. . Germany - the taxman cometh

[BlasterBates]

That's true if you're in Germany and you haven't drawn any funds then you haven't earnt anything, you would be in the clear. The problem there is that German taxman will expect this to be taxed by what ever "entity" earnt it. This would be the German Tax accountant, who would probably pay that proportion I suspect. I cannot see how this invoiced income is non-taxable.

Complicated but still wouldn't touch it with a barge pole.

[LegendsWear7]

Almost everybody I worked with used it. Almost every agency that I dealt with suggested that you should use it. They all called you an idiiot for not wanting to. I told them that I preferred to sleep soundly at night and that this was worth 10K a year

tim

Rings a bell. I had never done anything dodgy with tax in my life. Arrived in Germany and *everyone* was imploring me to 'save money'. Even accounting staff the end client said I would be a fool to pay tax in Germany.

[BlasterBates]

Tax offences can only persued for 5 years, so anyone who left Germany 5 years ago has nothing more to fear.

There is an non-criminal offence of Steuerkurzung (same thing as Steuerhinterziehung but for lesser amounts of money), which can result in a fine of up to EUR 50,000. I think they usually double whatever you owe.

They can go 4 years back.

[poppy01]

Rings a bell. I had never done anything dodgy with tax in my life. Arrived in Germany and *everyone* was imploring me to 'save money'. Even accounting staff the end client said I would be a fool to pay tax in Germany.

I would go further and state that I was told I had to do it this way. I did have the option to apportion the funds as either self-employed income or offshore. Fortunately I put most of it through as income as I needed the cash. It wasnt til I got on-site I realised there were contractors using there UK Ltd. It pissed me off mightily that I 'd to go through the rigmarole of registration etc...

[LonelyRider]

It is good that the matter of Steuerkurzung and Steuerhinterziehung was brought up. Actually the most important difference between them is not the amount of money involved, but the motivation. Steuerkurzung means not declaring all income or in some other manner declaring incomes incorrectly unintentionally, without criminal intention. The result of uncorrect declarations has been that the person has paid less tax than he should have been. Steuerkurzung cannot lead to a criminal record and the penalty payment is usually small.

Steuerhinterziehung means that one has not declared all incomes or otherwise filed false tax returns with full understanding and criminal intent. Conviction will probably result to a criminal record (unless the sums were very small), fines are high and even prison sentence is possible. It is up to the tax authority to prove that there has been criminal intention behind not paying taxes, without very strong evidence the case is likely to be seen as only Steuerkurzung.

I have heard from my sources that when it comes to foreigners the tax office does not usually even bother to try to get evidence about Steuerhinterziehung, as they would have to prove without any doubt, that the accused person has been fully aware of all German tax laws and he has not been for example falsely advised by others.

I would say that Steuerkurzung is in fact, what happened to most contractors. We have been advised very badly and with false information. Most would have made other choices, should they have known everything. I guess most also arrived to Germany without knowledge of the German language, so getting information by oneself was difficult. In that position most just trusted their employers, MOs and accountants. Getting more information or advise would have meant in most cases that one should have hired one more lawyer/accountant.

[BlasterBates]

Website concerning a similar problem


I think the link is from 2002 ...but looks the same

[ExContractor]

I've been reading this with a lot of personal interest. Ive been in touch with my agent of 5 years ago and now his recommended german tax lawyer. Fees for the two tax years I worked there will be EUR500 if there is no problems with my tax, or EUR 2000 if there are problems and they need resubmitting.

Tax offences can only persued for 5 years, so anyone who left Germany 5 years ago has nothing more to fear.

But he didnt mention this limitation on being persued (not in his interest) ... it is difficult to get good advice. Where did you find out this tidbit of information?

[tim123]

That's true if you're in Germany and you haven't drawn any funds then you haven't earnt anything, you would be in the clear. The problem there is that German taxman will expect this to be taxed by what ever "entity" earnt it. This would be the German Tax accountant, who would probably pay that proportion I suspect.

See my previous post. This money goes nowhere near the German tax accountant. It goes:

Client->Agency->Foreign (Dutch/Swiss/Whatever) Management Company->undecalared offshore Bank account.

declared funds go:

Client->Agency->Foreign (Dutch/Swiss/Whatever) Management Company->German Accountant(Nominee)->Tax Deducted->Contractor.

I cannot see how this invoiced income is non-taxable.

I agree

tim

[tim123]

I guess most also arrived to Germany without knowledge of the German language, so getting information by oneself was difficult. In that position most just trusted their employers, MOs and accountants. Getting more information or advise would have meant in most cases that one should have hired one more lawyer/accountant.

Tell me about it!

You go to the local tax office and try to do the right thing and the response you get is (in German) "If you don't speak to me in German, I can't help you" [1]

and then they wonder why foreigners don't pay their taxes properly.

Doesn't happen like this in Sweden [unfortunately :-)].

[1] If a British Goverment/Council official responded like this, the press would be shouting "institutional racism" in a nanosecond, boy did it piss me off.

tim

[LonelyRider]

But he didnt mention this limitation on being persued (not in his interest) ... it is difficult to get good advice. Where did you find out this tidbit of information?

That information can be found in various websites explaining German tax laws, unfortunately again only in German. The tax offenses can be persued for 5 full years. For example if one has earned something in 2003 and submitted the tax returns in 2004, the offense can be persued until the end of 2009, as the counting of the years starts from the beginning of 2005.

The tax office can ask for payment of unpaid taxes for 10 years, but to be able to do so they must have valid evidence (documents) of tax evasion (Steuerhinterziehung). Even if they have evidence, they can no longer prosecute those old cases, only request a payment for unpaid taxes.

My lawyer has told that in his opinion it is normally needless to try to correct the taxation which is older than 5 years. The chance that those files will be opened by the authorities is extremely small.

It is very strange that the MOs or their accountants do not even know or bother to tell their clients this basic information about the German tax laws.