Contracting in Germany

[BlasterBates]

I might be contracting in Germany. The last time I was there I was "Freiberufler" and there was no problem I paid tax and no social insurance. Over the last few years I've been "abroad", but I might be coming back this year.

I recently got a "Antrag auf Kontenklärung" from the German Public Pension Federation, which looks harmless enough asking me to clarify the years I didn't pay into the system, and it seems to have been sent to everyone. But I wonder whether this could lead to an inspection of some kind. I think I'm in the clear bacause I last "didn't pay" social insurance in 2003, and since then I've been in Luxembourg, and Switzerland so I don't think it'll get followed up, because they usually only demand 4 years back, but is worrying for the future because it is clear they're now sniffing around, trying to find out who isn't paying.

What are you German contractors doing about this these days. Who's paying social insurance, who isn't?

[scooterscot]

Is it not possible to work using your UK Ltd? Assuming you're also returning to the UK a every other month or so...

[darmstadt]

What are you German contractors doing about this these days. Who's paying social insurance, who isn't?

I'm not too sure what you mean by Social Insurance, do you mean pension, unemployment, etc? If so then I haven't paid it since I started contracting, in fact the BfA told me it wasn't worth it. I work as a freiberufler as well and pay UST (quarterly in advance) and your normal tax which, as you probably already know, is quite complicated. As for the other stuff, thats all done privately. However for me its probably different to many other Brit contractors as I'm resident here...

[The Lone Gunman]

Working under a UK Ltd is a non starter unless it is a short term contract or you work half your time in the UK.

I have just started in Germany again and need to check a few things, but last time I aplied for an E101 (check the numbers) which allows you to stay in the UK NI system and out of the German. You present the form to one of the health schemes in Germany and they claim back from UK. If that is still valid I will do it again.

[BlasterBates]

I'm not too sure what you mean by Social Insurance, do you mean pension, unemployment, etc? If so then I haven't paid it since I started contracting, in fact the BfA told me it wasn't worth it. I work as a freiberufler as well and pay UST (quarterly in advance) and your normal tax which, as you probably already know, is quite complicated. As for the other stuff, thats all done privately. However for me its probably different to many other Brit contractors as I'm resident here...

I mean Sozialversicherungsbeiträge, and the Scheinelbständigkeit. I am resident in Germany, but I've been working in Switzerland recently. When I started contracting in Germany like you I was told not to pay in, but then the there was the Scheinselbständigkeit Law in 2000 or 2001, at the time contractors were worried but in 2002 they set the criteria for "Scheinselbständigkei" 3 from 5 so it was easy to avoid. I've had a look recently and I've noticed they've gone back to the original criteria 2 from 4, i.e. if you work for one Auftraggeber and no employees you're liable, though it îs "grey". But what is particularly worrying is the fact they're checking on preople who haven't paid in. This could easily lead to a detailed check. It strikes me they're getting serious. I think you really do need to employ someone or have more that one client. I presume you have more than one client, is that true?

worrying article

I received Kontenklärung in March this year.

[The Lone Gunman]

Can you translate and precis that article?
All the rules have changed since I was last here (Oct 2003).
I am on a 4 month (possibly longer so no UK Ltd) contract with a set work package established and am set up as freiberuflich through a Danish management company. Wanting to avoid getting involved with as few German systems as is possible.

I am reasonably up to speed, but any pointers would help.

ie what are the 2/4 and 3/5. I should know these. Is that 2 clients, business attributes, employees etc?

[BlasterBates]

The 3/5 rule is easy to satisfy, as if you have a marketing presence you basically satisfy it. The 2/4 rule, which has been reintroduced, is if you have no employees or one client yu are liable for Sozialversicherung. In the past operating a Ltd gave you some protection, but not anymore. Employing your wife, or family is not acceptable. If you have two clients then it can't be the same owner. This is much more difficult to satisfy. So you really need to make sure you satisfy one of these criteria, to be sure. It is really nasty.

What is bad is that this development is very new so the consequences aren't clear. Up until last year it was "don't worry".

[The Lone Gunman]

The 3/5 rule is easy to satisfy, as if you have a marketing presence you basically satisfy it. The 2/4 rule, which has been reintroduced, is if you have no employees or one client yu are liable for Sozialversicherung. In the past operating a Ltd gave you some protection, but not anymore. Employing your wife, or family is not acceptable. If you have two clients then it can't be the same owner. This is much more difficult to satisfy. So you really need to make sure you satisfy one of these criteria, to be sure. It is really nasty.

What is bad is that this development is very new so the consequences aren't clear. Up until last year it was "don't worry".

How big does the other client have to be? I maintain a business web site for a friend who pays me a couple hundred quid a year. Is that enough?
I had discussed this a long time ago with a hardware friend of mine. We figured I could provide web design and support and he could provide me with hardware support at equal costs.

[expat]

How bad is the hit from Sozialversicherung? I take it that for most UK contractors it would be UK or German, not both?

[darmstadt]

I mean Sozialversicherungsbeiträge, and the Scheinelbständigkeit. I am resident in Germany, but I've been working in Switzerland recently. When I started contracting in Germany like you I was told not to pay in, but then the there was the Scheinselbständigkeit Law in 2000 or 2001, at the time contractors were worried but in 2002 they set the criteria for "Scheinselbständigkei" 3 from 5 so it was easy to avoid. I've had a look recently and I've noticed they've gone back to the original criteria 2 from 4, i.e. if you work for one Auftraggeber and no employees you're liable, though it îs "grey". But what is particularly worrying is the fact they're checking on preople who haven't paid in. This could easily lead to a detailed check. It strikes me they're getting serious. I think you really do need to employ someone or have more that one client. I presume you have more than one client, is that true?

worrying article

I received Kontenklärung in March this year.

Ah right, that old stuff. I remember going through it some years back. I can't actually remember what the various options were apart from more than 1 client, employees, etc. although I believe that one was advertising which included having a website.

I do have more than 1 client but this year its a bit difficult invoicing a couple of them so I've saved some work over from last year to invoice them this year to get around that. They are starting to get a bit stricter on self-employed people now, not just us contractors, with more checks. Last year the Finanzamt questioned my Freiberufler status but after giving them a lot of technical waffle they agreed with me only to now ask for all my paperwork regarding finances. This actually happens quite a lot now and luckily for me I have a very good Steuerberater so I just pass it all on to them.