Working in Germany

[expat]

If it is 3 months your Ltd won't be deemed to have a pemanent branch therefore would run through your Ltd on the British tax system.
...

Thanks.

So if you do work e.g. 3 months in Germany, are you not due to pay German tax because the money is earned in Germany?

[BlasterBates]

No provided your business has no permanent establishment. Then you bill for services as if you're exporting. If your contract keeps getting extended or that is your intention, probably better to go straight onto the German tax system, i.e. establish yourself as a freelancer from day 1. But just for a 3 month contract wouldn't see the need. Think of yourself as a UK software supplier providing some Software for a German co. What makes the difference is when you become resident in Germany. But I wouldn't run any German busniness through a UK ltd, or if I did I might conisder setting up a different co. so that the division was clear.

Might be worh advice from a German accountant, to verify. You could even ring up the German Finanzamt, I don't see why not, you're not hiding anything. They're obliged to tell you what you can and can't do. That advice would be free. I've done once or twice, and then check up on what they've said.

[Fred Bloggs]

Thanks BB. But it is exactly this lack of simplicity and clarity that makes me avoid European gigs. I yearn for the EU to bring out a single, unified tax system for all contractors working across EU boundaries. Sadly, I think it will never happen since the EU seems to want everyone in large corporations as they're much easier to control and tax.

[BlasterBates]

Thanks BB. But it is exactly this lack of simplicity and clarity that makes me avoid European gigs. I yearn for the EU to bring out a single, unified tax system for all contractors working across EU boundaries. Sadly, I think it will never happen since the EU seems to want everyone in large corporations as they're much easier to control and tax.

The fact is, it is simple. If you're not there for 183 days you have the option to continue in your tax resident location as if you'd never left, once you stay beyond that limit, you set up a local company or sole trader or whatever you want and tax it there, all income is clearly sourced there and can be declared to another authority without problem. The complicated split income, tax planning schemes are a fiction. I've been working in 4 different countries and haven't heard a peep from any tax authority. Basicailly I tax all income where the contract is, in fact I had 3 month Lux. contract but just taxed it all there, was extended as I expected, but it was even worth it for 3 months.
By doing this you avoid all the cross-border issues. In Switzerland I'm employed through the agent and in Luxembourg there as well through a management co, but no dodgy offshore, and in Germany I operated as a freelancer. I mean it isn't like I had to do anything other than go to a local company or tax advisor that does it for you. Just be a bit savvy generally about tax laws and pay for advice if you're not sure. I've never really understood why contractors think they can shove money secretly offshore and get away with it.

I'm not aware of any country where the tax laws are more complicated than they are in the UK. I find it is pretty much the same wherever you go.

and one final note the take home pay is pretty similar wherever you are, yes there's variation but it isn't a great deal, and all countries have their equivalent of IR35, even in the US.

[Fred Bloggs]

Thanks BB.

[TiroFijo]

I've never really understood why contractors think they can shove money secretly offshore and get away with it.

The fact is that it has been going on for 20 years and they have been getting away with it. Every Brit contractor that I came accross who was working in Europe for more than 183 days used the same MC scheme. Agencies are not going to deal with any local ltd company that you might want to set up in Germany for example. They will insist that you either use a MC or your ltd which you can only legally do in the counry where you are contracting for 183 days then after that you are evading that countries taxes. Of course hmrc will continue to take your money as they don't know that you have gone cause you didn't tell them either by a p85 or a UK tax return that would make you non UK tax resident i.e. no income was earmed in the UK.

It seems the people who have been caught in Germany were turned in like in the case with 'Mt H'. I mean how else would they know? Ok in Germany they don't like MCs (or so someone said) so that might cause them to look a little bit deeper. I suppose that there are some tax authorities that sometimes enquire into large companies that use a lot of contractors.

As for the local accountant, he's got zero to do with it, he only sees what you bring into the country and declare so he can only file taxes on that. He doesn't know what you did not bring in (of course he has a fair idea of what goes on).

Now I'm not saying that you should use these schemes but that many do and not many have had any issues and where they have it's been in Germany or so it seems.

As Europe continues to get smaller I would think that these types of schemes will not be around for much longer? Who knows further down the line there might even be a central European tax system so you won't have to bother with all this nonsense with 183 days etc. If you are resident in one European country then you are resident in all - so to speak.

The other bloke here who said he used his ltd company for some years while contracting in Germany was also evading German taxes. Just because he paid hmrc he was in fact a German tax resident. I'm still not sure how the jerries caught him tho? I mean if you were going to continue using your ltd after 183 days the last thing you would do is go and register your self in germany for anything (be it social security, taxes etc...). Short of the crowts comming into where he works and seeing him sitting at his desk surfing then I just don't see how they could know he was there.

Why anyone would want to work in Germany is beyond me anyway. It's a tulip boring place, christ they won't even cross the road unless the wee green man tells them to. If your gonna contract in Europe then do it in Greece, Italy, Portugal, south of France or Spain, at least they are more laid back and you get the sun. Maybe Amsterdam if you want to go to the titty bars and smoke some weed. Someone asked me if I was interested in a contract in Brussels, but really didn't fancy dying of terminal boredom

[Fred Bloggs]

Interesting points. It's against the rules to stay >183 days but if you fly in Monday and fly out Friday how does anyone know you're working there? I don't know. I'd be too concerned to exceed the 183 days but I guess lots of folk do that.

I have seen jobs in Monaco lately. I guess you'd have to stay in France to sleep though because of the prices in Monaco. Given that Monaco is tax free to work in, but France isn't, I wonder what would happen to a person who worked in Monaco, slept in France but came to the UK every weekend? However, the rates in Monaco are not as high as they used to be, they're paying ~Euros 600 a day. They were ~800 a day 2 years ago.

[Edelweiss]

I've never really understood why contractors think they can shove money secretly offshore and get away with it.

We weren't "Contractors", we were Employees of a German Agent, I've never been Self-Employed. It wasn't a secret either, hourly rates can been seen on the net advertised by Agents and the same Agents tell the Finanzamt your monthly salary... Couldn't be more obvious!

My German boss considered this kind of thing accepable law-breaking because Germany needs skilled foreign workers. I never expected a knock on the door but when it came and they accused me of tax evaision,
I said "So what?"

Germany also has a list of MC's and considers them all to be Laurndrettes, they can also monitor bank transfers and do all that CIA stuff.

[TiroFijo]

We weren't "Contractors", we were Employees of a German Agent, I've never been Self-Employed. It wasn't a secret either, hourly rates can been seen on the net advertised by Agents and the same Agents tell the Finanzamt your monthly salary... Couldn't be more obvious!

My German boss considered this kind of thing accepable law-breaking because Germany needs skilled foreign workers. I never expected a knock on the door but when it came and they accused me of tax evaision,
I said "So what?"

Germany also has a list of MC's and considers them all to be Laurndrettes, they can also monitor bank transfers and do all that CIA stuff.

Let me get this straight, you were an 'employee' of a german agent\company who was physically located in germany and they raised your invoices for you then split the £ to your offshore account and to your local german bank?

That's unusual for a company to do this when the said company is itself located in it's own country i.e. the one you are also contracting in. So basically the german tax bods came to the german agency to see their books etc and they seen what you invoiced and what you declared then came knocking on your door? If that is how it happened then yes you were taking a very high risk.

On the other hand MCs are outside the country where you are contracting and therefore the local tax bods don't have access to their books. They tax bods can only go to your local accountant (quite often provided by your MC), if they have good enough reason to do so that is.

Can you tell me is the MC solution still being used a lot in germany by non-german contractors?

Like I said in another post, almost all the brits (and other non brits) where I worked (not in germany) were on the same MC split. There was no other way to have the contract as the agent would only sign a contract with a MC. I suppose one could have then told the MC not to split the £ and hence bring it all into the country where one had the contract and then pay tax on all of it.

When I see the tricks that our current MPs get up to, especially Charles Darlin fiddling the the tax payer to get them to pay for his two houses and also to pay for his accountant to help him to pay even less I find it hard to see the difference between what you have done and what they have done.

[tim123]

Why anyone would want to work in Germany is beyond me anyway.

Because the job of an "engineer" is treated with respect

tim