An alternative to a management company in Germany?

[nicodeemus]

Hi folks,

First time in here for a while.. well since around 2002 i guess.. i couldn't even remember my old username.. anyhoo things have been going great for me contracting in the uk using my limited company but now i want to branch out to Germany and hopefully have an interview next week for a 12 month contract.

The agent has said we would need to use a management company to handle the payments. The thing that strikes me though is that it is really rather expensive for what you actually get - they would want 5 percent of my pre-tax earnings, then I would have to pay the local accountant 100+ euros a month and it's all eating away at my take home.

For the 5 percent they would do
- all timesheets, invoicing and money movements
- all insurances (which are apparently mandatory?)
- plus advice on all the stuff i need to do personally.. registration etc.. and anything else i can think of.

The rest is thru the accountant which I guess includes..
- all tax issues & return
- all social security issues (which i apparently don't pay as a freiberufler)
- handle the expenses

So, what I want to know is, has anybody contracting in Germany done anything other than use a management company.. or can anyone recommend one that is (much) cheaper?

(fwiw the agent didn't recommend this company, but said it's one that other contractors in Germany use.. although I guess there is some sort of kick back involved).

All advice would be really appreciated, and please let me know if there is anything I've overlooked.

Thanks
Nick

[Will x-post on toytowngermany soon too if any of you are over there]

[nicodeemus]

more..

further to the above I've been doing some more reading on this site.. (particularly the postings of blasterbates which were very helpful.. thanks dude)

and..

a) without a management co is it just me that invoices my UK agency..?
b) and if so, how is the VAT handled..? I'm not quite clear on that from people's comments.. as this would effectively be asking the UK agency to pay germany VAT?
c) i wonder how the agent will react. they previously said it HAD to be handled with a management co.. anyone any experience of this? surely there is no way they can enforce this if there is legal alternative.. their relationship to the client isn't affected.. i wonder if it's the barrier between the contractor and themselves they are keen to put in place? but anyway.. first step = get job offer, second step = squeeze agent.

[BlasterBates]

As long as you are a freiberufler that's fine. But make sure there is no funny business on splitting.

It is correct that you pay no social insurance. As a Freiberufler all your invoices are direct from you to the agency.
The management co. shouldn't be involved other than to pay VAT and fill out your expenses. Make sure this is the case.

You should compare their costs with a local tax advisor. I paid 260-270 a month for my tax advisor, so that was cheaper, but that was several years ago. They produced a P & L.

You also need a local presence so that they can handle audits. But that would be after several years. An audit in the first few months is highly unlikely.

I personally would prefer to have it dealt with by a reputable local tax advisor. Ask some of your German colleagues.

But this management co doesn't sound like the tax evasion sharks that contractors usually use.

[nicodeemus]

thanks loads for the reply. i've got the name of a local tax advisor so will hope to speak to them and clarify.

i didn't quite understand this bit..

As a Freiberufler all your invoices are direct from you to the agency.
The management co. shouldn't be involved other than to pay VAT and fill out your expenses. Make sure this is the case.

i was thinking the alternative doesn't involve a management company at all? more of a local lone trader arrangement.

[ThomasSoerensen]

If you, as a german freiberufler, invoice a UK agent, there is no VAT involved.
My DE accountant has verified that it is corect that I invoice without VAT.
I also do not use a mangement company (anymore).

cheers

[BlasterBates]

yes just be aware that the rule is you don't pay VAT on professional services, but if they find you're not a freiberufler, then you become liable for VAT.

[ASB]

If you, as a german freiberufler, invoice a UK agent, there is no VAT involved.
My DE accountant has verified that it is corect that I invoice without VAT.
I also do not use a mangement company (anymore).

cheers

I am sure that is true in your case - and is likely to be in most cases. However one cannot be sure without knowing how the place of supply rules operate. It is possible - with certain services - that the place of supply is deemed to be where the customer is. In this case it would be necessary to charge VAT (which would of course be reclaimed so it's largely a waste of time). [Sometimes it is not necessary to charge VAT but the customer should "self account"].

It is extremely unlikely the services of the OP fall into this category, but since he gives no indication what it is we can't be sure.

[BlasterBates]

I am sure that is true in your case - and is likely to be in most cases. However one cannot be sure without knowing how the place of supply rules operate. It is possible - with certain services - that the place of supply is deemed to be where the customer is. In this case it would be necessary to charge VAT (which would of course be reclaimed so it's largely a waste of time). [Sometimes it is not necessary to charge VAT but the customer should "self account"].

It is extremely unlikely the services of the OP fall into this category, but since he gives no indication what it is we can't be sure.

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.

[nicodeemus]

It is extremely unlikely the services of the OP fall into this category, but since he gives no indication what it is we can't be sure.

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.

[ThomasSoerensen]

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.

I might influence the assesment that I am not a developer. So there is no way I am selling software.