Working in Germany - tax question
Discussion
Hi All,
I recently set up a limited company which is managed through Clearsky. It is still in the process of completing ID checks and whilst I can speak to them, I wondered if the wider experience here could offer some advice over the weekend.
I've been approach to potentially work in Germany for 6 to 9 months (initial) and wondered the best way to approach this. My understanding is that in Germany I have to register or work for an umbrella company, if so, I can put my account on hold and do this. But how does it impact on tax? Do you get taxed fully in both the UK and Germany? Can I use the wages earnt in Germany to then be invoiced by my Ltd so I only pay corporation tax in the UK?
As you can tell, absolute novice here with the working abroad piece and running the ltd is also new to me.
Thanks
I recently set up a limited company which is managed through Clearsky. It is still in the process of completing ID checks and whilst I can speak to them, I wondered if the wider experience here could offer some advice over the weekend.
I've been approach to potentially work in Germany for 6 to 9 months (initial) and wondered the best way to approach this. My understanding is that in Germany I have to register or work for an umbrella company, if so, I can put my account on hold and do this. But how does it impact on tax? Do you get taxed fully in both the UK and Germany? Can I use the wages earnt in Germany to then be invoiced by my Ltd so I only pay corporation tax in the UK?
As you can tell, absolute novice here with the working abroad piece and running the ltd is also new to me.
Thanks
I currently live / work in Germany and rent my houses in in the UK to make use of my personal allowance and to pay less tax in DE.
I file one German tax return and again a separate one in the UK.
Dual taxation does not exist as there is an agreement between U.K. / DE.
The Germans are VERY thorough with your tax returns, in that every return is checked and they will request evidence of out of country income streams along with the proof of tax paid.
Tax / Social here is circa 50% (all in) with some small allowances to reduce to around 48%.
HMRC have a set of guidelines that give you some guidance as to whether you will / will not be classed as a UK resident for tax purposes, if you plan to move to DE for 6/9 months I assume you will be liable for DE tax and not UK, unless the DE company pays a U.K. Company ... not to sure on that as I am PAYE.
It's a nice place to live, but the paperwork side is stereotypical, there are forms for everything and nothing can be done over the phone or by email!
Good luck with the language, I've been here two years and it still baffles me ....
I file one German tax return and again a separate one in the UK.
Dual taxation does not exist as there is an agreement between U.K. / DE.
The Germans are VERY thorough with your tax returns, in that every return is checked and they will request evidence of out of country income streams along with the proof of tax paid.
Tax / Social here is circa 50% (all in) with some small allowances to reduce to around 48%.
HMRC have a set of guidelines that give you some guidance as to whether you will / will not be classed as a UK resident for tax purposes, if you plan to move to DE for 6/9 months I assume you will be liable for DE tax and not UK, unless the DE company pays a U.K. Company ... not to sure on that as I am PAYE.
It's a nice place to live, but the paperwork side is stereotypical, there are forms for everything and nothing can be done over the phone or by email!
Good luck with the language, I've been here two years and it still baffles me ....
Cheers
looking at the various websites it says that a contractor must be employed by a local umbrella company/agency, but I wonder if I can show that I am selling my specific services through my UK ltd business. Otherwise, how do consultancies based in the UK get away with project related work in Germany?
When you say 50% tax, is that a flat rate? If so at what point does it kick in or does it taper like in the UK?
looking at the various websites it says that a contractor must be employed by a local umbrella company/agency, but I wonder if I can show that I am selling my specific services through my UK ltd business. Otherwise, how do consultancies based in the UK get away with project related work in Germany?
When you say 50% tax, is that a flat rate? If so at what point does it kick in or does it taper like in the UK?
Personal income tax is imposed on the income of individuals, who are resident in Germany or have their normal place of abode there, have full income tax liability. All the income earned at home and abroad is subject to German tax. A foreign resident, who is employed in Germany, pays tax only on income earned in Germany.
Tax rate
In Germany is personal income tax progressively.
In 2008 is tax rate from 0 % to 45% (250K+).
The so-called solidarity surcharge at a rate of 5.5 % of income tax has to be paid on top of this, essentially reunification tax.
above is taken from the CFE tax website.
I pay 42% + 5.5% and my social security in the U.K., not 100% how it all works out as its quite complex but I basically tax home 50%.
If, technically you are not earning in Germany, UK company paid directly in the UK in GBP then ... I don't know
Tax rate
In Germany is personal income tax progressively.
In 2008 is tax rate from 0 % to 45% (250K+).
The so-called solidarity surcharge at a rate of 5.5 % of income tax has to be paid on top of this, essentially reunification tax.
above is taken from the CFE tax website.
I pay 42% + 5.5% and my social security in the U.K., not 100% how it all works out as its quite complex but I basically tax home 50%.
If, technically you are not earning in Germany, UK company paid directly in the UK in GBP then ... I don't know
If you were physically located in Germany for 183 days or more in the tax year I would expect the German Government to want tax from you as an individual because you would be resident for tax purposes. The rules you quoted say it has to be a local company therefore your UK company is not able to do this. If less than 183 days you could remain resident in the UK for tax purposes and use your UK company. This is my personal view without looking up all the associated laws. You would also need to find out the tax year/calendar year details for the DE Govt.
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