. . Germany - the taxman cometh

[BlasterBates]

Only because my original MC advised me that I should do that.



No, I wholeheartedly agree that Freiberueflich is the way for newbie and, where appropriate, existing contractors to go.



There is my problem right there. Damn Agencies. They are the ones who should be giving this advise, not us. Sure, once in-situ you can ask around to find out what other people are doing and decide for yourself what is best for you. But first you have to be here, gainfully "employed" which means signed contracts, etc. etc.

The other alternative would be to come out as a permie and then switch later, but even then, you need to know who and what to ask.

At the end of the day, being with a Management Company will attract the attention of the Finanzamt. However, I have a german colleague here on site who does not work through a management company, is 120% "Inordnung" (of course he is, he's German!) and still attracts the attention of the Finanzamt!! In fact, he even had one of his returns questioned and was informed that he owed €2000! He paid it just for a quiet life.

It seems that one's mere existence will ultimately attract their attention in one form or another, sooner or later. The key is, "the split income is not illegal".

It seems that the Finanzamt can never consider themselves to be in the wrong and any attention is going to cost you, one way or another. This should in no way be taken as an indication not to register, as that itself can create a whole set of new problems (in addition to any potential tax issues), to wit, being discivered not to have registered will land you in a world of hurt.

If anyone is considering coming out to Germany on a contract, then do so, it is great out here. However, whatever form your contract takes, DECLARE EVERYTHING to avoid too much negative attention. Sure, if you work through an MC, you may get assessed sooner rather than later. But if you are 100% compliant and can prove it, you have nothing to worry about.

For those who are considering a short-term contract (< 2 years), then all I can say (as a veteran of >10 years) is that you need to decide between yourself and your conscience what to do w.r.t splitting and declaring. You might get away with it, you might not.

What ever solution you go for you should have it looked at by a registered German accountant.

That goes for any country including the UK, and you should always have a stamp on your tax return, until you really understand tax law.

I recently advised a contractor starting in Luxembourg to do this. i.e. take his ITECS solution and pay for advice form a local tax advisor.

THIS IS A MUST.

[darmstadt]

There is my problem right there. Damn Agencies. They are the ones who should be giving this advise, not us. Sure, once in-situ you can ask around to find out what other people are doing and decide for yourself what is best for you. But first you have to be here, gainfully "employed" which means signed contracts, etc. etc.

Only those agencies that deal primarily in the UK and have seen opportunities here. If you use an agency that also has offices in Germany then they should pass you on to their relevant German office to help here. I once contracted through a UK agency who tried to insist on a management company, basically told them to take a long walk off a short pier..

At the end of the day, being with a Management Company will attract the attention of the Finanzamt. However, I have a german colleague here on site who does not work through a management company, is 120% "Inordnung" (of course he is, he's German!) and still attracts the attention of the Finanzamt!! In fact, he even had one of his returns questioned and was informed that he owed €2000! He paid it just for a quiet life.

If he's a German then he wouldn't go through a management company in the first place! The Finanzamt will investigate anyone, they've investigated me trying to get me to be Selbständig instead of Freibrefulich and therefore incur Gewerbesteuer but that was worked out. You do know that depending upon the type of job you do will also change whether you're Selbständig or Freibrefulich and unless your Steuerberater knows IT then you might well get caught out there. I've posted a couple of times here links to a list of accountants who deal with IT contractors in Germany.

For those who are considering a short-term contract (< 2 years), then all I can say (as a veteran of >10 years) is that you need to decide between yourself and your conscience what to do w.r.t splitting and declaring. You might get away with it, you might not.

I would say don't come here unless you're willing to be above board about everything. Most UK contractors come here thinking that they can get away with paying no tax and give the rest of us (me > 20 years) a bad name.

[tim123]

The problem with that is, when you next come into the country, airport only as they check your passport, you'll be banged up until you pay the fine off at €100 per day. Happened to a friend...

I meant "leave before you have received your letter".

tim

[tim123]

You cannot simply pick up the german equivalent of a yellow pages and find a telephone number (cold) for an accountant in germany!! How is this even possible unless you are aware that you even need to do this!! What planet are you living on??

You're aware because he just told you.

I don't think he was implying that people should "just know this".

tim

[tim123]

At the end of the day, being with a Management Company will attract the attention of the Finanzamt. However, I have a german colleague here on site who does not work through a management company, is 120% "Inordnung" (of course he is, he's German!) and still attracts the attention of the Finanzamt!! In fact, he even had one of his returns questioned and was informed that he owed €2000! He paid it just for a quiet life.

All that proves is that the Finanzamt do random audits.

I have a friend who's working as a Freelancer. He's claiming "second home allowance" (which is available, if you need it, to everybody whatever their tax status). The Finanzamt demanded that he supply proof that he was actually paying the bills, and going back to, his first house (presumably because they suspect that guestworkers will be renting out their first home and not acutally returning to it)

I have another (ex-)colleague who made a very long commute to work (Bremen to Hanover, FFS) and the Finanzamt demanded that he supply several years worth of petrol receipts (which I think you can see would be about one per day). Fortunately, he was prepared for this and had them.

tim

[Codejock]

@Darmstadt:

If he's a German then he wouldn't go through a management company in the first place!

I believe I said that he wasn't with an MC:

However, I have a german colleague here on site who does not work through a management company

I recently advised a contractor starting in Luxembourg to do this. i.e. take his ITECS solution and pay for advice form a local tax advisor.

Yes, ITECS. Hmmmm. I remember them. They are the MC I was with when I came here and the reason for the mess in the first place (i.e. MC's, Steuerberater etc.).

If memory serves, they were also offering (pushing) a split income solution using a "loan" type arrangement but also part paying in the UK and making UK-based NI contributions (employee and employer) which were phenomenally expensive). It was because of these that I moved away from them and down the Freiberfueflich option, but only after I had been in Germany for a few months and was able to inform myself. I was able to rectify the situation (i.e. tax-returns) before anything nasty happened, but only just!!

I was lucky, but others might not be/have been quite so lucky and I blame the agency for pushing ITECS as the solution in the first place.

[Codejock]

You're aware because he just told you.

I don't think he was implying that people should "just know this".

tim

I realise that, and I didn't mean to suggest that Blaster was suggesting that there should be some kind of "collective consciousness" meaning that contractors coming to Germany would know, be default, what to do.

I honestly believe that it is the responsibility of the Agencies to be correctly informed as to how contractors need to operate here in order to be compliant (just as they would do if they were recruiting for clients in the UK).

If they are unable, or unwilling to inform themselves, and the contractors, then IMHO they have no right even thinking about trading here.

[Codejock]

Tax advice

Oh, one other thing...

We have been talking here about speaking to your Tax accountant. I have spoken with mine (with whom I am on very friendly terms) and was advised that if one, hypothetically, has concerns with the legitimacy of any solution one is using that it is often better to speak with a lawyer specialising in tax law.

It's to do with this "privileged information" thing - anything you tell your [reputable] accountant that is not legal, they can be obliged to inform the Finanzamt. If your accountant does not do this, then arguably they are not quite so ... "reputable".

[darmstadt]

All that proves is that the Finanzamt do random audits.

I have a friend who's working as a Freelancer. He's claiming "second home allowance" (which is available, if you need it, to everybody whatever their tax status). The Finanzamt demanded that he supply proof that he was actually paying the bills, and going back to, his first house (presumably because they suspect that guestworkers will be renting out their first home and not acutally returning to it)

I did when working in Munich but it was a real pain at first. Originally the Bavarian authorities said I had to deregister from here and register there which would mean changing number plates, etc. I just told them that then I would only spend 3 days a week there and they capitulated. Also when you do this you can also put all your bills (electricity, GEZ, etc.) through your accountant and claim back a lot of it. Recently I've found it easier to stay in pubs or hotel apartments.

I have another (ex-)colleague who made a very long commute to work (Bremen to Hanover, FFS) and the Finanzamt demanded that he supply several years worth of petrol receipts (which I think you can see would be about one per day). Fortunately, he was prepared for this and had them.

tim

Did that for a few years but my accountant has said its better to keep a logbook of your car journeys as you'll get more back. You do have to use the car for more than 50% business though to make it worthwhile

[darmstadt]

Oh, one other thing...

We have been talking here about speaking to your Tax accountant. I have spoken with mine (with whom I am on very friendly terms) and was advised that if one, hypothetically, has concerns with the legitimacy of any solution one is using that it is often better to speak with a lawyer specialising in tax law.

It's to do with this "privileged information" thing - anything you tell your [reputable] accountant that is not legal, they can be obliged to inform the Finanzamt. If your accountant does not do this, then arguably they are not quite so ... "reputable".

Has happened to me. I had to sign a form which would absolve them of all responsibilty in regards to certain 'arrangements' that I had made in preparing my tax return