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Article written by Julia Lovett, ITECS. (2006) Introduction Arranging your finances in Germany is not easy if you cannot speak German. It is advisable, therefore, to contact an accountant or management company who can assist you or handle these affairs on your behalf. Obtaining a Tax Code in Germany A tax code is required for your employer to pay you whilst contracting in Germany. The tax code is featured on the Lohnsteuerkarte (wage tax card), which you will need to request from the registration office. Taxation in Germany Using the 183-day ruling is commonplace in Germany, whereby if you work less than 6 months you are not required to pay taxes on any employment income earned in Germany so long as you remain tax resident in your home country. Tax payments are submitted quarterly and are calculated based on the assessment of the previous year. However, if you start working in Germany mid-year, you will not be entitled to any rebates. This is because the German tax authorities assume that you will have earned a similar salary elsewhere for the earlier months, and so will consider you in a tax bracket based on you working a full year. Once you have found a contract in Germany, it is worth investigating the various options under which you can operate. If you are employed by a German company, you will most likely be subjected to not only German tax, but also health insurance, unemployment and retirement plans. These can create quite an impact on your net salary. If, however, you can find a non-German employer or a management company, then you may be able to obtain an E101 form to cover your assignment in Germany. This would most likely result in you continuing Social Security payments back in the UK and so exempting you from German social security. This should also mean that you could obtain an EHIC (European Health Insurance Card), which should exempt you from taking out costly private health insurance. Deductible Allowances in Germany There are various tax-deductible allowances available to the contractor in Germany. These include a meal allowance for double-household owners for the first 3 months, weekly trips to your home country and, if trips home are not possible, a portion of your telephone bill may be covered instead. You may also able to make use of a ‘double housing’ allowance if you are renting in Germany and still owning/renting back home. You will, however, be required to provide proof of ownership/rental of your house in your home country and the rental agreement in Germany. Health Insurance in Germany If your employer is able to obtain an E101 form for you to cover your assignment in Germany, then you should be entitled to a European Health Insurance Card (EHIC). An EHIC will grant you the same level of healthcare in Germany as those on the German state scheme. You may be required to register with a Krankenkasse in advance, by bringing your passport, EHIC and E101. If you do not have an EHIC, you will be required to register with the TK (Techniker Krankenkasse). In due course, TK will send you a Krankenschein which you should present whenever you require medical assistance. AUG Contractors should satisfy themselves that they have the appropriate licenses in place, as German law requires labour leasing licenses. Whether the license should be held by the contractor or by the employee can depend on the type of set-up you choose to work under during your assignment in Germany. Be sure to contact a European accountant or management company in order to work through the intricacies of the German tax system before embarking on a contract abroad. This should help to avoid any unnecessary pitfalls and could also provide more tax-efficient ways of working whilst contracting in Germany. ITECS is a payroll management company assisting Expatriates with their contracts abroad. To receive a personalised breakdown on how ITECS can help you, call +31 10 205 1660 (The Netherlands) +32 3 400 6363 (Belgium) or +44 208 863 2589 (UK). Previous Page
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