Reply to: Contracting in Germany

[Boo]

6 weeks isn´t long but even so generally you should be taxing work done in a country there.

That's complete nonsense. Any EU company has the right to send any of its employees to work in another EU company for up to 183 days without that employee being liable to be taxed there. This is a treaty right and overrules any national law.

Why do you persist in presenting this misinformation BB ?

Boo

[BlasterBates]

Hmmm...

I did a short gig back some years ago for about 6 weeks directly through my LTD company, was paid by int transfer...earned under 10k which I then paid tax on as per normal in the UK.

Is this the kind of thing which could raise a stink with the taxman, especially in the case of contracting again (umm properly) back in Germany?

yes

6 weeks isn´t long but even so generally you should be taxing work done in a country there.

You have nothing to lose by doing that just go through a reputable German accountant. With a 6 week contract there would be little tax to pay anyway. The problem is if the taxman audits the client and finds several contractors doing the same thing you may just end up being caught, and what you´re doing is tax evasion. Better to declare earnings and let the tax authorities decide whether and how much is taxable. In Germany it´s simple anyway. If you wanted just hand in a tax form with your earnings minus the expenses and a sheet with the P&L. For 6 weeks earnings no-one is going to question it.

[zerosum]

Hmmm...

I did a short gig back some years ago for about 6 weeks directly through my LTD company, was paid by int transfer...earned under 10k which I then paid tax on as per normal in the UK.

Is this the kind of thing which could raise a stink with the taxman, especially in the case of contracting again (umm properly) back in Germany?

[SalsaFever]

any updates?

cross posting from a similar thread since it's relevant:

Hi,

Would someone update me about the fate of H's clients who got caught back in 2008/2009 time frame?

I was one of the H's clients, however I haven't received anything so far in UK. I left Germany by 2009 when this thread was pretty active. Then it gradually became inactive. Does it mean that taxman is off our tails or what?

The story is that I am thinking about going back to Germany and would be delighted if anyone share the latest situation in the field.

I am reaching out to my network to catch up: There are three types of people among H's clients: 1) those who lucky;meaning never received anything so far. 2) those who raided/investigated and left Germany 3) those raided/investigated but settled the scored with the taxman.

As I am being in Group 1, I wonder what's the situate of limitations in Germany?

Edit:
Somebody pointed out me this link, it's pretty new and summarize latest situation:
http://www.rudolph-recht.de/en/news/...anies_psb.html

[stayaway]

You can't fight them alone

Has anyone else out there tried fighting the finanzamt? I keep hearing so many stories of the illegal tactics they are using (mostly into scaring people into paying) and not even giving a clear "list" of what they are paying. A different amount each time you hear from them (and we are talking tens of thousands different each time).

Has anyone filed a complaint with the EU on this?

... But maybe if we could get a list of all the impacted people it may help those trying to fight in the future. I feel I have been absolutely taken to the cleaners by a bunch of nazis (funny that you can get an anagram of nazi from finanzamt ) I feel alone you get nowhere but as a group - as there must be thousands of us by now- we would have a chanc.

[TooMuchStress]

Anyone else experiencing illegal tactics by the German Finanzamt?

Has anyone else out there tried fighting the finanzamt? I keep hearing so many stories of the illegal tactics they are using (mostly into scaring people into paying) and not even giving a clear "list" of what they are paying. A different amount each time you hear from them (and we are talking tens of thousands different each time).

Has anyone filed a complaint with the EU on this?

[stayaway]

Nazi tax office

The tax office in Germany only seem interested in the little people - mostly victims of the big management companies. We are easy pickings - and can't afford a fight or a fair trial.
The real villains here are left to carry on ripping new contractors off with schemes that are illegal - why the authorities do this I do not know - but from my own experience and that of many others I advise anybody reading this NOT to work in Germany!

The above is the most useful article I have read on the subject and those working in Germany or intending to do so should give it careful consideration.

I see many companies boasting 80% retention rates for contractors working in Germany if you work through them. I just wonder how on Earth they think they can get away with this. Why aren't the authorities somewhere closing them down or stopping this? I work through TCP and my retention rate is more like 50%. Not good but not much worse than IR35 in the UK but better if the pay rates are higher in Germany.

[RolandRB]

Here you can find some background information about the offshore account-cases:
IT Consultants Tax Investigations | Dr. Tobias Rudolph - Rechtsanwalt Nürnberg proceedings for tax fraud against foreign IT specialists

<mod> link removed </mod>

The above is the most useful article I have read on the subject and those working in Germany or intending to do so should give it careful consideration.

I see many companies boasting 80% retention rates for contractors working in Germany if you work through them. I just wonder how on Earth they think they can get away with this. Why aren't the authorities somewhere closing them down or stopping this? I work through TCP and my retention rate is more like 50%. Not good but not much worse than IR35 in the UK but better if the pay rates are higher in Germany.

[BlasterBates]

A quick bump and a quick question to you guys...

I am about to begin a contract as a consultant. I will be resident in the UK and registered here (as it is my long term objective to do most of my business here) however my first project will be with a German company. This means I will be commuting to Germany 4 days a week, excluding any time off or remote working arrangements.

My only question is, is there anything I need to watch out for in terms of falling under German tax jurisdiction...apparently they can be a nightmare. For example, the number of days a year present in Germany may put me under their jurisdiction, or that I am exporting a service to The Fatherland. I am not too sure.

Can anyone help? Please help!

See a German Steuerberater and follow his advice. Don't do anything else other than that.

Many contractors go to Germany work through their Ltd and then end up with a huge tax bill and face prosecution for tax evasion.

It is very tempting just to keep to your comfortable way of working through your own Ltd, but the consequences are horrendous when it goes wrong.

If someone says on the forum, you can just work through your Ltd for up to 6 months, get it double checked by a "Steuerberater". They can handle your tax affairs for you. Just because someone did it and had no problems doesn't mean it's alright to do it.

It isn't just a matter of personal tax residency (6 months), you are doing business in Germany. The requirements for taxing companies is quite different.

Contractors will always set everything up with a UK accountant when they do business in the UK and then trust a mate's piece of advice or the agent when they go to a foreign country.

Ignore at your peril.

[AlfredJPruffock]

Afraid I was being a might sarcastic Swift was a poet known for subtlety, I believe a rapier is a type of sword. The actual quote comes from Red Dwarf

Red Dwarf - now that was a cracking show Lisa - eh ?

[darmstadt]

I have a German friend who works as a contractor in Germany. I have recently been talking to agencies regarding opportunities in Germany.
when I asked her about freelancer status and the general approach, I was told that contractors can not work as a freelancer and this reserved to artists musicians and then was referred to wikipedia to see the definition. I see from the forum most people are working as Freberuf and reported back to her that evidently this is not a problem. We had a big argument that it isn't possible and you need to work get a Gewerbeschein at the Gewerbeamt and then work as Einzelhnadelskaufmann.
Can anyone clarify the discrepancy??? or what my friend is getting at?

Katalogberufe i. S. d. § 18 Abs. 1 Nr. 1 EStG sind: Arzt, Zahnarzt, Tierarzte, Rechtsanwalt, Notae, Patentanwalt, Vermessungsingenieur, Ingenieur, Architekt, Handelschemiker, Wirtschaftsprüfer, Steuerberater, beratender Volks- und Betriebswirt, vereidigten Buchprüfer, Steuerbevollmächtigter, Heilpraktiker, Dentist, Krankengymnast, Journalist, Bildberichterstatter, Dolmetscher, Übersetzer und Lotse. Erfordert die Ausübung eines der genannten Berufes eine gesetzlich vorgeschriebene Berufsausbildung, übt nur derjenige diesen Beruf aus, der auf Grund dieser Berufsausbildung berechtigt ist, die betreffende Berufsbezeichnung zu führen.

and:

Freiberufler aus dem IT-Bereich: Informatiker, Programmierer, Softwareentwickler usw.

Immer wieder erlebe ich es, dass Freiberufler aus dem IT-Bereich Gewerbesteuer zahlen, obwohl sie es nicht müssten. Die Einordnung von IT-Spezialisten als Freiberufler bzw. Gewerbetreibender ist ein besonders schwieriges Thema. Die Einordnung bereitet insbesondere Schwierigkeiten, da die neuen Berufe im Bereich der Informationstechnologie nicht so recht in die "alten Schubladen" der Finanzämter passen. Auf Grund neuer Finanzgerichtsurteile besteht für viele bisher gewerbliche Unternehmer die Chance, als Freiberufler anerkannt zu werden. Die Abgrenzung zum Gewerbetreibenden wird nämlich - insbesondere bei IT-Spezialisten - vom Finanzamt oft falsch vorgenommen.


Wer Freiberufler ist, definiert das Einkommensteuergesetz (EStG) in § 18. Danach muss eine selbstständige künstlerische, schriftstellerische oder unterrichtende Tätigkeit vorliegen, wie z. B. bei Journalisten und freien Dozenten. Aber Berufe wie Contentproducer, Multimedia-Entwickler, Webdesigner oder EDV-Berater kennt das Gesetz noch nicht. Ohne Probleme werden i. d. R. Grafiker als Freiberufler anerkannt, deren Arbeit von fast allen Finanzämtern als künstlerisch beurteilt wird. Gleiches sollte eigentlich auch für Webdesigner gelten. Leider stufen viele Finanzbeamte Webdesigner "sicherheitshalber" als Gewerbetreibende ein. Online-Journalisten haben das gleiche Problem. Noch schwieriger ist die Einordnung von Contentproducern, insbesondere wenn sie Texte ohne journalistischen Charakter verkaufen. Es stellt sich die Frage, ob der Beruf als Schriftsteller gilt, denn dieser Beruf fällt ohne Probleme unter § 18 EStG.

EDV-Berater haben es dagegen bei den Finanzämtern sehr schwer, als Freiberufler eingestuft zu werden. Nach Auffassung der Finanzgerichte zählt die Beratung auf dem Bereich Internet nicht zu den freien Berufen. Nach meiner Auffassung und anderer Experten stellt die Beratung auf dem Bereich Informationstechnologie eine freiberufliche Tätigkeit dar. Denn Consulting in der Informationstechnologie ist nichts anderes, als etwa die Tätigkeit eines beratenden Betriebswirts, die bei entsprechender Gestaltung unzweifelhaft freiberuflich ist. Bei Systemanalytikern hat der Bundesfinanzhof die Freiberuflichkeit bereits bejaht. Die Urteilsbegründung ist interessant, da das Finanzgericht mit der Ähnlichkeit zum Ingenieur argumentiert, der gem. § 18 EStG Freiberufler ist. Diese Argumentation über die Ähnlichkeit der Berufsgruppen sollte auch für den IT-Berater und dem Unternehmensberater greifen.


Die vom Bundesfinanzhof (BFH) entwickelten Abgrenzungskriterien zwischen einem Gewerbetrieb und einem Freiberufler auf dem Gebiet der Programmierung können wie folgt zusammen gefasst werden: Freiberufler ist derjenige, der sich mit Systemsoftware (und nicht mit Anwendungs-Programmierung) beschäftigt. Die Tätigkeit im Bereich der Systemsoftware stellt eine ingenieurähnliche Tätigkeit dar. Nach der Definition des BFH ist der Begriff Systemsoftware aber erheblich weiter auszulegen als vielleicht aufgrund des Wortlauts anzunehmen ist: Man muss also nicht gleich das Betriebssystem Windows oder Linux programmiert haben, um Freiberufler zu sein. Nach der Definition des BFH gehören zur Systemsoftware z. B. Betriebssysteme, Datenbanksoftware und Datenübertragungsnetze. Ein Programmierer kann unschädlich noch als Freiberufler im Anwendersoftwarebereich tätig sein, wenn die gesamte Tätigkeit sich überwiegend auf Systemsoftware bezieht und somit für die Gesamttätigkeit prägend ist.


Bei der Entwicklung von Anwendersoftware wird geprüft, ob bestimmte Prozesse sich mit Hilfe der EDV lösen lassen. Es werden weitere Fachkenntnisse in irgend einem anderen Anwendungsbereich außerhalb der Informatik benötigt. Darüber hinaus möchte ich auf eine neuere und nicht veröffentlichte Entscheidung des BFH hinweisen, in der die freiberufliche Entwicklung von Anwendersoftware angedeutet wird. Somit könnte der BFH von seiner langjährigen Rechtsprechungspraxis, die ausschließlich dem Systemsoftwareentwickler den Status als Freiberufler zuerkennt, möglicherweise abrücken. Es gibt für Anwendungssoftware-Programmierer steuerliche Gestaltungen, wie die Gewerbesteuer zumindest reduziert werden kann.

[riiiiiich]

A quick bump and a quick question to you guys...

I am about to begin a contract as a consultant. I will be resident in the UK and registered here (as it is my long term objective to do most of my business here) however my first project will be with a German company. This means I will be commuting to Germany 4 days a week, excluding any time off or remote working arrangements.

My only question is, is there anything I need to watch out for in terms of falling under German tax jurisdiction...apparently they can be a nightmare. For example, the number of days a year present in Germany may put me under their jurisdiction, or that I am exporting a service to The Fatherland. I am not too sure.

Can anyone help? Please help!

[balajo]

Freiberuf

I have a German friend who works as a contractor in Germany. I have recently been talking to agencies regarding opportunities in Germany.
when I asked her about freelancer status and the general approach, I was told that contractors can not work as a freelancer and this reserved to artists musicians and then was referred to wikipedia to see the definition. I see from the forum most people are working as Freberuf and reported back to her that evidently this is not a problem. We had a big argument that it isn't possible and you need to work get a Gewerbeschein at the Gewerbeamt and then work as Einzelhnadelskaufmann.
Can anyone clarify the discrepancy??? or what my friend is getting at?

[PharmaContractor]

E101 and social security, NICs, private cover....

With regards to being a Freiberufler I understand that I don't have to pay German social security but that everyone in Germany, however, is required by law to have health insurance. So I have the choice of paying for private health insurance or pay into the German social security system (which I have been told is linked to income, so could be pricey if you're earning >100k.) Could I continue to pay UK NICs if that is 'cheaper' (possible?)?

I have been told that if I have an E101 certificate (now is that the same as having the E101 card??) that proves that I have paid into the EU (UK) social system and can then simply pay into the German system and reap its rewards.

German tax advisor has told me that paying into German system will probably be about 500-600/month, so I imagine that I could find a cheaper private cover for that (and make it an expense)?

Any advice is appreciated on what people are doing when they get to Germany. I like to plan ahead and see what's coming than realise after 12 months that I've screwed up!

Thanks!

[BlasterBates]

Probably best get a German accountant to do it for you, just ask for a recommendation from another contractor when you get there. You need to register yourself with the tax authorities, You bill the company directly as a Freiberufler sort of like a sole trader in the UK. Basically just bill the company in your own name, keep receipts, and pay the VAT. At the end of the year fill out a tax form. If you are less than 183 days you just pay tax on your contract earnings, if longer you become fully tax resident.

Don't tax it elsewhere, if the Finanzamt find out they'll be down on you like a ton of bricks. The tax rates in Germany aren't much different to the UK, so there's no point in trying to get away with it. It won't be taxed again in the UK, though you'll be expected to declare it because it looks like you'll still be resident in the UK, unless you up sticks.