. . Germany - the taxman cometh

[SalsaFever]

But it is presumeably possible to do 6 months work in Germany under the 183 days rule through your UK Ltd Co, right?

You can take UK Ltd Co track, if you sure you stay in germany less than 183 days. If you stay beyond, you will be considered as resident and taxed, possible in both countries.

On the other side, if you register as freelancer, you will be german resident from up front, meaning, even you stayed in Germany a single day, you still have to pay taxes since you are registered.

Handle UK Ltd option with extreme care, since it may turn ugly anytime...

[Boo]

Handle UK Ltd option with extreme care, since it may turn ugly anytime...

Sorry, but in what way ? Do you just mean that it's a no-no if you overstay the 183 days ?

Also, is the German way of counting the days the same as Belgium (ie only days actually worked and excluding travelling days) ?

Thanks,

Boo

[EelamTiger]

From what I've and experience from other contrcactors.

If you go back to the UK they'll try and track you down, usually by contacting the UK tax authorities. Then they chase you up through the UK courts.

Hello, could you share more info on the result?
Is it really true that they chase you up through UK courts?
Don't they need to have proof that the person is actually evading? Can they demand payment+go to court based on suspicion?

[BlasterBates]

Well I knew one contractor who they tracked down, he settled, so it didn't get to court. I'm sure it depends on the amount and he knocked them down a lot to pay it off. At least you have more leverage if you're UK based than if you're in Germany, because they can't just come and "slap in you irons". This particular case wasn't tax evasion, they just demanded a huge amount of back tax. In this case they found out how his scheme worked and estimated his tax bill for him, and he would have had to challenge it and appeal it, if it had been wrong.

[PharmaContractor]

You can take UK Ltd Co track, if you sure you stay in germany less than 183 days. If you stay beyond, you will be considered as resident and taxed, possible in both countries.

On the other side, if you register as freelancer, you will be german resident from up front, meaning, even you stayed in Germany a single day, you still have to pay taxes since you are registered.

Handle UK Ltd option with extreme care, since it may turn ugly anytime...

Presume 183 days means you have to physically be there on German soil, so if you can wangle it to work from home that would help your case?

[BlasterBates]

Be careful with the 183 days, they don't count the days you're in Germany, they'll simply count from the day you arrived, even if you go back every weekend or work some days at home, basically they'll just say you're resident after 183 days.

..and if you stay longer than 183 days then all the income including the 183 days is taxable.

For you not to qualify for tax residency it would have to be more than a few days working from home.

It is woolly like residency rules are. If you are intending to work mainly in Germany for an extended period, best just to have done with it and tax yourself in Germany from day one. That way there'll be no complications.

You also need to be aware that the 183 day rule is only personal taxation. If you have a contract in Germany, and most of the work is done there, and you are the only employee of the company they can argue that the income from your Ltd should have been taxed in Germany. Just be aware of that. The 183 day rule is not a 100% cast iron criteria for your 1 man Ltd company, not to be registered or taxed in Germany.

If Germany had an infinite number of tax inspectors monitoring everything, I would say that they would tax you for your 3 month contract, but they don't so you can probably stay in a hotel and stay under their radar.

[PharmaContractor]

Hi BB,

Thanks for the advice. Hmmm...no need for me to persuade the client to allow me to work from home then every other week!

I had been inclined to go for the freibefluer route, but then saw the forms in german etc, spoke to another chap out here who's UK accountant told him that a UK Ltd would be fine for him so I started re-thinking my options again! I was also thinking that getting a mortgage back in the UK (not now, but maybe in 1-2 yrs) it would appear 'better' that I produce my UK Ltd documentation than German receipts and contracts. I know how narrow-minded the banks can be all of a sudden in these days of 'responsible lending'!!

Either way, I am hoping that retention wise, there won't be much in it between UK Ltd and freibefluer as expenses can be claimed with both anyway.

Thanks again!

[BlasterBates]

If you are going to go Ltd then I would make an effort to work at home fairly often. The German tax office can argue between the begin date of the contract and the end date of the contract your business had it's main centre of activities in Germany and therefore should have been registered. This because you're a 1 man Ltd company and the sole employee was doing the work in Germany. A Ltd is not allowed to do business in Germany without registering if it has business activity in Germany. There is no time limit on this stipulation, i.e. 6 months or whatever, so be aware of that. However whether the German tax office would bother with it is another matter. However if the contract is longer than 6 months then you really would be in deep sh*t with the German tax office, and they wouldn't mess around. The VAT boys would on you like a ton of bricks if they found out.

Don't be put off by filling out German forms, a "Steuerberater"(German Tax advisor) will do that for you. The only forms you fill out are the VAT and income tax forms. As a "Freiberufler" you don't register a business, just register as a resident at the local Gemeinde. That is easy to do. Whatever decision you take it shouldn't be because you were put off by the forms. It should be based on what is legally correct.

Don't take advice from a UK accountant, take advice from a German accountant. The UK accountant can only tell you it's OK from a UK perspective. You can wait until you're in Germany and get a recommendation for a local accountant. At least you'll know whatever you're doing is above board.

Filling out German forms is a pain but not half as painful as an enquiry from the German tax office, or worse still being arrested by the VAT inspectors, who just happen to have decided to follow up an invoice they were looking at, and they're very used to chasing up invoices from British contractors.

Remember there wouldn't only be back tax from your income there would be the VAT as well.

[taxing]

Finanzamt is still at work- Just received a notice

I am from a South Asian Country and worked in Germany in the year 2004 and 2005. I worked in 2005 only for a period of 4 months.

The story is as follows:
Filed my tax returnsfor the year 2004.
I was given prepayment assessment of 0 EUR for the year 2005.

So happily ignored filing as I was a non resident for the year and out of Germany for the last 6 years.
Just 2 months back I received a notice to my address accusing me of Tax evasion for the year 2005 and Finanzamt claims that the local tax estimation is too low for the year 2005.
1. I do not how they tracked my address.
2. I honestly do not remember the details of the year 2005.

The wording in English is something like this.
You are accused and as an accused you have right to refuse to testify. You may contact your lawyer. Some bizarre translation. In German wording, Finanzamt claims that they have sent me a letter few months back.

Any pointers how should I react?
1. I faxed them a letter stating that I need more time to dig on what they are talking about.

Any one else there in the same situation?

[SalsaFever]

Filed my tax returns for the year 2004.
I was given prepayment assessment of 0 EUR for the year 2005.

Were you an employee or freelancer? If you were an employee, payroll taxes were already deducted from your salary, technically you cannot be accused based on tax evasion. Indeed, you would get some money back, if you filed 2005 tax returns. I guess they are mad just because you did not file tax returns for 2005 (although taxes are already deducted by your employer)

If you are not planning to return Germany soon, I would suggest, you just ignore their request. famt can't even reach and collect back-taxes from UK, you are way too safe in South Asia, no worries, enjoy tikka masala and sunshine

How they got your address? Simple, when you were doing your 2004 taxes (during 2005), you were already in India, so you handed out your own info. One other option, most South Asians need a visa to come Germany, probably they would obtain your details from the consulate where you applied for your visa.

Remember, there is no trial in absence in Germany. So they have no other option, but settle down this issue with you. (in this case, you do not own any back taxes, where is the beef? What are they chasing for? I am really confused.)