. . Germany - the taxman cometh

[Edelweiss]

As far as I know for Germany (and as Blasterbates has already pointed out) there's nothing wrong with using a UK Limited company in Germany

Those rules are for proper Companies though...

Germany's (And the UK's) position is that your whole basis to be Self-Employed is bogus as per IR35 etc... You're doing the same job as a Permie using the CC's equipment. Flying home at W/E's isn't proof of working in the UK either.

It's all a Tax fiddle and you know it.
At least I admit I was on a Split as an Employee of a German company and knew full well the score. Your just looking for some dubious loophole.

Like I said, all the people I know that work long term in Germany are now Hourly Paid Employees of a GbmH.

[Northerner]

I repeat nothing wrong with using a UK limited company in Germany as long as you establish a branch in Germany. Otherwise Germany would be in violation of EU treaties. I am guessing that the tax residency status of the director (controller) has a bearing on whether a branch should be established or not and whether corporation tax should be paid in the UK or Germany.

There are a lot of German entrepeneurs who have chosen the Ltd route due to the cheaper alternative to GmbH, which I assume is why the 'mini-GmbH' was recently introduced in Germany.

IR35 is a completely separate issue and not one I raised/mentioned/wrote.

Have a look at:
http://www.reedsmith.com/_functions/...=0&fde_id=4394
which mentions specific cases that the European Court of Justice had to deal with and when it all changed back in 2003. I don't know if there have been any other changes since the article was written.

[Edelweiss]

I
IR35 is a completely separate issue and not one I raised/mentioned/wrote.

The German philosophy about Self-Emplyment is the same though, so if you're not really Self-Employed, you can't be Ltd or GbmH, so the whole thing rests on that point.

99% of "Contractors" work on the CC'c site using their equipment so you don't quaify to even be Self-Employed.

[BlightyBoy]

I am guessing that the tax residency status of the director (controller) has a bearing on whether a branch should be established or not and whether corporation tax should be paid in the UK or Germany.

My limited understanding, based on advise given to me by a german Tax solictor, is that the question of taxation in either germany or elsewhere (the UK, in your example) has less to do with "personal residency" and more to do with "residency of the company". For example, if you are contracting through the german branch of your UK limited company in germany and invoice agent/client etc. from that company, then that income will be subject to taxation in germany. If you are also working for a UK client, and the UK branch of your company is invoicing the client, then that income would be subject to taxation in the UK. It's actually quite simple because you are essentially dealing with two seperate tax entites - one based (and therefore resident) in german - demonstrated via the entry in the Handelsregister, and the other in the UK, demonstrated by the registration of your company at companies house.

Where things will start to get complicated is with payment of salaries/dividends. As an employee (albeit of your own company) you have tax residency either in germany, the UK or somewhere else and it is in that country where you are required to pay personal income tax, and where your employer will also be obliged to make contributions along the lines of NIC (UK) or Sozialversicherung (Germany).

There are a lot of German entrepeneurs who have chosen the Ltd route due to the cheaper alternative to GmbH, which I assume is why the 'mini-GmbH' was recently introduced in Germany.

That's right. I remember reading an article a couple of yers ago about starting your company for Euro 1.40. I recall finding it comical at the time because that was about the equivalent of UKP 1, and having once had my own company when contracting in the UK, am aware that this is the minimum amount of money you needed to start a Ltd company. Minimum of one share with a minimum value of 1 pound.

IR35 is a completely separate issue and not one I raised/mentioned/wrote.

This thread is essentially about taxation in germany, not NI (or similar) contributions. Nor are we debating the so-called Rein- vs. Schein-selbständigkeit (german IR35 for the uninitiated). They are both seperate issues.

However....

If you are working through a german registered branch of your own UK company, and the company are making the necessary contributions (which is essentially you anyway!) then this is not an issue. The german authorities (in this case) are less concerned with who makes the contributions and more concerned with the fact that contributions, where required, are being made at all.

The German philosophy about Self-Emplyment is the same though, so if you're not really Self-Employed, you can't be Ltd or GbmH, so the whole thing rests on that point.

99% of "Contractors" work on the CC'c site using their equipment so you don't quaify to even be Self-Employed.

There are plenty of german companies, ESG, Dornier to name only two, who place "consultants" at client sites where the consultant in question is also using CC equipment (as you put it). German IR35-similar issues do not apply here because the consultant is a permanent employee of ESG or Dornier (in that example) for whom Sozialversicherung contributions are being made.

The issues of german NICs and tax are two seperate and wholly unrelated matters and I would ask you, Edelweiss, not to allow yourself to confuse the two, otherwise you should go post on another forum.

[Edelweiss]

The issues of german NICs and tax are two seperate and wholly unrelated matters and I would ask you, Edelweiss, not to allow yourself to confuse the two, otherwise you should go post on another forum.

I've never mentioned NIC's?
And the point I'm making is only what the Chief Tax Officer told me about Self-Employment in Germany... So they have double standards... I already saw this when the non-Brits in my office weren't busted, take that to the ECHR.

[BlightyBoy]

I've never mentioned NIC's?

Not directly no, but you have mentioned IR35 and the german equivalent (self-employed vs. disgusied employment) and that has nothing to do with taxation.

I already saw this when the non-Brits in my office weren't busted, take that to the ECHR.

It is more likely that you were receiving a split payment and the others not.

I am aware of "arrangements" where the non-german citizenship is used as "leverage" in a "centre of life" argument.

I suspect you received a salary in germany which was subject to taxation. I also suspect that you received a further payment, probably into a UK bank account which should have been (and possibly was in fact) subject to taxation in the UK. This amount was probably below the income tax and NI thresholds so that no contributions were payable (in the UK).

The german tax authorties are clamping down. Understandably so as they have to claw back revenue to feed to the failing banks (e.g. Hypovereinsbank). You have been investigated. You have been busted. The money paid as a split (in whatever shape or form) should have been subject to taxation in Germany and not in the UK.

This is undoubtedly the finanzamt's argument, and under german tax law is perfectly legitimate. Regardless of where you work, germany is where you live/lived and germany is where you should be paying tax.

Your's is an unfortunate but not rare case.

[TiroFijo]

This is undoubtedly the finanzamt's argument, and under german tax law is perfectly legitimate. Regardless of where you work, germany is where you live/lived and germany is where you should be paying tax.

Your's is an unfortunate but not rare case.

All contractors heading for Europe should take note of that. If you are going on a long term contract then forget all about the UK and your Ltd company there as you are now tax resident in your new country. HMRC has zero to do with you anymore so get with the system where you are going.

[BlasterBates]

I don't think you'd find any Germans running their affairs through an MC. There really isn't a lot of difference between UK based contractors using offshore solutions and MC's in Germany. Many UK contractors are facing hefty bills from the UK tax authorities. If any German was doing this they'd be down on him like a ton of bricks. In Belgium the same thing has happened. You have to declare everything you earn to the German authorities, even if it is taxed elsewhere.

[TiroFijo]

I don't think you'd find any Germans running their affairs through an MC. There really isn't a lot of difference between UK based contractors using offshore solutions and MC's in Germany. Many UK contractors are facing hefty bills from the UK tax authorities.

You mean that there are UK contractors contracting in the UK and using a MC and splitting income? That sounds strange - can't think of why they would do that or why an MC would do it, unless it was a European based MC.

[Edelweiss]

it is more likely that you were receiving a split payment and the others not.

The non-Brits were working at the same company on the exact same deal. The Gestapo tried to make the case against me British only by talking about Brit MC's, Offshore Banking etc... It's clear discrimination although I'm sure the ECHR wouldn't care. You could make a different story about 10 French contractors in my office being paid a Split in Switzerland, but they prefered to just to go for us, funny that!