Contracting in Germany!

[silentbull]

Hi

I am a British citizen and have a limited company in UK.

I have a 12+ month prospect contract and would like to know the best possible way of doing this contract.

Assuming the rates are as par as UK, will it be profitable for me,

1. Do i need a german employer to run payroll for me?
2. Can i invoice the agency to pay directly to my UK business account and if so do i need to pay UK tax and German tax?

I am so confused on the taxation laws of both Germany and UK.

Please do shed some light on the procedures.

Regards
Krish

[jmo21]

Run for ze hills!

Do a search on here, there's been numerous threads on how the German tax authorities are super strict, and the penalties for making mistakes.

For what it's worth, I don't think I could be bothered with all the hassle unless it was a way higher rate than equivalent rate I'd want for travelling to another country (which would already be higher than the rate I'd want for the UK)

[acnm]

I understand the German rules may be stricter however I can tell you that I have two legal entities, one UK and the other Spanish. Depending on the contract and the client I may choose one or the other as it can save a great deal on tax under the 183 day rule. You should never have to pay tax twice and so long as you keep good records you should be covered.

[stek]

I understand the German rules may be stricter however I can tell you that I have two legal entities, one UK and the other Spanish. Depending on the contract and the client I may choose one or the other as it can save a great deal on tax under the 183 day rule. You should never have to pay tax twice and so long as you keep good records you should be covered.

There is no 183 day rule for Limited Companies.

[SueEllen]

Assuming the rates are as par as UK, will it be profitable for me,

1. Do i need a german employer to run payroll for me?
2. Can i invoice the agency to pay directly to my UK business account and if so do i need to pay UK tax and German tax?

Do a search on google as there have been threads on here in the past about contracting in Germany.

Generally you will need to work as a freelancer, though there are some restrictions on this, and be taxed in Germany. There is a dual tax agreement between Germany and the UK so any tax paid in Germany will be off-set against your UK tax liability.

You can't use your UK limited company for the contract length you have in mind and don't try. The threads that the search throws up will explain why.

[BlasterBates]

The 183 day rule is to do with residency. Non-residents pay tax on income they earn in any country regardless of whether they're resident or not. There is a myth that if you're not resident you are exempt from tax.

eg you're employed by a French company for two months, you're not resident in France but you pay French tax on your French income.

Anyway to come back to the original question, I would advise the OP to register in Germany and be a "Freiberufler" this is the normal case. If you are returning to the UK every weekend you will be UK resident. Nevertheless the Germans will assume you are German resident so you need to inform them and keep proof of trips back to the UK and provide evidence of your flat/house in the UK. If you are in a hotel in Germany and a family or partner in the UK this will probably be a formality. If you rent a flat in Germany it becomes a bit greyer, particularly if you are single. Though if you remain only for a year and return after that I would expect them to accept it fairly easily.

Anyway regardless of where you are resident you pay tax in Germany on your contract earnings, and then declare them in the UK, where they take into account any German tax.

Unless you have significant income such as interest or dividends which are fully taxable only where you are resident the question of residency isn't that important. Other than that there will be small adjustments to your tax rate depending on where your residency is and who gets the "tax-topups" presuming you have UK and German income in the same tax year.

The residency status is not a "winner takes all" thing as some people think, it's more subtle and far more complicated than that

[silentbull]

To make things easier, can i bill through my UK ltd for first 6 months and go through an umberlla company for the remaining six months.

Also, if I have a contract with UK based company where the contracts and rates are agreed between us and he pays me in GBP with VAT, do i still need to pay german tax as this UK company is the one which sends me to Germany as per contractual obligations.

Regards
Krish

[BlasterBates]

To make things easier, can i bill through my UK ltd for first 6 months and go through an umberlla company for the remaining six months.

Also, if I have a contract with UK based company where the contracts and rates are agreed between us and he pays me in GBP with VAT, do i still need to pay german tax as this UK company is the one which sends me to Germany as per contractual obligations.

Regards
Krish

No you need to do this from day one as a German contract.

I think our explanations on 183 day rule weren't clear

I would advise you to set up as a Freiberufler for the duration of the contract, forget your Ltd. Some management service companies will handle this for you.

For contracts the 183 day rule is meaningless.

Basically you need a German accountant (perhaps through a managment service co) to handle your tax in Germany and a UK accountant to handle everything in the UK.

If you really want to simplify then just move to Germany and deregister in the UK. That would be the only way you could simplify, then you just simply pay German tax from the day you move over there.

[SueEllen]

To make things easier, can i bill through my UK ltd for first 6 months and go through an umberlla company for the remaining six months.

Also, if I have a contract with UK based company where the contracts and rates are agreed between us and he pays me in GBP with VAT, do i still need to pay german tax as this UK company is the one which sends me to Germany as per contractual obligations.

Regards
Krish

NO

And read people's posts and follow the instructions for searching as the threads it throws up will explain why your question isn't a good one.

[Midland White]

There is no 183 day rule for Limited Companies.

Can you elaborate what you mean?

From the DTA:

Article 1
Persons covered
This Convention shall apply to persons who are residents of one or both of the Contracting States.

Article 3
General definitions
d) the term "person" includes an individual, a company and any other body of persons;
e) the term "company" means any body corporate or any entity which is treated as a body corporate for tax purposes;