UK LTD in Germany

[markotsg]

Hello


I currently live in London and I do have my own ltd company.(I am single director). Under this company I work for the client in London.
Currently I pay corporation tax in UK, and I receive the salary + dividends from the company.

There may be possibility that I will be going to Munich Germany and staying there for period of 6 months to 1 year initially.
I would be working from Munich remotley (home) for same London client and once a month travelling to London office.

Would you be able to advise me how will this affect me tax wise?
I would have to complete P85 and notify HMRC that I am leaving country and becoming non resident?

Does it mean after P85 is submitted my LTD will not be paying corporation tax and tax on salary+ dividends in UK and will be paying in Germany for these instead?


I would appreciate your advise on this matter.
Many thanks for your assistance and looking forward hearing back from you.

regards

Marko

[Martin at NixonWilliams]

Would you be able to advise me how will this affect me tax wise?
I would have to complete P85 and notify HMRC that I am leaving country and becoming non resident?

Unless you leave for a whole tax year it is unlikely that you will stop being a UK resident for tax purposes. You only need to complete the P85 if you are going abroad for the whole tax year.

Does it mean after P85 is submitted my LTD will not be paying corporation tax and tax on salary+ dividends in UK and will be paying in Germany for these instead?

You will continue to pay UK tax on your income from your company and the company will still pay UK corporation tax.

In my experience clients working in Germany for no more than 6 months to a year do not suffer any tax / social security costs there. However, there are some posters on here that have experiences of working in Germany and have suffered tax from day 1.

Note that any tax paid twice on the same income will be relievable on your tax return.

I suggest that you speak with a German accountant to get an awareness of you liabilities there.

I hope this helps.

Martin

[doodab]

When you become tax resident in Germany after 183 days of being there you will become liable for taxes from day 1. You will need to declare all of your income on your German tax return, including that not liable for German tax, as the total amount determines the rate of tax you pay on that income which is taxable.

You won't be non-resident in the UK unless you are out of the country for a full tax year i.e. 12 months April - April, so you will need to file personal tax returns in both countries and potentially pay tax in both countries, claiming back the tax paid in one in the other. Dividend income may well be taxable only in Germany, though I would check this with an accountant, IIRC that was the case when I paid a final dividend some time after moving there but I wasn't also tax resident in the UK at that point. I don't know what happens with the dividend tax credit, I *think* you get it in DE as well. You will also find you need to pay the difference due in Germany over and above what you have already paid in the UK if something is due, this will depend on your personal circumstances and can work both ways as the German system is very family friendly so you could actually find yourself being better off there if you are married with kids.

You will want to sort out the E-101 so that you are covered by UK social security, this is good for 2 years I believe.

As for the tax situation with the company, this depends on whether you have a "permanent establishment" in Germany, which you almost certainly will, so the company will need to file two tax returns*. I didn't use my LTD in Germany so I avoided getting into the details of this, i.e. whether income is attributable to the permanent establishment and taxable in Germany etc. The rules are all in the tax treaty.

http://www.hmrc.gov.uk/taxtreaties/in-force/germany.pdf

If you want a German accountant I can recommend the guys at expattax.de

* This is my understanding of how it is supposed to work. Lots of people wing it and work through a UK LTD in Germany only filing in the UK and only paying UK taxes. Some of them get their fingers burned and others don't.

[BlasterBates]

You can run your Ltd in Germany but you should register it there, otherwise they might come down on you hard. A few posters have had to face charges of tax evasion even though they were there less than 6 months.

Even if the tax man is wrong it is a time consuming and expensive process fighting your case through the German courts, and the German tax office don't give up easily.

The most tax efficient method is to register there as a Freiberufler, no need to setup as a German Company. It is relatively free of bureacracy.

[markotsg]

You will continue to pay UK tax on your income from your company and the company will still pay UK corporation tax.
Martin

Hello Martin

does this mean for 6-12 months in Germany I will continue to pay corporation tax in UK and income/divindeds tax in UK and Germany as well?
with Dual Taxation agreement in place i would then have to submit tax return in bouth coutries and get the tax refund from UK I guess as I wouldnt be present in UK for 6-12 months?

[markotsg]

You can run your Ltd in Germany but you should register it there, otherwise they might come down on you hard. A few posters have had to face charges of tax evasion even though they were there less than 6 months.

Even if the tax man is wrong it is a time consuming and expensive process fighting your case through the German courts, and the German tax office don't give up easily.

The most tax efficient method is to register there as a Freiberufler, no need to setup as a German Company. It is relatively free of bureacracy.

BlasterBates if I register as Freiberufler do I still operate via my LTD? currently my ltd sends invoices to my client, would I as freelancer send invoices to my LTD instead current salary i am getting?

As freelancer in germany, would you require Germany accountant for tax return in Germany and to register you as freelancer only ? I guess you still require UK accountant for UK side ltd management coporation tax, vat payments, tax return etc?

[markotsg]

If dividends from UK are taxed 25% in Germany, are they taxed 25% at the end of tax year when you do annual tax submition and then remaining amount from dividends (After 25% tax) added to UK salary which is taxed as single income for that tax year?

or the salary is taxed seperatley from dividends althogether?

thanks all

[Martin at NixonWilliams]

Hello Martin

does this mean for 6-12 months in Germany I will continue to pay corporation tax in UK and income/divindeds tax in UK and Germany as well?

Yes, the company will continue to pay UK corporation tax as it is resident in the UK.

If you set up a German company, you could (strictly speaking) still be resident in the UK if the company's central management and control is exercised in the UK. A similar DTR is available for company's if this was ever the case.

with Dual Taxation agreement in place i would then have to submit tax return in bouth coutries and get the tax refund from UK I guess as I wouldnt be present in UK for 6-12 months?

Correct, you would usually receive the relief in your usual country of residence, i.e. the UK.

[markotsg]

Many thanks all,
if the UK LTD company operates longer then 6 months, Mehrwertsteuer )corporation tax, trade tax,etc need to be paid in Germany.
As my client (I send invoices to UK agency in UK) is based in UK I would still be charging VAT on my invoices? or that would stop as soon as I submit P85?
Would I charge Mehrwertsteuer instead on Invoices?

[BlasterBates]

BlasterBates if I register as Freiberufler do I still operate via my LTD? currently my ltd sends invoices to my client, would I as freelancer send invoices to my LTD instead current salary i am getting?

As freelancer in germany, would you require Germany accountant for tax return in Germany and to register you as freelancer only ? I guess you still require UK accountant for UK side ltd management coporation tax, vat payments, tax return etc?

No you don't run through your Ltd, declare everything as personal income, pay German tax and VAT (unless you're under a threshold), and then declare that to the UK who then charge any extra. You need a German accountant, or some UK accountants might work with German accountants. You can ask SJD, they seem to be familiar with international working.

The advantage of doing it this way is that there is no uncertainty and it doesn't get complicated when you go beyond 183 days.