. . Germany - the taxman cometh

[Dominic]

Sham company

I have now read most of this thread. There are some that may have wanted to "hide" income for a later date. However, I am sure that there many like me, who used their UK comany as a mater of professional operation. All the money was declared to the UK who took their corporation tax and all the money i invoiced was declared to Germany. The problem is, that Germany wants all the tax.

Currently I am now double taxed and facing a penalty. I dont speak a word of German and used a Munich Steuerberator (Dr. Elizabeth Wolf-Wacker). She was fully aware of the "split" and the role of the UK company. Even in the first interview with tax inspectors believed she had done nothing wrong. It would apear that her professional opinion was either way of the mark, or the German Tax authorities acted illegaly.

[tim123]

I have now read most of this thread. There are some that may have wanted to "hide" income for a later date. However, I am sure that there many like me, who used their UK comany as a mater of professional operation. All the money was declared to the UK who took their corporation tax and all the money i invoiced was declared to Germany. The problem is, that Germany wants all the tax.

Currently I am now double taxed and facing a penalty. I dont speak a word of German and used a Munich Steuerberator (Dr. Elizabeth Wolf-Wacker). She was fully aware of the "split" and the role of the UK company. Even in the first interview with tax inspectors believed she had done nothing wrong. It would apear that her professional opinion was either way of the mark, or the German Tax authorities acted illegaly.

"Illegally" is a very emotive word. It is very unlikely that the German authorities acted illegally. They may have made a mistaken assessment (though even that is in doubt) but pursuing that mistake is not an illegal act.

And you haven't been double taxed. You've been fined for getting it wrong. It works exactly the same way if you make a mistake in the UK. You will not get the EU court (or your MP) interested.

Your best (only) hope is in a negligent claim against the advisor.

tim

[JustMe]

I have now read most of this thread. There are some that may have wanted to "hide" income for a later date. However, I am sure that there many like me, who used their UK comany as a mater of professional operation. All the money was declared to the UK who took their corporation tax and all the money i invoiced was declared to Germany. The problem is, that Germany wants all the tax.

Currently I am now double taxed and facing a penalty. I dont speak a word of German and used a Munich Steuerberator (Dr. Elizabeth Wolf-Wacker). She was fully aware of the "split" and the role of the UK company. Even in the first interview with tax inspectors believed she had done nothing wrong. It would apear that her professional opinion was either way of the mark, or the German Tax authorities acted illegaly.

Hi, Dominic,

For how long did you work in Germany with you limited?

[BlasterBates]

Several years ago, trying to save tax, I asked my Steuerberater whether I could run a UK Ltd, and tax German income in the UK. His answer was categorically no. I would have to register a branch of the Ltd company in Germany and tax all German income there. By the way the same would happen if you have a GmbH and tax the UK income in Germany, if the UK authorities found out they'd tax it. A lot of people try it on and some get away with it, but it isn't legal.

I don't know the ins and outs but you need a second opinion from a reputable German Steuerberater. If your income taxed in the UK was generated in the UK, if you have proof you could challenge it, and provided you submit an appeal in time your tax would be refunded. If you extracted dividends, you would be liable for German tax but UK tax paid would be credited.

You can read the above the Double Taxation Treaty, the UK one or the German one, they're both the same.

[darmstadt]

I still think, and hopefully will be proved correct, that the German Tax authorities have acted illegally. But it is better to argue this point from the UK than in a concentration camp.

No wonder you got fined

[BlasterBates]

All the money was declared to the UK who took their corporation tax and all the money i invoiced was declared to Germany. The problem is, that Germany wants all the tax.

reading this again. At face value ie. you invoiced in Germany from your Ltd, you incorrectly paid corporation tax in the UK and the Germans correctly demanded tax.

I would see a UK accountant about getting your UK tax back.

[Dominic]

double taxation

Just to correct one point.

At this time the exact same monies have been taxed in Germany and the UK. So it is double taxation. The penality and 6% interest are a seperate costs, for which we are sueing the steurberator.

There was no attempt to hide any money anywhere. The UK acounts show full disclosure. The steurberator was fiully knowledgable about the operation, It went on since 1999. The same operation was done by many larger UK companies.

The most annoying thing abou this, is there was actually more tax paid than if I had declared all the money as mine. The Germans are npt penalising me for not paying taxes, they are penalising me for allowing the UK to get the half the taxes, and ignoring the fact the the UK company is a seperate tax enity, (which I belive is illegal under EU Law, we will find out).

Look up the European Court cases, you will see German figures a greate deal. They do act illegally, they know they act illegaly, they dont care. I believe they see the EU as their property and not as a member of it.

I have asked the UK IR if I can adjust the profits and therefore taxation for the UK company has it now has had significant back dated costs, that is, more personal money for me, to which the Germans have taxed me. hence the double taxation of the same money.

I have been penalised for my steurberator getting wrong. She should have known that it was not allowed for a UK company to perform business in Germany. Although, since she initially defended our case by stateing it was perfectly legal, it would appear that tje German Tax laws are not easily understandable.



Incidently this is still very much going on with several large british companies, eg Thales, BAES etc, I very much doubt the German tax man will go after them, they can afford justice.

I will alos make the point to teh MPs, that Germany should not be considered for any more multi national projects, since British Tax payers money is beeing effectlvly transferred directly to the German Finazamt. Only if the EU comision or the EU patent office taxation system is used could we allow Germany to host multi national projects paid for by the tax payers of other countries.

If enough of us band together we could at least :
1. Highlight the issue to the UK parliment
2. Support a class action against the non recogniation of UK companies
3. Get support to ensure Germany is black listed from hosting multi national projects.

[BlasterBates]

Yes but the point is, what is this income? Is it UK based income.

You can't tax money you earnt in Germany wherever you like. A Ltd company operating in Germany has to be registered with the local Gemeinde and you declare and pay German corporation tax on your activities in Germany.

This is common. Hundreds of Germans are using Ltd companies because it is cheaper to setup a UK Ltd. But they pay German corporation tax, not UK corporation tax.

If you didn't register a Ltd company in Germany but work and invoice from it whilst in Germany, this is illegal. You are fully entitled to use a Ltd company or any EU company but you have to abide by the local regulations.

The fact that you have a Ltd does not mean any income is completely immune from taxation from another country, if you are doing business there and working there. That is not what the EU law says. The EU law simply allows you to operate your company wherever you like, but you must abide by the loacl tax regulations.

The UK expects the same.

[Dominic]

Taxation a UK Ltd company in Germany

I believe that what should have happened, is that the German Tax authorities should have asked for the corporation tax paid by the UK company to the IR, to be paid to them instead. According to the IR, there was a way of doing this.

However, they insisted instead, to ask for all the money to be taxed in Germany as my personal money and ignore the UK company. I suggest that this was illegal.

The concept of setting up a local branch to be taxed locally was originally to avoid large corporations from setting up in very tax friendly regimes and avoid paying taxes in Europe. No one can argue that the UK is a tax friendly regime.

There is nothing integrated in Europe. It is a compete myth. I have had far easier times working in Asia

[Dominic]

The right of tax

It would be good to have a more detailed discussion on some of the points about German Tax concepts, and there dire consequence if not followed. Anyone know how to branch off a thread, rather than just adding a post at the end of this one?

Location of tax entity, versus location of “worked” performed.

We are taxed on our personal income according to our residency, that is location of the tax entity.

We pay sales tax at the location where the sale takes place. Again location.

We are taxed on our world wide income, no mater where that profit is generated, It is taxed at our locality and not where the “work” of generating the profit occurs.

It seemed to obvious that it was the locality of the tax entity that has the right of taxation. However, this appears not to be the case always. The tax system seems to be an awful corruption of reason and logic.

The original tax concept was to avoid tax havens for the “location” of a company, whilst the “work” is performed in the high tax regime. This concept has since been corrupted by the internal states of the European Union in order to grab as much tax as possible from each other.

If it is not obvious that tax is due on profits arising from “work” , at the location of the work, rather than the location of the tax entity, then is it reasonable to expect professional, licensed tax advisors to know this?
If yes to above, then we should have a case for compensation from negligent tax advice.

Is anyone else in a litigation process with the German Tax authorities, or the Steurberators, or agents?