. . Germany - the taxman cometh

[SalsaFever]

Just a quick update..
Someone I know received an audit letter from f-amt requesting his invoices and contract.

This guy never worked with Mr H. and he is never been to Munich. But he works with a MC which is a 'usual suspect'.

The MC advised him to send the documents and just wait, since there is nothing can be done at this point.

How bad or good is the audit letter if you compare with 'on site audits' or 'dawn raids'? Anyone else received such letter before?

[BlasterBates]

I would say take legal advice. Normally they show up for a "Betriebsprüfung" at your accountants. However I've never been through one, so could just be routine.

[LonelyRider]

I have understood it is a practise of tax offices of some states/cities/towns to usually start with a request of an audit rathen than go directly for raid/investigation/prosecution. Probably the reason they have sent the letter is the same anyway ie. they suspect something may be wrong in the person's accounts/tax returns and they want to look into it.

It is better to be approached by a letter requesting an audit or documents than getting a visit or letter about an investigation. At this point they only want to see his paperwork and if there something to correct, make the corrections and pay the possible extra taxes. He should be able to avoid any further investigation, if he agrees to the requests of the tax office.

I would also seek a professional to deal with the tax office.

[darmstadt]

I got that last year and I don't work with any MCs, just for myself, and a number of German contractors I know have had it. Its pretty much standard practice for anyone who is self employed here. I just got my accountant to send in all my paperwork for the past few years to show it was all correct and that was it.

[CodeKid]

According to my s-berater the F-amt are aiming to eventually investigate everybody who worked through a MC. However they don't have the respource to "raid" everybody so I agree that the "audit" request is probably a pre-amble. It's NOT likely to be routine at all if your friend is working through an "established" MC. However, that said, it's difficult to know what to do. If he/she has a significant exposure then it might be an opportune time to get out of Dodge. Alternatively, send in the "papers" and if it goes further (ie they launch an investigation) consult a lawyer at that point and then prepare to either tough it out (contest the investigation) or leave.
As stated in a previous post, they rarely follow through and attempt a prosecution because they can't build a cast iron case.
Engaging a lawyer at this stage is perhaps a bit of a giveaway (and indeed it might be part of the F-amt strategy to "test" your reaction).

CK

[contratornewb]

More information

Hi guys,

I'm about to start working as contractor for the first time in Germany. After reading this thread, I'm beginning regret the choice...

Will I still be subjected to the high german taxes, if I work as a freelancer for less than 183 days in Germany?

Thanks in advance.

--
newbie

[BlasterBates]

German taxes are not that high, it is the social inurance that is high. The social insurance can be avoided as long as you are self-employed. I see no reason at all to go into a management co. The tax take is between 30-35%.

If you are there less than 183 days you ought to be able bill directly from your UK Ltd. VAT though is always an issue though.

[contractornewbie]

Situation

German taxes are not that high, it is the social inurance that is high. The social insurance can be avoided as long as you are self-employed. I see no reason at all to go into a management co. The tax take is between 30-35%.

If you are there less than 183 days you ought to be able bill directly from your UK Ltd. VAT though is always an issue though.

Hi Blaster,

Thank you for the info. Is "self-employed" the same as freelancer? I will be working as a Software Developer for a German company directly, there isn't any management company or agents in between us. I do not have a UK Ltd company either...

What are my options in this scenario? And what should I do the moment I arrive? The German company that I'll be working for is a small startup and it seems that I'm the first "non local" they hired, therefore I'm not able to gather much information from them.

This is my first time working as contractor and I really appreciate your help.

Thank you.

[BlasterBates]

Yes freelancer, otherwise as you are subject to business tax.

You need a "steuerberater" in Germany. Ask for a recommendation when you get there.

If it is shorter than 183 days then you have the option to run through your Ltd. In which case you only have to worry about VAT, and I don't exactly know the rules for crossborder inviocing.

If you think you're probably going to be longer probably best to set up straight away as a freelancer.

You don't need to have everything setup before you send your first invoice.

In Germany as a Freiberufler you have no obligations for registering anything, you just invoice in your own name, and to a personal business account, you charge VAT and send a VAT form to the Finanzamt every month. At the year end you simply fill in your income in the box selbständig and that is your legal obligation satisfied. Normally though you submit a P&L with your tax return.

You'll need to do book keeping in case there's an audit, but usually apart from travel expense, from your German home to work, there isn't much. The only thing you should be recording is simply your monthly invoices and the VAT, and then things like depreciation on your computer, business phone bill etc.

Very simple actually.

[contractornewbie]

Yea, I will definitely need one. I plan on staying for longer than 183 days, so will just go ahead as freelancer.

Do you have any tax consultants that you can recommend? And how much on average does one charge?

I'm only making EUR35/hr, hopefully I can afford their services.

Thanks in advance.