Contracting in Germany (Tax Query)

[oversees]

Hello,

I have a question for those who have contracted in (or are currently contracting in) Germany. I have taken a contract in Germany, working via my Ltd in the UK and a UK agency. I am traveling back and forth most weekends to the UK.

What pitfalls should I be aware of regarding the possibility of being taxed here in Germany. I have been told of the 180 day rule, but have also heard of other rules that may be applied to one man companies, if the director is spending most of his/her time in any given country.

Any light that can be shed on this one would be great. My accountant has not been very helpful so far.

Thanks in advance
OS

[tim123]

the answer you are looking for is here:

www.contractoruk.com/over...cture.html

Basically what you wish to do is not a recommended route.

tim

[DBPeak]

How long are you going to be there - longer than 183 days? It will probably be worth registering as freelance in Germany. There are certain professions where you are allowed to go freelance, such as IT contractors, journalists - this as least gets you out of paying the various social security taxes (health, pension).

Also could be worth using a overseas umbrella company to assist you.

[BlasterBates]

Well as long as you are there for less than 180 days it shouldn't be a problem, you can charge through your Ltd on the UK tax system. You need to just check VAT though.

After 180 days you have to register with the German authorities. In the past foreigners didn't and got away with it.

The Germans are now very strict about VAT so the company billing you may request a tax code (it is law that invoices include the tax code).

My suggestion is that you wait until you're in Germany and see an accountant.

If you get the VAT wrong it could be expensive. You can operate a Ltd in Germany, you just register it and is common practice, but you pay "Gewerbesteuer (business tax))

The cheapest way however to operate in Germany is as a "Freiberufler". As a "Freiberufler" you do not register as a business (weird I know), but charge VAT and hand in a tax form at the end of the year. The only thing you pay is income tax (about 35% a year).


Aha I've seen you contract through a UK agency


Careful!!!

If you are not charging VAT and it isn't being given to the tax authorities, you are liable.

I think this is OK as long as you are there for less than 6 months. But do check this.

[oversees]

Re: Germany

Thanks for the replies. I am charging VAT to the UK agency and passing it on to HMG C+E.

I am still concerned by the other points of corporate tax residence and labour leasing however.

Does anyone know how the authorities would determine "residency" in Germany. I am here 3 or 4 nights a week, staying in a hotel.

[BlasterBates]

Re: Germany

Well that's why you need to see an accountant. Going back at the weekend doesn't count.

If after 6 months you charge to a UK company under UK tax law, it is probably (99.99%) illegal, but you'll probably get away with it, especially if you don't register and live in hotel. Don't forget though the hotel will pass your details onto the authorities, as a matter of course.

It is possible however if the company you work in has a review they may pick up on the invoices from you agency. If they do you're basically f**ed.

Contractors have been jumped on by tax officials before. So be aware.

If I recall correctly the 180-183 day rule usually means 180 days within a consecutive 12 month period, irrespective of the tax year.