Reply to: Contracting in Germany through UK company

[EXPATTAX]

You are totally right, as long as nobody stays for more than 183 days, there is no need to get involved with the German tax office. And even if one of your subcontractors ends up staying longer - well that is not the end of the world either. Potentially requires paying taxes in Germany - not rocket science and no reason not to take on a project. In many cases we see that people end up paying less tax in Germany compared to the UK.

[yasockie]

I am sure that most here are a one-man army, but I run what I think can be legitimately classed as a software consultancy - the Ltd has multiple clients (often repeat business on different projects) and at a peak I had 5 subcontractors.
Assuming, very hypothetically, that I got some business from Germany, there is absolutely no reason to eveen deal with the German taxman, as long as none of us stays for more than 183 days in Germany right?
Just an UK company sending an invoice to a German GMBH?

[EXPATTAX]

Hi there, we see increasingly that agencies and also end clients pretty much dictate that you register for tax and pay your tax in Germany as a freelancer. Why is this? Contractors who do not register for tax in Germany and find "creative" ways of not paying tax correctly or not paying tax at all, create a tax problem for themselves and not for the agency or the end client. If you take a bit of a closer look, you will find very quickly, that agencies and also end clients get dragged into it, if contractors are not compliant. Even if agencies or end clients end up with no tax problem as such, the last thing they want is having to deal with investigations, questions from the tax office, allegations etc. And an agency which is seen as bringing in non compliant contractors is on its way out before they know.

So, even if registering in Germany for tax is not a guarantee that the contractor is fully compliant, it is seen as best practice by an increasing number of agencies and end clients.

I am introducing this aspect here as we see many contractors who spend a lot of time working out their best setup, only to find out that their setup is dictated to them anyway. So please make sure you are very clear before you sign on what your agency needs from you in this regard.

[BlasterBates]

I am in a similar situation at the moment, so it has been interesting to read all the comments.

I started a contract in Munich in January 2012. It was supposed to be for 12 months, so I used a payroll company that set me up as a Freiberufler in Germany. My contract was cut short after 4 months due to lack of budget, but luckily I found a new contract in Switzerland. The German Steuerberater provided by the payroll company took care of paperwork for the tax return.

Now I have been offered another contract in Duisburg starting in August and lasting until the end of May 2014. I am wondering if it would be possible to work through a UK-based limited company for the first 6 months (183 days) and then work as a Freiberufler registered in Germany.

I own an apartment in UK and plan to return every 3 weeks. In Germany I would stay in a furnished apartment instead of a hotel.

Would I get into trouble by working through a Ltd company for the first 6 months? Would I end up paying more tax in UK than in Germany?

Any feedback is welcome!

Keep it clean, tax youself in Germany for your German contract and in the UK for UK contracts.

I know that some contractors want to minimise the paperwork so just keep billing through the UK Ltd. This is a huge mistake because if the German authorities find undeclared invoices they will come after you.

Just to be clear, even if you are non-resident you are taxable on all income you receive in that country. Forget the 6 month rule. If you were a real company you could send over one of your employees for a couple of months but not if your self-employed.

You won´t save any tax or very little by going through your UK Ltd so it´s pointless as a tax saving exercise, and it is a huge risk.

[darrylmg]

I own an apartment in UK and plan to return every 3 weeks. In Germany I would stay in a furnished apartment instead of a hotel.

Would I get into trouble by working through a Ltd company for the first 6 months?

I'm planing to do exactly this for 4.5 months.
My accountants said it should be fine.
I won't be spending the money I earn too soon, just in case they come knocking...
I guess proper tax advise is always a good thing to have.

[Casall]

Ltd company vs. Freiberufler?

I am in a similar situation at the moment, so it has been interesting to read all the comments.

I started a contract in Munich in January 2012. It was supposed to be for 12 months, so I used a payroll company that set me up as a Freiberufler in Germany. My contract was cut short after 4 months due to lack of budget, but luckily I found a new contract in Switzerland. The German Steuerberater provided by the payroll company took care of paperwork for the tax return.

Now I have been offered another contract in Duisburg starting in August and lasting until the end of May 2014. I am wondering if it would be possible to work through a UK-based limited company for the first 6 months (183 days) and then work as a Freiberufler registered in Germany.

I own an apartment in UK and plan to return every 3 weeks. In Germany I would stay in a furnished apartment instead of a hotel.

Would I get into trouble by working through a Ltd company for the first 6 months? Would I end up paying more tax in UK than in Germany?

Any feedback is welcome!

[alexvs]

5 months Contract in Germany

I have a one man ltd company in UK. I have been proposed a contract a Germany (via a British agency for a German company) starting soon and I have being requested to go through an umbrella company as a "Freiberufler". The contract is initially 3 months and can be extended, however I am definitely and clearly not planning to stay more than 150 days, furthermore I would have to work in other countries for a short period a well such as Austria, Switzerland. To make simple, let us consider, I do not renew my contract after 5 months for instance . As far as I understand I would have to pay tax in UK as my wife, my son and I have a house there. I would stay in temporary places (hotel etc .)for work purpose in Germany etc ... I mean that there should be no way, as far as understand, I have to pay income tax in Germany. Am I correct? As far as I understand I have to go through an umbrella company to comply and please the German company and the German law, then because I stay less than 180 days I can transfer the money from the Freiberufler to my Ltd company, that what I understood after talking to a person of an umbrella company. Please do not hesitate to correct me as this all complicated, strange and new. Another point, if sby can advice for a good umbrella company for a short time for a German contract please let us know, I have had a quotation with one for 400 Euros min per month including a German accountant which I do not need as I am not staying more than 5 months, this looks quite excessive, I do not know.
Thanks

[edonald]

Well I'm Freiberüfler and I offset practically everything against tax (well my accountant does.) I think if your contract is definitely only going to be for 3 months with no possible extension and you know that you won't be working in Germany again in the same tax year, I don't see why you just don't use your Ltd.

Hello Darmstadt,

I've been on my first contract in Munich for 18 months working self employed through an umbrella company who I pay 450Gbp per month to. The umbrella company have German Accountants who look after my tax affairs and I've just had my first
tax bill for last year which is much larger that I expected. Dealing with the accountants to get answers from them has been a nightmare and so I've been searching through this forum to try and find the best way forward.

I've seen loads of posts by you in this subject area and I think you are also working in Munich (?) and seem to know the score.

If possible, can you give me the name of the German Steaurberater that you use and also give me a rough idea as to what I'd be paying them?

I feel I am being ripped off by the umbrella company / accountant I'm currently using but I've been burying my head in the sand until I received the tax bill and I'd like to go forward the best possible way - preferably eliminating the umbrella company altogether.

Thanks in advance.
Cheers.

[BlasterBates]

no you need to tax it from day one.

I would register and set yourself to tax yourself from day one. The admin for taxing yourself as a freiberufler is minimal, that would mean you would have no problems in extending or coming back.

Remember they only tax you on the income you make in Germany. If they tax you it would probably be around 20% of your income for the 3 month contract on EUR 70 an hour.

So you certainly don´t save any tax by using your UK ltd, just the additional admin costs. A Steuerberater would charge you 500 EUR to fill out a tax return. For that amount just do the P&L yourself, the Finanzamt will be pretty relaxed about it given the amounts involved.

[suityou01]

Well I'm Freiberüfler and I offset practically everything against tax (well my accountant does.) I think if your contract is definitely only going to be for 3 months with no possible extension and you know that you won't be working in Germany again in the same tax year, I don't see why you just don't use your Ltd.

Alles klar.

But what if after 3 months they want to keep me on? Can I switch tracks then or is it better to get it straight right off the bat?

[darmstadt]

So, boiling it down?

Ltd or Freiberufler?
Rent or Hotel?
If Freiberufler status, can you offset expenses against German tax?
Does your ltd definately become a German legal entity for the duration of your stay of has Doodab gone mental?

I'm already fed up with this contract and I haven't even started

Well I'm Freiberüfler and I offset practically everything against tax (well my accountant does.) I think if your contract is definitely only going to be for 3 months with no possible extension and you know that you won't be working in Germany again in the same tax year, I don't see why you just don't use your Ltd.

[suityou01]

So, boiling it down?

Ltd or Freiberufler?
Rent or Hotel?
If Freiberufler status, can you offset expenses against German tax?
Does your ltd definately become a German legal entity for the duration of your stay of has Doodab gone mental?

I'm already fed up with this contract and I haven't even started

[northernladuk]

Should be ok, you would just be seen as visiting your customer in Germany, but still based in the UK. You could not be seen as residing in Germany if you were staying in hotels.

Our gov't is putting people up in hotels cause there is not enough housing for them and they are residing in the UK. I don't think that argument is one to fall back on IMO.

Once you start doing so many regular 'stints' the lines would blur the line between a visit and resident trying to pull a fast one and I would imagine you have to be very careful about keeping them as stints and not start getting lax to the point you crucify yourself.

[sunflower]

Does anyone know what the score would be if you do a number of small stints, say 2 or 3 day stints up to 10 times a year?

Should be ok, you would just be seen as visiting your customer in Germany, but still based in the UK. You could not be seen as residing in Germany if you were staying in hotels. Keep all travel tickets and hotel bills as evidence.

[darmstadt]

This two rulings have nothing to do with taxes, but with Internal Market Rules and National Insurance Contributions.
There is absolutely no problem in Germany in this regard. To clarify, you can easily operate from a UK limited in Germany as long as you register with the Tax Office (Finanzamt) like a local company would do and have an accountant that knows how to deal with Double taxation treaties and the Finanzamt in Germany. It is, however, way simpler, and cheaper to register locally as a freelancer as you will not have to pay corporation tax and may be able to avoid local NI contributions, also, if done properly, pay less taxes than you would in the UK.

Correct, you can even open a UK Ltd. here in Germany and use it legally. The problem with this thread, and every other one about tax in Germany is that people think that they can go there and get away with paying no, or little tax in either the UK or Germany as they think they're inder the radar. People have been trying this for years and get caught. There have been many suggestions as to what to do if you want to contract in Germany, such as above by registering as a Freiberüfler and getting a Steuerberater, which are correct but people still think they can try it on.