Getting paid on a German contract?

**tim123** · 14 February 2010, 22:27

There are some clients who wont let their "external" hires work as freelancers, but if they will it is the best way to go by a mile.

You will have to pay full tax (after expenses) but should op out of the very expensive German NI scheme and buy cheap (by comparison) international health cover.

Keep a house in the UK and you can claim all your costs of accommondation/travel in Germany (up to a reasonable limit). It needs to be a house that you genuinly pay the bills at, they will ask for proof after a while.

Edit -forget to mention.

If you freelance in Germany you are automatically assumed to have all the abilites that you claimed to have, when you applied for the role. There's no expectation that the client should test you to check or to train you when you get there. If you turn up for work and can't do a job that you said you can do, the client is entitled to terminate the contract forthwith and reclaim all of the fees paid to date.

This isn't just a theoretic possibility, I have worked at two places where it has happened to previous freelancers.

tim

**Olly** · 15 February 2010, 15:55

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**whattodo** · 17 February 2010, 21:59

Looks like an expert has answered this question http://www.contractoruk.com/004750.html andhere

Given it's a 12 month contract it sounds like that in itself would result in failing the criteria of being a ‘Freiberufler’ by having more than 5/6ths of your income from one client in a tax year.

That just leaves the option of full on tax and social security, presumably paying the employers part of the contribution as well.

Has anyone got a back of an envelope calculation on what that results in for take home pay when everything is taken account of? Sub 50%?

**AdrianH** · 18 February 2010, 06:48

You can stay UK tax resident for 2 years

Provided your main residence is in the UK and your Ltd company is registered in the UK, you can continue to pay UK tax whilst working in Germany. This is advice from a German accountant based over there and many UK contractors in Germany work under this arrangement.

So, provided you are not caught by IR35 this would be the best option for you.

Paying full-whack German tax would sting. Or if you decide to use some dodgy offshore solution there is always the risk of getting busted ...

Just pay your tax here. Less hassle, less tax.

**doodab** · 18 February 2010, 10:14

Originally posted by AdrianH View Post

Provided your main residence is in the UK and your Ltd company is registered in the UK, you can continue to pay UK tax whilst working in Germany. This is advice from a German accountant based over there and many UK contractors in Germany work under this arrangement.

So, provided you are not caught by IR35 this would be the best option for you.

Paying full-whack German tax would sting. Or if you decide to use some dodgy offshore solution there is always the risk of getting busted ...

Just pay your tax here. Less hassle, less tax.

I would check this out very carefully. A few points:

Your company will probably need to register for and charge your customer german VAT

Your ltd may end up liable for German corporation tax due to the center of control being in Germany.

You may have a job getting a German business bank account

You should not become tax resident in DE as long as you are there for < 183 days in a tax year, but if you do become tax resident in Germany you will have to pay German income tax on your "worldwide income". Also, as you are employed your company may need to run a German payroll and pay German social insurance.

**BlasterBates** · 18 February 2010, 11:10

Originally posted by AdrianH View Post

Provided your main residence is in the UK and your Ltd company is registered in the UK, you can continue to pay UK tax whilst working in Germany. This is advice from a German accountant based over there and many UK contractors in Germany work under this arrangement.

So, provided you are not caught by IR35 this would be the best option for you.

Paying full-whack German tax would sting. Or if you decide to use some dodgy offshore solution there is always the risk of getting busted ...

Just pay your tax here. Less hassle, less tax.

Don't trust that. German tax residency kicks in after 183 days regardless of whether you are resident elsewhere.

That is a very risky strategy, the only justification is that you are unlikely to be caught if you are there for no more than a couple of years. The fact that many contractors do it is even more a reason not to. If one gets caught they'll then go through systematically all British contractors, you can bet.

By the way the Sozialversicherung (National Insurance) is NOT A TAX. They will not come after you for it from the tax office. The tax office doesn't care. This myth is often used to scare contractors into schemes. THERE ARE NO PENALTIES FOR NOT PAYING IT, JUST A BACK DEMAND FROM THE PENSIONS DEPT. It is a Insurance for your benefit, and it is seen as such froim the authorities. Only nasty employers not paying it for their employees would face penalties not contractors, who would only be classified as "Arbeitnehmer ähnliche Selbständiger" if you work for one client in any one year.

This would only be a problem if you stayed in Germany for several years. The Pensions office is not going to investigate a non-resident (i.e. if you return to the UK). They usually chase up Germans who've stopped paying it and were registered in the past.

And in any case if you are really worried you can pay EUR 200 a months for up to two years.

**Olly** · 18 February 2010, 12:31

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**doodab** · 18 February 2010, 12:59

Originally posted by BlasterBates View Post

And in any case if you are really worried you can pay EUR 200 a months for up to two years.

Hi,

Do you have a reference / link to some information for this? I'd appreciate it if you have as I'm currently a freiberufler and I'm concerned about being adjudged "false self employed".

My undertstanding is the penalty is up to 3 months employees contributions for me + a backpayment from my "employer" up to the duration I have been working for them which would obviously upset them. If I can avoid the risk by paying €200 a month then that would be grand.

**BlasterBates** · 18 February 2010, 14:43

Originally posted by doodab View Post

Hi,

Do you have a reference / link to some information for this? I'd appreciate it if you have as I'm currently a freiberufler and I'm concerned about being adjudged "false self employed".

My undertstanding is the penalty is up to 3 months employees contributions for me + a backpayment from my "employer" up to the duration I have been working for them which would obviously upset them. If I can avoid the risk by paying €200 a month then that would be grand.

Try that
http://www.arbeitnehmeraehnlicher-selbststaendiger.de/

Penalties and employers contributions are only due for "Scheinselbständigkeit"
for example on a building site. An IT contractor is not going to be classified as "Scheinelbständig" . This is to punish employers exploiting their employees.

You may however be classified as "arbeitnehmeraehnlicher-selbststaendig". In which case you have no penalty just back pay (EUR 20,000 max for 4 years), and your employer has nothing to pay.

However they will probably check up on you in a few years. You might get a "Kontenklärung", which is a clarification on your contributions, why you haven't been paying. That's what you need to think about.

You can employ someone on a salary of greater than EUR 400 (for example a friend of mine could do your bookeeping for you :-)) then you would have no worries. However you could pay the EUR 500 or 200 for 2 years and then 500 and have done with it.

Getting paid on a German contract?