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Ask HN: Germans, how to work legally remote?
Hey there,
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+).
- ohthehugemanate 7y agoI did this for a few years. Here are your options: 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.
- helge5 7y agoJust a small clarification: You are still "selbständig" (self-employed) if you do a "Gewerbe". The thing you don't get easily is a so called "Freiberuf", particularly if you don't have an engineering degree (though I managed to get it). 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.
- johannes1234321 7y agoThe difference between "Gewerbe" and "Freiberufler" ist quite grey. I'm the software field I have often seen the distinction between creating software on your own (creative/artistic work - freier Beruf) vs. implementing other's requirements (production - Gewerbe) but in each case it depends on the tax officer looking at the files.
- cntlzw 7y agoYes, unfortunately. With a degree in CS you might get away with Katalogberuf: no Gewerbe, no Gewerbesteuer
- rad_gruchalski 7y agoYou don’t need a degree anymore. Experience comparable to a degree, documented with proper work contracts and references gets you there too. Source: myself, not German citizen, living and working in Germany as Freiberufler (alongside other things).
- throwaway9283i 7y agoCan you go more into detail regarding the tax stuff? Who pays the VAT then?
- cygned 7y agoIn countries that have a tax agreement with Germany (e.g. Canada), the Reverse Charge procedure is used; you signalise that on your invoice. In that case, the customer is obligated to pay the VAT in their country and you bill the net amount. However, that depends on the service/product sold. If you re-sell development services, for example, you still have to pay VAT in Germany on a part of the amount billed while the rest is covered by Reverse Charge.
- alien1993 7y agoIn Italy there is a similar law for freelancers, but it's only valid if the client is another italian company, so if I work only for a US company for example there should be no issues. In any case I suggest you ask a German lawyer, he know best for sure.
- kevinherron 7y agoHow long do you want to stay for? I'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.
- throwaway9283i 7y agoYou mean VISA in the US? I want to stay in Germany (I am a German citizen). I would plan to be there for a significant time, more than three years.
- kevinherron 7y agoI'm sorry, I completely missed that you were a German citizen and assumed you were a US citizen who wanted to move to Germany. Nothing I posted is relevant to you.
- wozmirek 7y agohttps://bluemarblepayroll.com/about/ https://bluemarblepayroll.com/about/ might be able to help? needs your employer to set this up tho
- throwaway9283i 7y agoThanks, will have a look :)
- rjsw 7y agoIs it really that expensive to set up a company in Germany ?
- tpetry 7y agoIt‘s very bureaucratic starting a company here. You will need much time.
- jacquesm 7y agoCostly too. German tax law is complicated and it will cost quite a lot of money to get all the filings done correctly.
- throwaway9283i 7y agoYes, I think it is at least 2-3k€ per year even for an empty GmbH.
- BjoernKW 7y agoIt depends. Incorporating is comparatively expensive and time-consuming. Running as a sole proprietor is simple and cheap on the other hand.
- A2017U1 7y agoBulgaria if you want Eurozone incorporation. The benefits are too huge to ignore. (more a comment for anyone browsing and thinking about it)
- chrisked 7y agoYes, corporate tax rate in Bulgaria is attractive. However, how does this help if op wants to stay in Germany. Immediately cross-border tax issues are introduced you have to deal with. Only the tax accountants and lawyer are winning in this case with their billable hour. Also do not discount the language barrier too much.
- throwaway9283i 7y ago
- BjoernKW 7y agoSo, if I understand you correctly you'll be working on a contractual basis for a single client, full-time for a prolonged period of time. 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.
- throwaway9283i 7y agoI don't think that my employer would do so only for me (given that I don't even have an employer right now, I'm just speaking generally here). But I agree this would indeed be the best option. 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)?
- BjoernKW 7y agoI suppose there are legal constructs that allow you to do this. For example, you could set up the UG mentioned above yourself and be its only employee with all the taxes and social security costs that implies. 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.
- telcy 7y agoJust use a Gewerbe and make sure you issue a few invoices to other clients. I have done that for years and never had any problems.
- throwaway9283i 7y agoI don't have and I don't want to have any other clients.
- bitL 7y agoEither make your own UG or use individual W8 form for US company (reverse charge in DE, no VAT). Still, you need to have at last 20% of your income from another source if you stay a freelancer. Ideally if the US company had two legal entities and you could issue invoices to both. Most people start their own GmbH with all the increased taxes it brings.
- throwaway9283i 7y agoWouldn't that still be a grey zone to just invoice two different legal entities even though they are technically the same?
- bitL 7y agoI don't know, it's best to discuss with a lawyer of course. Still, if they are two different entities with two different TINs, why would that matter to the tax office?
- cygned 7y agoBe aware that if you incorporate, you still will have problems with Scheinselbständigkeit - being a small UG/GmbH does not prevent you from that! 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.
- jotm 7y agoHow so? Is there a problem with having a company with only one employee and one client?
- cygned 7y agoYes, if you have an incorporation (UG/GmbH/...) where you are the only managing partner (Ein-Personen-GmbH) and you only have one client, you’re handled as if you were a freelancer with only one client. It was an easy way to circumvent several obligations until they “closed” that “loophole”.
- jotm 7y agoCome to think of it, there was a proposed change to taxation in the UK for these cases. Not sure what happened to it, it was not in effect this year.
- throwaway9283i 7y agoWhen did they close that loophole?
- cntlzw 7y agoIt was never a loophole. „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.“
- Aardwolf 7y agoOff topic, but why are Ask HN posts displayed in gray like a negatively voted comment? This entry has 35 positive points currently so shouldn't be made so low contrast...
- frfl 7y agoIt's to de-emphasize post bodies. It's like that for all post bodies on HN. I believe the rationale was to focus on the title/link and any comments.
- Tempest1981 7y agoFor me, the title is also gray: "Ask HN: Germans, how to work legally remote?"
- majewsky 7y agoI think that's the styling for a:visited. (It links to itself.)
- chrisked 7y agoFeel free to reach out to me. We have seen this case couple of hundred times already and I’m sure I can provide some direction. Certainly a Trade Office registration or own limited company is the way to go. Can talk you through the costs as well. My email is ck at firma dot de.
- throwaway9283i 7y agoDone, thanks for your help :)
- leethargo 7y agoI'm in a similar situation (German citizen living in Germany, working as a freelancer for a company in Asia). As far as I can tell from some research, the only "risk" is that I might have to do some back-payments into the Rentenversicherung. 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".
- helge5 7y agoWrt to social security stuff, one should proactively run a "Statusfeststellungsverfahren" - you fill out some forms and the authorities will tell you how they declare you. That puts you on a safer side. 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"!
- throwaway9283i 7y agoI do not want to save any money in taxes, health insurance, social insurance or pension fund. I am actually happy to pay all this. Nevertheless I heard horror stories even by doing so you are at risk they will f..k you anyway after a Prüfung (audit) within the first five years or so. 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.
- helge5 7y agoI can feel your pain, but that is really not what this is about. It is all about the rules/laws :-) 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).
- k__ 7y agoScheinselbständigkeit also takes into account other properties than "only one customer". 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.
- k__ 7y agoBtw. I work remote for 4 years now and since last year for US companies. I just solved that problem with multiple customers, so I don't really have your problem, sorry.
- throwaway9283i 7y agoThanks to let me know the additional conditions. As an employee I wouldn't be able to control that.
- zeug 7y agoYou should give the Rentenkasse an call. They are happy to tell you, if this would be Scheinselbständigkeit.
- zeug 7y agoThey will also give the reason why/why not on paper. So you should be Fine.
- throwaway9283i 7y agoI already know the answer: yes, it will be Scheinselbstständigkeit. The question is how to legally avoid that classification.
- purerandomness 7y agoYou can join any "IT-Genossenschaft" like [0] or [1], which legally saves you from falling into the "Scheinselbstständigkeit" category. One-time cost is about 100-200€. [0] https://www.4freelance.de/ https://www.4freelance.de/ [1] https://www.it-projekt-eg.de/ https://www.it-projekt-eg.de/
- hawski 7y agoThat's interesting. Could you expand it a bit or point to some English articles about it? After joining can you work with your own client and not share the client with the rest of the cooperative?
- throwaway9283i 7y agoThis sounds genius! Never heard of that. Will definitely look into it. Thanks a ton!
- HelenePhisher 7y agoThat contradicts their own statement in their FAQ: https://www.it-projekt-eg.de/freiberufler/service/haeufige_fragen 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.
- johannes1234321 7y agoOne way to set this up is using some form of consulting/temporary worker company as an intermediate. I was employed in that form for a while. So legally that company hires you and then invoices the U.S. corporation taking a cut. In my case that was Kelly Services and was hassle free (I got my salary as negotiated in time, only interaction I had with them was signing a contract and terminating it) no idea how hard this is to setup or what the cut is they take.
- throwaway9283i 7y agoSomeone else will make huge money only because bogus laws in Germany which probably won't be fixed even in the year 2100. 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.
- johannes1234321 7y agoAbout bogus laws: I think the employee protection in the German system is a factor (not the single one) on why German economy did quite well and populists for a long time had limited success. The strong safety gives guarantees so that one has less fears and representation of employees on the board ensures long term perspective over short term gains. (With the downside that employees on the board represent current, not future employees and leads to more conservative operation as change is hard) Anyways, that's a different complex debate. 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 :)
- literallycancer 7y agoYou could stay in Germany for less than 183 days a year and in Austria/Switzerland/etc. for the rest. And have permanent residence somewhere like Georgia.
- sparkling 7y agoNope.
- movingbritde 7y agoI'm in a similar situation, except I'm a British citizen looking to move to Germany. I already have a sole director, UK limited company set up for contracting / freelancing. 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?
- throwaway9283i 7y agoWithout being able to contribute to your question: in hindsight of Brexit (UK will leave the EU) this might not be possible (as easy?) as in the past anymore.
- helge5 7y agoI think the "only" real change is that he will need a work visa, the other aspects should remain the same. A EU citizen can freely choose his workplace in the EU (which is a reason why the British voted exit, they specifically didn't want that).
- movingbritde 7y agoThankfully freedom of movement is still in effect until the end of October. So no visa's required just yet. As for residency after the brexit date that's completely in the air but I would rather be already inside germany than outside.
- movingbritde 7y agoFreedom of movement is still in effect until the end of October, as for after that time the visa/residency question is up in the air but there's an extremely good chance residency of some form will be offered to British citizens who are already established in Germany. 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).
- rurban 7y agoI avoided the Gewerbeproblem by proving that I am a free Systems Developer, in contrast to Application Developer. A true Freiberufler, even without a CS degree. 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.
- planetburgess 7y agoYou can be employed through a third party deployment company (ArbeitnehmerÜberlassungsGesetz) for up to eighteen months. Such companies (known in other countries as Employer of Record / GEO / PEO / Umbrella companies) have an AÜG license. We offer this to our clients in Germany. After eighteen months your company could setup (in order of complexity) a representative office, branch or subsidiary. Or you could pursue one of the self employed models.
- greys 7y agoFaced with similar issue, thanks for useful info guys!