Working Abroad (tax liablility related)

[BlasterBates]

Thanks guys for posting your thoughts.. Makes me wonder why I took up this gig in the first place.. but having been benched for 4 months, thought I'll take a chance... Hopefully this exp. will help me negotiate my next adventure better..!

Looks to me its Lux tax. I'll need to pay.. Thanks Chef, will try calling your German accountant and see what he has to say.. about the german tax..

Now seriously thinking if I can talk to the ageny and see if I can get out of the contract - to stay withing the 183 day rule..

One last question guys,

(At present I am paying UK tax. Hope this is fine if staying < than 183 days in the tax yr, and getting paid throught a brolly/management company in the UK)

If I exceed the 183 days rule (6 months contract approx.), I assume my tax liablity switches from the UK to Luxembourg. Assuming my contract is for 10 months - Can i pay first 6 months UK tax. and the remainder Luxembourg tax?

There will be no problem, fortunately you are an employee so any of this that is taxed will be exempt else where. This is a general principle followed by all EU countries and Switzeralnd. You do however have to be careful as your documentation will always be in the "wrong language" this means you have to be very clear indeed about what your income is and how it is derived otherwise they'll use "credits" and tax twice, which is the "default mode". There is also a principle that you pay NI only once, and you can probably arrange a contract where a very small proportion of your work is done in the UK and pay UK NI. All you need is a UK contract by your management co, and wave the appropriate documentation at the Lux authorities. Tax, NI certificates etc are never questioned they are accepted as bonafide. They communicate with one another to check if necessary, it would never go further than that, such as "were you really working in the UK blah blah". Strictly speaking you should go back to the UK so keep at least 3 plane tickets.

[ASB]

It doesn't switch as such. It is perfectly possibly to be tax resident in multiple jurisdictions at once. You could be liable in Germany, Luxembourg and the UK. [In fact you are almost certain to still be tax resident in the UK]. You are likely to be tax resident in Germany from the apartment. And you could be be tax resident in Lux.

But, as has been pointed out what you actually pay is entirely dependant upon your specific circumstances and potentially the DTA's between all the countries involved.

In general however you won't pay MORE than the highest taxing country in there, indeed you may well pay less. This depends upon whether the agreements in force covering your specific class of income are offset (tax in one place only) or credit (effectively joint taxing rights; home country gives credit for foreign tax paid).

Another thing you need to consider is social security. It may well be the case that it is beneficial for you to opt to continue to pay UK NI (this is possible for a period of time and may well be cheaper than any of the other NI you could be asked to pay).

Your situation is specific to you and the principles have been put forward, problem is finding somebody who can tie it all up. It's complex. For some light reading you should be able to find all the relevant DTA's on HMRC website to at least start sorting out the UK end.

[ace00]

(At present I am paying UK tax. Hope this is fine if staying < than 183 days in the tax yr, and getting paid throught a brolly/management company in the UK)

If I exceed the 183 days rule (6 months contract approx.), I assume my tax liablity switches from the UK to Luxembourg. Assuming my contract is for 10 months - Can i pay first 6 months UK tax. and the remainder Luxembourg tax?

I don't think you can pick & choose tax jurisdiction in that manner.
I have similar concerns in the end I decided to field every question to the Umbrella and let them tell me. Only obeying orders etc...

[*john_78*]

Thanks guys for posting your thoughts.. Makes me wonder why I took up this gig in the first place.. but having been benched for 4 months, thought I'll take a chance... Hopefully this exp. will help me negotiate my next adventure better..!

Looks to me its Lux tax. I'll need to pay.. Thanks Chef, will try calling your German accountant and see what he has to say.. about the german tax..

Now seriously thinking if I can talk to the ageny and see if I can get out of the contract - to stay withing the 183 day rule..

One last question guys,

(At present I am paying UK tax. Hope this is fine if staying < than 183 days in the tax yr, and getting paid throught a brolly/management company in the UK)

If I exceed the 183 days rule (6 months contract approx.), I assume my tax liablity switches from the UK to Luxembourg. Assuming my contract is for 10 months - Can i pay first 6 months UK tax. and the remainder Luxembourg tax?

[ace00]

...................
...........most likely the reaon you got the gig in the first place is because your much cheapness and personally liable for the various taxes to be paid.....

That is such a good point - try & digest it before signing up. Wish I had.....

[BlasterBates]

If you rent a flat in Germany greater than 40 sq metre then you are liable for tax regardless of how long you've been there.

In the UK lux and Germany the DTA state that income as emplyoment income is not taxed again. As long as you're an employee then the UK authorities shouldn't tax it again according to credit, this only applies to dividends. You would have to make it clear what your income is and quote the relevant DTA paragraph available on the web.

Due to the DTA you don't need to worry about multiple taxation.

I've been tax resident in multiple countries and this is how I've found it.

However you will need to fill out tax forms in each country that you are resident.

[Toastiness]

Hmmm not so simple. Luxembourg has cross border arrangements with the three neighbouring countries (Belgium, France and Germany) as 10's of thousands of workers live outside Luxembourg but work in the Grand Duchy.
In these cases (which sounds like yours) you pay all your taxes and social security payments in Luxembourg. You may have to inform the German authorities but there are no takes to pay (unless you have other revenue streams from outside Luxembourg).

Very simple:

If you reside in Germany for more than 183 days (excluding any holidays, weekends etc you are not in the country) then you are classed as a german resident and therefore should pay taxes on your worldwide income from the January to January tax year period in which you have broken the 183 day limit.
Chef

[chef]

Very simple:

If you reside in Germany for more than 183 days (excluding any holidays, weekends etc you are not in the country) then you are classed as a german resident and therefore should pay taxes on your worldwide income from the January to January tax year period in which you have broken the 183 day limit.

Therefore you pay german taxes and then declare the income and tax paid on your uk tax return using the dual taxation agreement between germany and uk.

The fact that your work requires you to cross the border in lux may also mean you have to pay lux taxes as you also may well pass the days in country limit for taxation. Also, working via a Uk brolly might complicate the various hoops you have to jump through regarding insurances etc. required but now we're getting way out of my knowledge area.

It is reallyonly my guess but I personally wouldnt like to fill out all the mountain of paperwork explaining all this and most likely the reaon you got the gig in the first place is because your much cheapness and personally liable for the various taxes to be paid.. I wish you the best of luck in sorting it out but I wouldnt hesitate in tackling it. German tax authorities are very efficient and not the friendliest of people.

I'd recommend you give Thomas Zitzelsberger a call and explain your situation, he is my accountant here in Germany, speaks excellent English and came highly recommended from several colleagues

Steuerberater

Wallmenichstrasse 24

81369 München

Tel 0049-(0)89-780 18 197

Fax 0049-(0)89-780 18 727

tz@expattax.de

www.expattax.de


HTH

Chef

[*john_78*]

Yes, I'd to register here locally (Germany) in order to rent.

Thanks for trying to help... but am totally confused as to - where to pay my tax.. UK/Germany/Luxembourg? Atleast till the 183 days can I pay just UK taxes?

Turion, I wish I could do that..

To re-iterate my situation..
Working in Luxembourg, living in Germany, paid by UK based management company into UK account.. (Have registered in germany for paying rent..)

[Turion]

It's simple to keep up to 98% of your cash. Just find an offshore brolly who will put everything into an offshore account for a small fee. Sorteeeeeeed

[Brussels Slumdog]

Not so simple

I travel back to the UK now and then.. and rent a apartment in Germany.. (Somewhere I read that if staying in Germany I will have to pay German tax...)

Also, will the 183 day rule apply for me (as I use a managed company in the UK - Sanzar/Umberlla Staff) and hence will it be okay for the first 6 months to pay just UK tax?

Your scenario has now gone beyond my simple understanding of Double taxation as an accountant. You now have to consider cross-border agreements + maybe double taxation agreements in 3 couintries.

Keep a log on a simple speadsheet of your actual days in UK and Germany
so you will know whether you hit the 183 day ruling in Luxembourg/Germany.
Did you have to legally register in Germany? in order to rent?

[*john_78*]

I travel back to the UK now and then.. and rent a apartment in Germany.. (Somewhere I read that if staying in Germany I will have to pay German tax...)

Also, will the 183 day rule apply for me (as I use a managed company in the UK - Sanzar/Umberlla Staff) and hence will it be okay for the first 6 months to pay just UK tax?

[Brussels Slumdog]

You are still UK resident but may also be Lux resident

[QUOTE=*john_78*;860184]Guys,

In a little bit of a muddle and any suggestions would help..

Started on a contract in Luxembourg 3 months ago.. through a UK based umberlla company and only now realized.. that I should have registered here locally and pay local taxes.. My contract is till the end of the year.. what should I do? If i declare now and start paying local taxes now, will they question my previous 3 months? or should I just leave it - my agency suggested that, since my contract length is 10 months (which is < than 1 yr) I'm still covered as a UK tax payer.

The sticky point is that my contract rate is low, and paying local taxes (40-50%) here could make my stay here very difficult..

Thanks in advance,

Do you travel back to the UK every weekend or now and then?
Are you staying in a hotel or in rented house/appartment?

If the tax in Lux is higher than in UK you will lose out as a UK resident
as the UK uses the Credit method

Tax due Uk XXXX
less Lux tax XX can't be greater than above

Lux uses the exempt method

Income UK 50,000
Income Lux 50,000
Total 100,000

Tax 40000
less 20000 UK =50% of income
Tax 20000

http://www.hmrc.gov.uk/manuals/dtmanual/DT12325.htm

[*john_78*]

Guys,

In a little bit of a muddle and any suggestions would help..

Started on a contract in Luxembourg 3 months ago.. through a UK based umberlla company and only now realized.. that I should have registered here locally and pay local taxes.. My contract is till the end of the year.. what should I do? If i declare now and start paying local taxes now, will they question my previous 3 months? or should I just leave it - my agency suggested that, since my contract length is 10 months (which is < than 1 yr) I'm still covered as a UK tax payer.

The sticky point is that my contract rate is low, and paying local taxes (40-50%) here could make my stay here very difficult..

Thanks in advance,
Jh