Getting paid on a German contract?

[doodab]

Try that
http://www.arbeitnehmeraehnlicher-selbststaendiger.de/

Penalties and employers contributions are only due for "Scheinselbständigkeit"
for example on a building site. An IT contractor is not going to be classified as "Scheinelbständig" . This is to punish employers exploiting their employees.

You may however be classified as "arbeitnehmeraehnlicher-selbststaendig". In which case you have no penalty just back pay (EUR 20,000 max for 4 years), and your employer has nothing to pay.

However they will probably check up on you in a few years. You might get a "Kontenklärung", which is a clarification on your contributions, why you haven't been paying. That's what you need to think about.

You can employ someone on a salary of greater than EUR 400 (for example a friend of mine could do your bookeeping for you :-)) then you would have no worries. However you could pay the EUR 500 or 200 for 2 years and then 500 and have done with it.

Thanks for that.

I wonder if giving the missus a €500/month job is acceptable?

[whattodo]

Ok, so just to clarify the options here... I still don't know if i've got this. You're working for one client for 12 months, on a contract, living in Germany full time:

• Any scheme that talks about offshoring cash to somewhere sunny / splitting income shouldn't be touched with a barge pole?
  
• From the experts answer, you'd be able to get the freelancer status, but with only 1 client in the year you'd fail to meet the grade when they ask you to prove it? (resulting in fines/back taxes?) So that's out as well.
  
• I've been pointed toward an "AUG licensed" employer, which sounds like they can lend you to the end client in Germany as one solution. Is this the German equivalent of an umbrella company? Is this something anyone has experience with?
  
• The same company also offer to set you up as self employed. Does this basically mean like a freelancer but paying full social security? Is this the fully paid up route?
  
• Is there something like a plain old boring umbrella company in Germany that pays all the taxes you should and maybe has a calculator of what take home pay would be? I'd love to just get a straight answer about what the safe route costs and how to do it.

Please clarify / correct / elaborate on any of these.

[darmstadt]

I've been contracting here for nearly 20 years but only once for a company based in the UK so I don't know most of those details but (in red):

• Any scheme that talks about offshoring cash to somewhere sunny / splitting income shouldn't be touched with a barge pole?
• Too right, many years ago I did a contract for a UK based agency who tried to get me to go the management company route instead I went to my accountant who said that it was illegal in Germany. So far, by reading many of posts here, they've been proved correct.
• From the experts answer, you'd be able to get the freelancer status, but with only 1 client in the year you'd fail to meet the grade when they ask you to prove it? (resulting in fines/back taxes?) So that's out as well.
• That is true but also it does depend on what work you are carrying out. I got investogated by the Finanzamt who wanted me to pay Gewerbesteuer (Freiberufler don't pay this but selbststädiger do) because they belieced that my work was not real freelance. By detailing my CV and pointing them to a court case an ex-collegue won against the Finanzamt many years ago this was overturned. For example, An applications programmer would not get freiberufler but a systems programmer would. Although there is this 5& of earnings rule it hasn't really caught me out, yet. I did a contract which went on for 2 years yet only invoiced another company once for a couple of weeks work during those 2 years.
  
• Is there something like a plain old boring umbrella company in Germany that pays all the taxes you should and maybe has a calculator of what take home pay would be? I'd love to just get a straight answer about what the safe route costs and how to do it.
• If you're going to be here for a while you're going to have to register to live here which means you're then going to be able to get a tax number. Once you have then then find an accountant (steuerbertaer, I've posted a list here before now) in your area and they will do the work for you. Your agency will pay the money into yout bank account (you'll need a German one for that and you can't get one until you register), keep all your receipts and other pertinent information and at the end of the ty year just give it all to the accountant. Thats all I do. There is no PAYE AFAIK as I'm currently paying my taxes for 2008 and possibly 2009. You do need to pay your MwSt quarterly in advance though. The Finanzamt change the laws quite regularly which is why having a Steuerberater is the best option. With tax and other deductions I lose between 30-40% of what I earn during a year (although 1 year it was only 22%!)

Please clarify / correct / elaborate on any of these.

[doodab]

Ok, so just to clarify the options here... I still don't know if i've got this. You're working for one client for 12 months, on a contract, living in Germany full time:

• Any scheme that talks about offshoring cash to somewhere sunny / splitting income shouldn't be touched with a barge pole?
  
  Yes, they are actively chasing people who do this and penalties are very agressive from what I have heard i.e. 100% of the amount on top of the tax owed. I have been told by someone who is currently being chased that several other people have been put in jail, but I don't personally know anyone who has had this happen
  
• From the experts answer, you'd be able to get the freelancer status, but with only 1 client in the year you'd fail to meet the grade when they ask you to prove it? (resulting in fines/back taxes?) So that's out as well.
  
  This is what I have done. There is a 3 year grace period (you need to request it via your accountant, I am nearing the end of mine) during which you are not assesed for social insurances.
  
  At the end of it, I will be assesed and it's the outcome of this I'm not quite sure about. A true freelancer doesn't have to pay the state pension contributions, but you do need to take out private health insurance, thats a legal requirement. There seems to be a 2nd kind of "semi freelance" called "arbeitnehmeraehnlicher-selbststaendig" where you have to pay state pension insurance, and if I fall into this bracket I will be required to pay the outstanding pension contributions for the 3 years (which is the €20k approx that BlasterBates referred to). I'm talking to my accountant about this at the moment.
  
  I was concerned about "false self employment" penalties which are 3 months for the employee and unlimited for the employer, but it seems this is really intended for cases where the employer is deliberately exploiting employees to avoid paying their share and won't apply to the likes of us
• I've been pointed toward an "AUG licensed" employer, which sounds like they can lend you to the end client in Germany as one solution. Is this the German equivalent of an umbrella company? Is this something anyone has experience with?
  
  From what I understand this is the equivalent of an umbrella company. The AUG refers to the German Labour Leasing law, basically to "lease" staff in Germany requires a special license, unlike the UK where anyone can get in on the act.
• The same company also offer to set you up as self employed. Does this basically mean like a freelancer but paying full social security? Is this the fully paid up route?
  
  I believe so yes, but from what I gather you have nothing to lose going the "freelance" route, the worst that will happen is they will say "no you aren't" and ask you for the outstanding contributions
• Is there something like a plain old boring umbrella company in Germany that pays all the taxes you should and maybe has a calculator of what take home pay would be? I'd love to just get a straight answer about what the safe route costs and how to do it.
  I think that's the AUG route

Please clarify / correct / elaborate on any of these.

You'll also need to retain your UK accountant (or get a clever german one). The chances are your 12 months will span 2 tax years in both countries, so it's probably best to let an expert sort out your tax returns.

[BlasterBates]

Thanks for that.

I wonder if giving the missus a €500/month job is acceptable?

Can't be a family member.

I think the only option on this one would be to save some cost from the Steuerberater and employ a competent book keeper rather than the Steuerberater, who in any case normally mainly does book keeping anyway.

..but there isn't much difference with the EUR 500 for the pension anyway.

[whattodo]

Thanks darmstadt and doodab, really helping clarify things for me.

Agencies trying to place contractors in Germany just don't seem to offer much advice other than "all the other contractors are doing / have done this".

The full-freelancer status sounds like it wouldn't be applicable if you're just with the one client for a long time. Tried looking at the semi-freelancer (as opposed to false self employed) and the definition is abit woolly - you're not under direct control etc.

In terms of net pay, freelancer (full/kinda) beats AUG licenced company / self employed route due to less social security payments, and if you failed the freelancer test after three years you'll be no worst off (no massive fine plus interest)? I'm guessing German companies don't want you paying full social security like you're not a freelancer though as that leaves them open to their own liabilities for employing someone?

Anyone got any links to an AUG company that has a calculator on it's web page (like a lot of the UK umbrella companies do)? The kind where you stick in your gross daily / hourly rate and a few bits of other info and it returns a net take home monthly pay and break down of contributions.


Thanks


Edit: Forgot to add, presumably there aren't dodgey AUG companies, if they've got that licence then they're doing the tax stuff by the book not offshoring things? I ask because the first one i was sent a link to was based outside of Germany.

[Olly]

..

[whattodo]

An applications programmer would not get freiberufler but a systems programmer would

Why is this? Something to do with being under control of the end client?

[darmstadt]

Why is this? Something to do with being under control of the end client?

Not really, its more to do with what your work entails. An applications programmer tends to get a specification of what they have to do and follow them whereas a systems programmer is more flexible and works more independantly. There is a list of of items, 6 I believe, that if you provide 4 or more of the services on them they you are considered as selbständig (i.e advertising your services via a website for example)

[AdrianH]

"Your company will probably need to register for and charge your customer german VAT"

If your agency is UK based then your customer is in the UK so no need to register for German VAT.

"You may have a job getting a German business bank account"

Just use UK bank accounts.