Reply to: UK LTD in Germany

[BlasterBates]

If you want to do it via your Ltd, you set up a branch in Germany. It will have it's own set of accounts.

You should talk it through with an accountant. try SJD.


http://www.sjdaccountancy.com/about/ourservices/contracting_germany.html

There is no simple answer to working cross border, and you need professional advice.

[markotsg]

thanks all
Would corporation tax paid in one country be credited in another?

If I pay coporation tax in UK but not in Germany, if I do have to pay in Germany will they substract the UK coporation tax?

If it comes to that as company may be longer term over 6-12 months in Germany (director will be based there) and my only client is based in UK and I charge VAT, would I be paying Corporation Tax in both countries and claiming relief on another?

[doodab]

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?

VAT depends on the place of supply rules. You would either be charging UK VAT or (more likely I think but you'd need to check it) charging 0% and your customer has to cross charge.

P85 is to do with your personal tax situation, nothing to do with your company at all.

[darmstadt]

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?

Just for information you don't put MwSt (Mehrwehrsteuer) on your invoices in Germany but Umsatzsteuer (USt) and you need to put this number on your invoice.

Umsatzsteuer is a literally tax on commercial turnover, whereas Mehrwertsteuer is a tax on increased value. Both are essentially correct terms, and as such interchangeable. The difference is that a commercial trader, while paying the full tax on his (German traded) turnover (so really Umsatzsteuer), can actually reclaim the tax already paid (Vorsteuer) on materials he has purchased. The end effect is that the net result is a tax on increased value (Mehrwertsteuer). Only the end consumer (who can't reclaim Vorsteuer) pays the full amount.

[BlasterBates]

Many thanks So in this case LTD wouldnt invoice the UK Client anymore? would I need to have new contract signed direclty with this client rather then LTD? I guess LTD would be without any income in that case?

...ah yes UK client

I would take advice from a German accountant on this one, on how to handle VAT.

Yes you could just simply sign the contract to you personally.

perhaps you could take advice from an accountant such as SJD that specialise in contractors and seem to have knowledge of contractors overseas and might help you out on this contract.

[markotsg]

sorry in terms of corporation tax paid, if uk LTD company is operating (director based and works from home in Germany ) in Germany over 6 months, I beleive this company will have to pay corporation & Trading tax in Germany as well?
Would it endup paying coporation tax both in Uk and Germany or there is a relief in place ?

[markotsg]

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.
.

Many thanks So in this case LTD wouldnt invoice the UK Client anymore? would I need to have new contract signed direclty with this client rather then LTD? I guess LTD would be without any income in that case?

[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.

[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?

[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]

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

[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]

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?

[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.

[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.