side! The German tax man will look at this as an existing foreign company moving from abroad to Germany - the questions they will ask are not very different from the questions Microsoft Inc would have to answer if they moved their US headquarters to Germany. They will ask for all sorts of company documentation, history, company house registrations, contracts etc. - And of course all to be officially translated into German language. Going forward you then need to file German accounts, file German Corporation Tax returns, Local Trade Tax returns, VAT returns (all outside of your personal Income Tax returns). A nightmare!!! To be avoided at all cost - great business for accountants and lawyers.
Well, what is the solution? Setting up as a freelancer (sole trader, contractor, one man show)! Under German law, there is no need to trade through your own LTD. You just do it in your own name. This comes with one massive advantage: simple and quick to start and to stop. Minimum amount of admin. Minimum cost involved. You can actually start working even before you have registered anything. Totally above board. Great thing about it: it does not come with a tax disadvantage either. As good as any other complicated German setup. One potential disadvantage: it does not give you any limitation on your liability. Solution to this: professional indemnity insurance.Comment
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