An alternative to a management company in Germany?

[ASB]

If you offer professional services you are exempt from VAT when billing abroad, because you are adding value abroad, however the possibility of the Finanzamt demanding VAT cannot be excluded, if they decide you're selling software.

That would certainly be one case.

I am assuming trhat the place of supply rules for Germany are the same as the UK - they are supposed be consistant across all EU member states. There are a couple of documents on HMRC website. There is a deemed place of supply for where the services are performed and this depends upon what those services are. It is not the case that all "professional services" become exempt. Most do. Some related to (off the top of my head so I may not be entirely accurate) Advertising, Accountancy, Real Estate, Auctions are treated differently and do not nevessarily go outside the scope of vat.

[ASB]

I'm not sure I understand all of this, but are these the details you need..?

uk contractor.. programming, stats and general consulting in the pharma industry
uk agency
uk management co
client is in berlin, and i would be mostly on-site.

thanks for all the input peeps, much appreciated.

It is very likely outside the scopt of vat. I would suggest that you:-

- Read the place of supply rules and the guides for services
- Follow the flowcharts therein
- Check that the sort sort of services you provide does not override this
- Ask HMRC for an opinion

It is important to recognise that outside the scope and zero rated also become different things. The former does not count as turnover for FRS the latter does. Of course if you are using a umbrella then it is largely their problem.

If you are a registered freelancer in Germany (and you probably should be) then you need to ensure you remain compliant with the German rules - which should be broadly the same. Though as BalterBates says, if you get it wrong it's you who end up paying the VAT. To muddy the waters a bit, if the entity you are ulitmately invoicing has a branch in Germany this can have an effect.

The effect of it all is that almost always vat should not be charged, and if it is it will be reclaimed as input tax anyway - hence rendering the entire system pointless.

[BlasterBates]

The exemption of VAT for professional services is a very specific German rule, it isn't some general principle. I know this one, because I paid for some advice from an accountant to tell me whether I needed to pay VAT in Luxembourg, and his answer was generally no, but it depended on how the Finanzamt classified my business, so they could demand the VAT, and there would be no gurantee that I didn't have to pay it. However the British agency did categorically say that I couldn't charge VAT, which does imply that they didn't collect it either.

[nicodeemus]

Many many thanks for the replies everyone. I had the interview this morning and have already been offered the role

Going to call a steuerberater now.

[nicodeemus]

Update - tax advisor here in berlin offered excellent advice in a free 2 hour consultation and convinced me that it's fine to work here in germany as a freelancer without the management company, agent disagrees though.. says that is 'not legal'.. any advice?

[ThomasSoerensen]

Update - tax advisor here in berlin offered excellent advice in a free 2 hour consultation and convinced me that it's fine to work here in germany as a freelancer without the management company, agent disagrees though.. says that is 'not legal'.. any advice?

I am doing this right now. I send invoice and timesheet from my german freelance personally owned company to my agent every month. No management company involved.

Tell your agent that they are full of bulltulip.

[nicodeemus]

Thanks Thomas,

Have you ever been presented with the argument about 5/6 ths of your turnover being generated by one client, and therefore not being seen as 'independent' ?

This as just come thru to me on an email from a uk overseas tax advisor, via the agency, as reason for needing a management co - have asked my steuerberater for an opinion as it seems spurious to me.

[expat]

The exemption of VAT for professional services is a very specific German rule, it isn't some general principle. I know this one, because I paid for some advice from an accountant to tell me whether I needed to pay VAT in Luxembourg, and his answer was generally no, but it depended on how the Finanzamt classified my business, so they could demand the VAT, and there would be no gurantee that I didn't have to pay it. However the British agency did categorically say that I couldn't charge VAT, which does imply that they didn't collect it either.

So you might escape having to charge VAT for either or both of these reasons?

EITHER (a) because of the EU-wide rule that if your Co is registered in one EU country and the place of supply is in another then it is an intra-community supply, "not within the scope of VAT", and the buyer accounts for VAT.
OR (b) because of the specific German exemption for professional services.

[ThomasSoerensen]

Thanks Thomas,

Have you ever been presented with the argument about 5/6 ths of your turnover being generated by one client, and therefore not being seen as 'independent' ?

This as just come thru to me on an email from a uk overseas tax advisor, via the agency, as reason for needing a management co - have asked my steuerberater for an opinion as it seems spurious to me.

no, never

[nicodeemus]

no, never

thanks man.

reading between the lines my position seems like a challenge to the agents normal ways of working, they feel unnerved by that and are coming up with muddled arguments to try and persuade me otherwise. lately they seem to be confusing the freelancer status argument with the need to have have a management co, like you can't be one without the other. the debate goes on!