Ask HN: Germans, how to work legally remote?
being a freelancer in Germany is possible and well-known if you have multiple clients throughout the year and follow some rules.
However, being a remote worker and employee of a US corp/startup seems to be a grey zone to me because German law requires to work maximum 80% of your time for one client only.
How do you solve that problem? Is there even a legal way to do that?
I also thought about incorporating a GmbH which then creates invoices to the US company. Nevertheless, this would introduce additional costs and probably risks (e. g. when you are no longer an employee of the US corp).
I asked some tax consultants. Nobody of them really understood what I want to do and additionally, the bigger problem seems to be the German Rentenversicherung and not only the Finanzamt.
More info: I want to stay in Germany and am a German citizen. I want to be for a significant time at the company (3y+).
121 comments
[ 3.0 ms ] story [ 297 ms ] threadI'm by no means an expert, but when I looked at this recently (same scenario - remote worker for a US company), I found the only real option was to apply for a Residence / Long Stay Visa.
I was only looking to stay for ~1 year in theory.
I would plan to be there for a significant time, more than three years.
You have to pay into it of you're employed and make below ~4800€ (before taxes) a month.
It's rather much % of your income, so you can save rather much by not paying it.
To do (software) business those are relevant options (there are more, but those are more exotic or for larger businesses or startups):
a) "Freiberuf" (often translated as freelance, but it is actually something different). This is originally intended for architects and similar professions. It is hard to get, and even harder if you don't have some kind of engineering degree.
b) "Gewerbe". You just need to register, pay a few minor fees, and you can do business. However, you are personally liable for the business you do (so get proper insurances).
c) GmbH or UG. An LLC. This _used to be_ expensive (GmbH requires at least 12.5k of base capital to be put into the company). This establishes an own legal entity and the liability is restricted to the money you put into it. "UG" is a "new" (>10y old now!) version of a GmbH which only requires 1 Euro to be put into the company (should be more like 2k) ...
Costs
a) and b) are essentially "free". You don't necessarily need a tax consultant and all the filings are not that hard anymore (all online AFAIK, though I do let my tax consultant do that). a) is a little better because the taxes are setup a little different.
c) Setting up a UG is not _expensive_, but not exactly free either :-) Plan ~1k for setup, and then ~1.5-2k yearly for letting the tax consultant do the necessary paperwork. It's very easy too, you just setup the company at a notary, and they will essentially do everything for you.
Notably there are also lots of funding and startup programs in Germany, many of which are actually quite good.
Probably the most important thing is to find a reasonable tax consultant. It's not rocket science, but it's worth the money.
Disclaimer: I have a) for ~15 years, and I've setup two c)'s and an AG (a stock based company).
Employment by the US company:
They're allowed to employ you and have you "stationed" in Germany. You pay no US tax, and DE tax on 100% of this income. For Sozialversicherung, Rentenversicherung etc it's just as if you were selbständig. Since you're allowed to give up all sorts of rights in DE conteact Law, the US based contract is probably fine.
Contractor for the US company: this is OK too. Since the company does not have a DE presence they can't run afoul of the Scheinselbständigkeit rules. You really should register as a Gewerbebetrieb, GmbH or English Limited company though, as that solves a lot of tax questions for you. In any case as a selbständiger in Germany You should expect to get audited in the first few years... And this makes it less likely they'll find things you have to pay.
I am not a Steuerberater... But I've been in a two selbständig household in Germany for 7 years. My income was from international tech contracts, just like yours. And I went through a Steuerprüfung, where they decided that since I dont have a degree in CS, I can't be selbständig in that field. Didn't matter that I have a long resume of big organizations, and a letter of reference from the CTO of one of the biggest companies in Germany. I had to form a Gewerbebetrieb and pay back taxes for it. It sucked.
Also, good luck on finding a Steuerberater who will help you optimize at all. Technically tax optimization is illegal, so most are very cautious even talking about it. 99% are just form fillers.
Tax wise it is actually almost easier to do non-EU business than doing business in Europe, because there are no VAT issues involved (and there are no tariffs on those things). You just invoice the net value.
I think the reasoning is that a VAT - value _added tax_ - requires that the other party also pays VAT (you only pay the difference, the "value add"). Which simply doesn't happen if you are outside your own country. In "regular" cases this is compensated by tariffs, but there are none for consulting/dev AFAIK.
But again: ask you tax consultant :-)
So that's what I do, and on my "Umsatzsteuererklärung" form, there is a field for income that is VAT-free, where I put basically everything.
Personal take on tax accountants or anyone in that profession: They're more than useless. As parent poster said, 99% are form fillers, so if you tell them that you're working for a US entity that is not paying income tax on your behalf some of them will flat out say "but that's not even possible" (yes, someone told me that). My tip is just to read up on some topics, band together with co-workers in a similar situation and then just do the taxes yourself using one of the popular services.
In my current specific situation there are no coworkers from Germany.
I didn't even know that a US-based company can give me a German contract. Do you know the specifics how the stuff got deducted automatically (except the taxes)?
I don't know any of the details of how the company made the employment work. If you PM me I will give you the name of our German accounting firm which handled everything.
It's because most German beurocrats are garbage when it comes to laws related to outside Germany.
Can attest to that. Had similar situation - Being DE tax resident however working for my own company that is not based in DE.
I had just a simple question - when and how do I pay my taxes here from the money I bring from my company that is not German. And they could not help me because they really could not understand that someone might be living in Germany but not working in Germany.
But then, I always maintained one or two other contracts on the side. They made up less than 5% of my income, but their names were in my list of invoices. My tax advisor thought this was a good idea.
Wtf? Is there a rationale for this rule or is it just German's super weird "degrees are everything" culture turned to law?
(I'm Dutch, were basically Germans who talk funny, but I'm very happy we don't have rules like these)
It is very different in many other professions. So yes, you actually have to be an electrician with extra qualifications to be able (allowed) to setup an electrician shop (called a "Meister" ("master") but it is entirely different to the university master degree). This is even true for seemingly low profile stuff like haircutters, or painting shops!
And the rational should be obvious: You don't want to allow people to run a business which don't know how to write a basic invoice and you don't want an electrician who doesn't know how to properly install electric lines.
> Unlike in many other professions he _can_ be "selbstständig" in the CS field without a degree
I'm not an expert here, I can only tell you that the Finanzamt Köln disagrees with this sentence.
IIRC they lumped "web development" in under "engineering", and therefore required qualification. The only way around it that I've heard of, is some front-ender friends of mine invoicing as "Web Designer", which counts as an artistic profession.
And as the other commenters noted, I _did_ say "selbständig" when I meant "freiberuflich". Can I get away with blaming autocorrect? :)
In any case I suggest you ask a German lawyer, he know best for sure.
This kind of arrangement indeed is quite likely to be classified as "bogus self-employment" by the German state pension system, no matter your legal setup. I wouldn't bother setting up a GmbH (private limited company) because it most likely won't help you anyway.
Unfortunately, there are no clear rules yet on when something is considered "bogus self-employment" and when it is not. However, there are some criteria for a setup to be more likely classified as "bogus self-employment" and other than the remote working part yours sounds more or less like the prototypical case.
The question remains, who would have to pay outstanding social security fees in that case. Usually it would be your employer. However, given that in your case they're in another jurisdiction social security might not be able to enforce that. Still, it might cause some trouble and costs for yourself (apart from the ethical issues that come with avoiding social security costs in such a manner).
The way remote employment (not consulting, which as you've mentioned, involves having multiple clients) could work relatively hassle-free in your case is your US employer setting up a company in Germany (a UG for example, which is a relatively cheap variation of the GmbH) and simply pay you from there, including taxes and social security like any other local employer.
Is there a way that I can pay the social security fees from day one on my own to completely avoid all hassle and possible back-payments after a Prüfung (audit)?
However, that will get complicated rather quickly:
You’ll not only be that company’s sole employee you’ll also be its managing director. A managing director who owns a majority in the company usually is considered to be self-employed. A managing director also is responsible for filing annual accounts and tax statements. This is both expensive and time-consuming.
Another point to consider is that you’d effectively cover for employer’s share of the social security costs (unless they will be paying that on top of your salary, at which point they might just as well set up the UG themselves).
Not only is this a dodgy practice but you’ll also have pretty rough deal.
In any case, because this will get complicated you’d have to ask a lawyer who’s well-versed in both corporate law and social security law about the specifics.
It’d be much easier if they either were your client rather than your employer or if you were a co-founder.
I didn't do that, regretted it later and wanted to return to it, but learned that the continuity is lost, that is, my income from the previous 12 months (when I was still employed in Germany) would not count for my unemployment payments.
Reg. your tax consultancy; we also do international business with freelancers and other contractors. Write me a mail, we might be able to sort that out.
„Ist der Auftragnehmer eine rechtsfähige Personengesellschaft (z. B. OHG, KG, GmbH & Co. KG, Partnerschaftsgesellschaft, GbR), schließt dies ein abhängiges Beschäftigungsverhältnis zum Auftraggeber im Regelfall ebenfalls aus. Dies gilt jedoch nicht, wenn im Einzelfall die Merkmale einer abhängigen Beschäftigung mit entsprechender Weisungsgebundenheit gegenüber den Merkmalen einer selbständigen Tätigkeit überwiegen. Nach Auffassung der Spitzenverbände der Sozialversicherung [>>](ISRV:NI:SVBEIEC 2/2004 1) soll dies grundsätzlich auch dann gelten, sofern es sich bei dem Auftragnehmer um eine Ein-Personen-Gesellschaft (z. B. Ein-Personen-GmbH bzw. Ein-Personen-Limited) handelt. Insbesondere bei typischen Beschäftigungsverhältnissen – wie beispielsweise bei den nicht programmgestaltenden Mitarbeitern in der Film- und Fernsehproduktion – kann die Gründung einer Ein-Personen-GmbH oder Ein-Personen-Limited nicht zur Umgehung eines sozialversicherungspflichtigen Beschäftigungsverhältnisses führen. Beurteilt nach den maßgebenden tatsächlichen Verhältnissen sind diese Personen vielmehr weisungsgebunden in die Arbeitsorganisation der Unternehmen eingegliedert. Arbeitnehmer kann – anders als ein Arbeitgeber – ausschließlich eine natürliche Person sein, so dass die Gründung einer Ein-Personen-GmbH oder Ein-Personen-Limited in diesen Fällen sozialversicherungsrechtlich ins Leere geht.“
I am in a similar situation, I am full time employed (as a developer) by 1 person GmbH. I work with a tax agency that has not said anything about this.
Thanks.
The following article (German) is a good read on that: http://www.schwerd.info/sozialversicherungsrecht/scheinselbs...
"Ask HN: Germans, how to work legally remote?"
But if I were to be employed regularly to a company (in the EU?) the same would apply.
In either case, I have to pay for the health insurance, so there's no real "avoiding the cost of social security".
Also there _is_ an "avoiding the cost of social security". If they consider you properly self employed and independent, you do not pay gov social security stuff, but you need to insure yourself (using private insurance companies). That is why the process mentioned above is important. If you register self-employed but later they declare you as dependently-employed, gov social security has to be paid! Something you should avoid upfront, can be super expensive. So => "Statusfeststellungsverfahren"!
I even want to stay in the public health insurance (freiwillig gesetzlich versichert). I actually do not want to benefit from being self employed. I just want to make it legal.
Your's is an pretty edgy case. All people I know which have been employed dependently by a foreign company, have been employed by a local subsidiary (and I can understand that your foreign employer won't open one just for you).
Just a wild guess: If you are above the minimum income for dependent-employees allowed to be privately ensured, I assume all should be good. But I would still do the "status feststellungsverfahren", or maybe just call them. I think they have a hotline.
(In general many answers/threads here may not be really relevant for you as they are focused around self-employment. What you really want is to be a "dependently-employee-in-a-foreign-company". I have no idea how that works, maybe just do make an appointment w/ a work-lawyer).
With that info, I traveled there for the onboarding (and getting a working visa), only to learn that the local tax authorities disagreed. My boss then suggested to just have me invoice him for the time being, until a subsidiary is created in the EU. Still waiting after two years :-\",
The possibility to use private insurance depends on having some minimum amount of income.
Also, I currently use the option to use public insurance (voluntarily) so that I can easily switch back to it once I become employed again in the future. Apparently, there is some risk of not being accepted by the public insurers after one had quit.
If you are self-employed, the public insurance is really nothing more but another (rather unattractive) insurance company you can choose from.
I agree it doesn't make sense from a financial perspective generally but it does depending on your health records/situation. I, for example, have a chronic disease which implicates monthly medication which is crazy expensive. I could enter a private insurance (because I have a Anwartschaft, thank god I kept this from since forever) but the monthly rate will drive to insane amounts when I'm getting older and/or adding the fact of kids (Familienversicherung).
Going back to public insurance after being in private insurance is highly problematic and probably even impossible without playing grey-zone games if you don't want to lower your salary dramatically below the income border for multiple years.
Disclaimer: my knowledge is based on internet research, I am not an expert on this and might be wrong.
AFAIK if you are self-employed the gov insurance doesn't have to take you either! Yet both have to take you using that "base tariff" (600? Euro or sth) since a few years (before a self-employed could end up w/ no insurance at all, not possible anymore).
It is true that the private insurance increases significantly over the years, but it is still WAY less than the gov insurance. The costs for the gov insurance is about 25% of your salary (remember, it's split between employer and employee, but as a self-employed you have to pay both sides). Assuming an income of just 5k per month, that would be 1.25k! per month, or more than twice the base tariff.
It often becomes problematic for self-employed low-wage workers when they enter pension. Which they often don't setup, and hence can't even pay their health insurance :-/ (and then move into social security, which again provides everything)
That it is difficult to get back to the public insurance is just non-sense unless you exceed a certain age. In fact you have to, whether you want or not, by law.
It's actually about 15% in total. The maximum amount currently is around €750 for both employer and employee.
> The possibility to use private insurance depends on having some minimum amount of income.
This is incorrect. If you are self-employed you are off the state records. You can yourself choose to insure yourself using the gov insurances ("Freiwilligenversicherung"). But that is _usually_ an awfully bad deal (though ethically the right thing to do and I personally hope they eventually do the "Bürgerversicherung", which will level the terms for everyone).
The minimum income thing is only for dependent(regular)-employees. They are forced to be in the gov-insurance unless they exceed a certain income. If they do, they can choose (which often makes sense because private insurance has way better benefits and is way cheaper if you (consistently) have a high income (I don't know the current rate, 14% for the employee and 12% for the employer [and both if you are self-employed?])).
> Also, I currently use the option to use public insurance (voluntarily) so that I can easily switch back to it once I become employed again in the future.
They have to take you back unless you are 50+ I think (google the details). If you are dependently employed you _have to_ be in the gov insurance unless you exceed the minimum income. Buckle up, it's the law! Because of that many privately insured people therefore often seek to get back into regular employment if they get closer to 50, to properly exploit the system.
> Apparently, there is some risk of not being accepted by the public insurers after one had quit.
This is age specific. Generally at least the "AOK" (kinda the fallback gov insurance company) has to always take you. In fact I think even private insurances _have to_ take you since quite a few years now - it's awfully expensive, but you are never supposed to be uninsured in Germany.
There are plenty of freelancers working only for Daimler, Bosch, etc.
Can you decline projects?
Do you control your work times/place.
Do you have to handle on your own authority etc.
I just solved that problem with multiple customers, so I don't really have your problem, sorry.
[0] https://www.4freelance.de/
[1] https://www.it-projekt-eg.de/
https://www.it-projekt-eg.de/freiberufler/service/haeufige_f...
Reicht zum Schutz gegen Scheinselbständigkeit der einfache Eintritt in die Genossenschaft?
Nein. Unser Modell schützt Sie dann vor Scheinselbständigkeit, wenn die IT-Projektgenossenschaft eG der Auftragnehmer ist und den Auftrag an Sie übergibt. Die Mitgliedschaft alleine reicht nicht aus.
That basically translates to "A membership does not protect you from Scheinselbstständigkeit. It will only protect you if the Genossenschaft is the contractor and transfers the job to you."
This might not be possible for all cases.
Anyway, I really like the idea and it sounds totally hassle-free. I will contact them and ask. Should I give you as a referral? Maybe you get a check if it works out for me.
I don't know if that company is best. Just gave it as reference, also for finding competitors. I think for most part you'd need a company with a representation in U.S. and here, so that your "practical" employer can do a contract under U.S. terms and you do one under German terms ... and not sure they'd remember me - it's 10 years ago :)
I've head rumours of German contractors using UK limited companies instead of the local GmbH/UG entities. How does that work generally? Are people setting themselves up as German employees of the UK entity and collecting a salary? Or is there something I'm missing here?
As for the company being incorporated in what will become a third country, from my research I can't see any reason why that will fall afoul of any regulations (as long as everything is properly reported to the authorities).
If you are contracting for multiple clients, you should probably be cool. The thing which is problematic is if you only work for a single client (the mentioned "Scheinselbstständigkeit" - your claim to be self employed, but you really aren't). In this case Germany really just wants that you are regularly employed by that client company. (the reason is that this was commonly abused to force cheap labour into self employments, so that the employers also don't have to pay gov insurances and work around a whole lot of other laws ...)
Of course the tax office did their "Steuerprüfung", but compared to my Steuerprüfung in Austria it was very simple, and needed just one day in their office.
No Gewerbe tax, 100% (independent, systems) work for big US companies.
I never spoke to a lawyer or tax assistant, I did remote work most of my life.