MattW

Anyone done this, thinking from a tax perspective?

scoobyster

Netherlands close enough?

Depends on your circumstances and whether your employer is British or German, but if you can swing keeping (most of) your taxation in the UK with an NT tax code then you're laughing. I might be able to answer some of your questions if you'll be working for a British company, as that's what I do and have an NT code.

MattW

Well depends on the definition, my company is UK Ltd but would be engaged by a German one. complication is that there are two of us, one who may not be working out of germany. We are IR35 compliant.

From brief reading it looks like we are ok if <183 days resident. just wondered if i could get paid out of the UK part of the employing company would it amount to money earned there.

scoobyster

How long will you be working there for then? My experience is of working for a Dutch company but via a UK agency on a permanent contract based purely abroad, so maybe our circumstances are quite different. If you're doing an assignment but not specifically contracted for the work abroad then it's probably a different set of rules.

In the Netherlands expats don't have to take up Dutch residency for 2 years so can stay in the UK system but still have non-resident status in the UK if there under 183 days PA as you state. I don't know who decides how much Dutch tax I pay or how it's calculated but this is offset by a reduction in UK tax (general EU rules) so it makes no difference to me in the end. In fact I pay less than 5% tax in the NL and the rest in the UK. If you have non-residency in the UK then they don't take their share of the tax, which is nice

If your employer is clued up they can sort out a special tax code for expats, independent of your UK residency status. NI is taken as normal if you stay in the British system, but your British taxable income will be reduced by the German tax so you'll pay a bit less NI too.

MattW

NI? Limited company paying dividends so that gets reduced anyhow

Sounds like a similar setup to what mine could be. Just don't fancy taking a 5 month contract knowing I can't go to 12 (ref 183 days). Not in this climate.

KiwiGTI

You need to get specialist advice, not just hearsay or what other people have done. You could get screwed big time by both HMRC and the German equivalent if you don't do things properly.

MattW

Sure, just wanted some hearsay to see whether it was worthwhile getting the advice

KiwiGTI

Placing UK individuals on freelance assignments in Europe :: Contractor UK

MattW

Yup, complicated ain't it!!! lol

skoobidude

Speak to one of this lot!

BMWhere?

I'm contracting in Germany

A lot depends on how long you intend to stay for really. If you're less then a year, then you'd remain tax resident in the UK and there is no difference from what you are doing now in the UK.

If you stay longer, then it gets a bit more tricky. Firstly you have to consider your company and yourself as an employee separately.

Starting with your company, even though its a UK limited company, it could become liable to German taxation if the German authorities consider it to be, in essence, a German company i.e. the management is based in Germany and all executive decisions are taken in Germany. This is easily solved by having multiple directors who are non resident in Germany - so it sounds like you've got this one covered. My company for example has 3 directors, 2 of which are UK based, therefore the company's management base is the UK! AGM etc. is held in the UK!

The second issue is your personal situation. If you are longer than 6 months you can declare yourself non resident in the UK and register for tax in Germany. If you are longer than 1 year, then you have to do this! You will effectively then stop paying PAYE in the UK (even if you are paid into a UK bank account!) and will have to start paying tax in Germany. As you work for a UK company, then you won't have to pay corporate NI, you just pay the personal taxes due in Germany. Because you are non UK resident, your salary is exempt for both corporate and personal taxes in the UK.

You really need to speak to both a UK and German accountant to get the finer details. I'm no expert by any means, I just let my accountants work everything out for me and I just pay what they tell me to

One thing you don't want to do is pay a dividend. As a German resident, your worldwide income must be declared and taxed in Germany. The UK sees the corporation tax on a dividend as a tax credit, so you do not pay any extra taxes on the dividend. This is not the case in Germany and you will have to pay both the UK corporation tax and German income tax. The best way is to pay yourself a proper salary and then you can declare a bonus of up to 30% of your gross salary.

You will probably end up paying a slightly more tax (%-wise) than you currently do with dividends in the UK, but the rates in Germany should be much better than the UK which will more than offset the extra tax! Plus there is all the extra savings from all the UK stealth taxes!

You do really need to get professional advice though and not read too much truth into what random people on an internet forum say! Its a very complicated situation and warrants proper investigation.

Don't let that put you off though, its really worth doing as long as you're not a home-boy that can't bare to be away from friends and family.

MattW

Dividend is salary Not taking a divvy in any tax year is not an option, I need money to live Also I have to be fair to my business partner so things are as 50/50 as possible. Sounds like a 6 month contract is best unless I can negotiate a UK to UK payment.

BMWhere?

And why couldn't you give/sell your shares to your business partner so he gets 100% of any dividends paid. Meanwhile you draw a normal salary! As a director you don't have to be a shareholder! Trust me, paying a salary in Germany is much better than taking dividends in the UK

MattW

Ah I see.