Project Service Beta/International Tax Solutions

[tim123]

Originally Posted by dr4m

I've also heard something about this Finanzamp disclosure.
I'm really interested in this matter, so if you guys know anything pls share your knowledge here.

Do you exactly know what consequences are for us, for overseas consultants in such an event? Might we end up in jail for instance?

No, not unless you've fiddled a couple of hundred million. You'll recall (or perhaps you won't) that Boris Becker got 2 years probation for evading 2 million. At the time, this amazed everybody by it's leniency, but it was stated as being the normal punishment for the level of the offence.

So, if they think you've fiddled 20K, they send you the bill and you either pay it or leave the country never to return. Currently tax demands are not internationally enforceable, but I think that steps are being discussed to end that.

tim

[AlfredJPruffock]

Originally Posted by tim123

IME all of the overseas management companies that offer reasonable returns operate in the way that you have suggested.

Sadly, ITS seems to be the least dodgy (that's not a negative comment about ITS BTW).

And wrt Germany, I have been told that the Finanzamp have recently had a round up of people operating through dodgy schemes and assessed them for tax on the gross billings, though I have no idea of the details.

tim

The Finanzampt excell at seeking through Dodgy schemes then sending you a whacking tax demand - often for may years retrospectively - I know some UK contractors whom have fallen foul of these boyz - they are NOT nice people to deal with .

As they say in Germany - everybody has one foot in prison.

If they catch you - either cough up or leg it - altough for good measure they will pass on your info to the UK authorities - what happens after that Im not too sure.

[Close2Bankrupt]

From further research into this, and discussions with other contractors / accountants, there are two issues currently being investigated by finanzamts in Germany:
- Income TAX, i.e. not decalring all income (German possibly also EU law states that all Income regardless of where it is earned, or located, must be declare dto the German authorities.) If they find out you have not decalred everything, then they will force you to redo you tax return, and additionally force a penalty / interest payment on that money. Supposedly prison is not an option but you could go to court and be put on prohbation.
- VAT, i.e. if they can prove that the the management company you use is there only as a front to filter the income i.e. does not provide a true IT service, but your end client is in Germany, then they can additionally force you to pay all the VAT that should have been paid, whether you have invoiced for it or received it.

If the management company is on the black list, then the finanzamt can go direct to your end client in Germany, and see how much Income was paid to your management company (German authorities see no difference between YOU and your management company in the case of black listed companies), and then come after you for the Income tax and VAT!

THE BIG QUESTION IS HOW DO YOU FIND OUT IF THE MANAGEMENT COMPANY IS ON THE SO CALLED BLACK LIST?

[PatrickN]

Sorry, I couldn’t help myself but I love exposing agent provocateurs. Bavarian’ and ‘Close2Bankrupt’ are cases in point because, to me, both are mouthpieces of the German Tax Office. Although I thought it obvious to everyone, I was clearly having a laugh at their expense. As stupid as it sounds, I was perversely admitting quite openly, to a tax authority and the world, something I’ve never done! As if…..!

‘Bavarian’ and ‘Close2Bankrupt’ created a story about PSB and, because I had previously contracted through PSB, I stupidly (yes, I admit) played along with them. Although what they said about PSB is fabricated, I did remember some loose talk in the Irish bars during my time in Germany from some drunken contractors about so-called management firms out there short-changing the taxman. It was my recollection of that which sparked my response to ‘Bavarian’ and ‘Close2Bankrupt’.

Because German bureaucrats probably have no sense of humour and as, sometimes in the past, my pranks and dry sense of humour have got me into trouble, it’s probably best I now put the record straight. Yes I was a subcontractor to PSB. Yes I worked in Germany and loved my time there. Yes I was correctly registered with the German authorities. Of course I declared to the German Tax Office my full rate as clearly spelt out in my one and only contract with PSB. My tax return was fully accepted by the German tax office and all due tax subsequently paid by me. I was not aware of any other fund – offshore or otherwise – that I could freely dip into.

[Close2Bankrupt]

Originally Posted by PatrickN

...‘Bavarian’ and ‘Close2Bankrupt’ created a story about PSB and, because I had previously contracted through PSB, I stupidly (yes, I admit) played along with them.....

I presonally would like to point out that I have nothing to do with, and want very little to do with the German government, with the exception of finding a safe and legal way for me as an Brit to contrcat in Germany.

I actually accepted a contract in Frankfurt and start tomorrow 7/4/08. As I could'nt find any clear information on PSB or any of the other management companies, to state whether they were 100% legit, then I have taken advice of a local accountant, and some colleagues that have also done stints in Germany, and have registered as Selbständige / Frieberüfler.

Supposedly as a Brit, there are a number of tax treaties etc, that will allow me to claim tax breaks for my stay in Germany such as dual housefold, so I should be able to reduce my taxes without and additional risks.

[feeble]

"And wrt Germany, I have been told that the Finanzamp have recently had a round up of people operating through dodgy schemes and assessed them for tax on the gross billings, though I have no idea of the details."

Does this actually refer to contractors which used ITS/PSB?

I'm also contemplating using these guys, but have heard that they had been caught out in Germany once? I don't know whether this is true though, so wondering whether anyone has some more info...The net retention they offer seems very high.
My contract will be in another country though.

[tim123]

Originally Posted by feeble

I'm also contemplating using these guys, but have heard that they had been caught out in Germany once? I don't know whether this is true though, so wondering whether anyone has some more info...The net retention they offer seems very high.
.

I can't answer the question that you asked, but IME PSB/ITS offer a similar retention to the other management companies by using a similar method.

I know of nobody offering a good retention rate in Germany using a fully declared method of operation.

tim

[Close2Bankrupt]

From my understanding all of the management companies offer a similar deal, and tell you that they are either fully tax compliant, or are currently tax compliant due to a loophole in the German laws.

I think the only difference between these companies, apart from the percentage they charge, is the way the "other money" is handled, ie in an offshore account in your name, or offshore account in the name of a trust, and off course how you can access that money, ie via a loan from the trust, or some provide credit cards to access the money.

The problem is that there is no way of finding out if the company you want to use has been blacklisted, or is under investigation.

[tim123]

Originally Posted by Close2Bankrupt

From my understanding all of the management companies offer a similar deal, and tell you that they are either fully tax compliant, or are currently tax compliant due to a loophole in the German laws..

No they don't. They tell you that you are compliant based on the "not getting noticed" rule. There is no loophope that allows you to channel funds offshore and not pay tax on it, just one that enables you go home before anybody notices.

HTH

tim

[dr4m]

Check this out:
http://www.focus.de/finanzen/news/af...id_229796.html

Unfortunately in German. Anyone can translate? It might be interesting literature .