Working for client in Germany with UK Ltd - is it possible?

Posted by pharmacontractor PM | on Tue, 11/01/2011 - 14:15 2254 6 comments | report

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Hi there,

I’m a consultant who has a client that is based in Germany. They require me for the next 12 months which involves me commuting to their German base Mon-Fri. I reside in the UK with my family, but not sure where I am liable tax wise. Currently 100% of income is from this sole client in Germany. I may be able to work for client from home a few days per month, but I foresee that I’ll be working there in germany for more than 183days.

Would I be able to operate through a UK Ltd company, or would I have to simply enter the German taxation system and forget using a UK Ltd for now? I have heard mixed messages about the ability to use a UK Ltd for contractors in germany, so any advice would be appreciated. Or if I could be directed to an expert in this field that would be great.

Thanks,

Comments

Germany/UK contractor - Tax

Dino Collections | Sun, 16/01/2011 - 16:26 | Permalink

Not sure of the legal aspects but would advise if at all possible to avoid the German tax system. Last summer I came back to the UK after being in Germany for the past 6 years. Having to do the self assessment in Germany is not a fun process at all. Their documents make the UK ones look basic.

After 6 months back in the UK I am still awaiting my final tax refund from Germany and was told last week that it is expected to take another 3 months before I am paid :-(

-- www.dinocollections.com Credit Management Consultants and UK Commercial Debt Collection

Check the treaty

Red1960 | Sun, 16/01/2011 - 21:50 | Permalink

I think the UK Germany tax treaty would be the place to start.

http://www.hmrc.gov.uk/manuals/dtmanual/index.htm

Good luck!

the way forward

pharmacontractor | Tue, 18/01/2011 - 08:00 | Permalink

Have researched this a bit more and it does all depend on the 183 day issue. After that I am liable for German taxes, but also from day 1 of my contract apparently. Think it's now just safer to establish mzyself here in DE for tax and be done with it. If anyone (who's googled across this article for example!) wishes to contact me for details, please feel free to do so. We're talking about 73% ish retention for tax. You can also claim for expenses for travel between UK and your temporary German residence which helps offset the tax. And a German accountant can be an advantage, though will cost about €1700pa for registration, form filling, tax returns and monthly book keeping. Not sure how that stacks up with the UK?

Residence

Marion Hayes | Tue, 18/01/2011 - 10:19 | Permalink

http://www.hmrc.gov.uk/cnr/hmrc6.pdf

This link is to the Revenue current guidance.

Please do not assume that you will be either resident in one country or another. Unless you have moved abroad with the intention of permanently leaving the UK you will still be resident here for tax, even though you are here physically less than 183 days. The presence of your home and family here will mean that you are taxable here on your world wide income.

I am not familiar with German rules but you may well be resident there too for tax purposes and have to complete returns in both countrys. There is a double taxation agreement so any federal taxes in Germany will be allowed against your UK tax bill, and vice versa, so I recommend that you consult an accountant who is experienced in residency and overseas matters.

There is often a difference between the expenses you are allowed to claim against income from one country to another so an accountant in both territories is unfortunately advisable. Similarly whether you are a self employed contractor or an employee of your client in these circumstances will depend upon the regulations of each country and may not be the same.

If you go to the TaxAdviceNetwork you should be able to find a qualified Tax Advisor who specialises in these issues.

-- Marion

Working in Germany

ThornyIssues | Tue, 18/01/2011 - 10:39 | Permalink

I have not found it possible to use a UK LtdCo for this purpose. You may find it easier to find a local (German) accountant who will regster you as a "freelancer" with the local tax authority. You are able to claim very generous expenses (including equipment purchased in the UK for use on job etc). German accountant will do all negotiation, filing, EoY returns etc and in my case, I did not find it expensive at all. Less than comparable UK LtdCo accounts.

thanks

pharmacontractor | Tue, 18/01/2011 - 12:17 | Permalink

Thanks Marion - I'll bear that in mind. I'm still off the UK Tax radar as have not worked in the UK for the past 9 years as I have been living abroad. But I guess HMRC may want to know where I have been once I enter the system in the future (I did inform them/complete a form when I left the country).

Thanks Thorneyissues - maybe we can compare notes at some point.

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