Working for US company remote from Germany as A German citizen
Can i work remotely from Germany for US company.
I am German citizen.
35 comments
Yes and no. If the US company is not registered as an employer in Germany (basically, has a subsidiary in Germany), then you’re not an employee under the German law, which means that you have to work as a freelancer (self-employed, pay health insurance yourself, and so on), and the US company must thus be willing for you to work as a contractor instead of as an employee. At least that’s my understanding.
Yes, and given that you will work as a freelancer for just a single company long-term, you will have to pay into mandatory social insurances as you are "arbeitnehmerähnlich Beschäftigt" (Arbeitslosenversicherung, Rentenversicherung, Krankenversicherung). Also note that you will have to pay both parts of the social insurance contributions (employer- and eyployee part). Assuming you are above the "Beitragsbemessungsgrenze" (~85.000€/year income), this amounts easily to 2.000€/month in social contributions (some of those are partly tax-deductable and I advice to get a tax accountant).
If you want to avoid paying into the mandatory social insurance, you must meet certain criteria to be considered truly self-employed. One way to achieve this is to not make more than 5/6 of your yearly income through one customer.
If you want to avoid paying into the mandatory social insurance, you must meet certain criteria to be considered truly self-employed. One way to achieve this is to not make more than 5/6 of your yearly income through one customer.
Contracting for the US gets you about 100-200k per year, so you certainly can afford the max. rates for healthcare and social insurance.
I think I paid about 700/month healthcare which was max. and I certainly didn't pay any tax accountant.
what I forgot was to pay into some kind of pension fund.
Thank you, i am okay to pay the social security contribution( both employee and employer part) and yes it is more that 2000 Euros per month. However for this, do i need to inform the Finanzamt? or informing my insurance partner(TK) is sufficient? any other formalities i should do before picking up the job?
you have to register yourself at the finanzamt and ensure that you qualify as free, which is doing system IT Services, certainly not application iT services. because then you have to register as Gewerbe, and then you have to pay them the russian rates, about 30% or so. for this rate they will protect you. something like that.
TK is fine, I used them.
TK is fine, I used them.
what do you mean to "pay them the russian rates, about 30% or so". And why do i need to register as Finanzamt.
My plan is to call TK and have direct debot from my account every month for Health insurance, Arbeitlos insurance, care insurance and pension insurance. This all comes more that 2000 Euros per month.
And on top to file tax every quarter, for this my tax consultant will help. Also my wife is working with tax class 5, hence we will file the tax together. Any thing i am missing here in this plan?
yes, your initial taxid, classification and hence gewerbesteuer. that's the hard part.
the online tax filing via Elster can be done by yourself, yearly.
TK is trivial.
the online tax filing via Elster can be done by yourself, yearly.
TK is trivial.
My tax consultant said, as you are going it get a fixed income from US company, this will not be a "Freelancer" job. Hence no need to do any special registration with Finanzamt.
All this is new for my tax consultant as well, may be he is wrong. Do you have any reference for tax consultant. happy to take help. or any content which explains the process, happy to read/watch?
Hi littlecranky67, I will be paying Arbeitslosenversicherung, Rentenversicherung, Krankenversicherung both employee and employer part. Do i need to do any formality with Finanzamt? Currently i am already working with regular Germany company as an employee.
Yes, you should be extremely happy you are not a US citizen trying to do this. Your arrangement is extremely simple and easy to do legally. IRS taxation of Americans abroad is vexatious and obdurate. Don't even get me started about taxation of Americans owning shares in foreign corporations.
The IRS taxation of American's abroad is basically just filing a normal federal tax return and claiming a $100k+ exemption on foreign earned income. It's very simple. The meme that the process is "vexatious and obdurate" seems most often propagated by those who have never done it.
Taxation of citizens abroad is simply wrong and a violation of sovereignty. You never heard of GILTI and have fun with almost every bank in the country turning you away immediately based on your place of birth (USA). In that case you are guilty of US citizenship until proven innocent. Have fun accepting contract work ("self-employed") and dealing with GILTI if you run your own foreign company. If you are a US citizen freelancer abroad youwill get slammed with double self-employment tax.
You're forgetting FATCA, which is a hassle for anyone who needs a bank account in a foreign country to get paid.
FATCA is a crime against humanity and a blatant violation of sovereignty. Thanks Obama?
I don't know if your statement is sincere or sarcastic. But assuming you're sincere, in addition to being a violation of national sovereignty, FATCA is most certainly a violation of the 4th and 5th amendments.
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Those who’ve never done it? Mmmm, no. It’s the opposite of what you say, and not a “meme” but reality. Citizenship based taxation instead of reasonable residency based taxation is vexatious, obdurate, and I’ve done it regularly and am doing it now. Those defending the US system are the ones who have never done it - or are at best passers-by with no financial planning or career path (including a pension) or family, taking a few years abroad on a modest salary and go home.
As an American working abroad who is about to wire the IRS a ridiculous sum of my money earned while living and working in a home for a company that happens to not be in the US, I assure you the exemption you refer to (FEIE), which is CAPPED at that $107K, is insufficient. That is because it covers wage income only and has numerous other limitations, including complete ineligibility if taken in conjunction with the other weak avenue (FTC) to only mildly offset a policy that should not exist to begin with.
Retirement, foreign investment (which is local to me) such as company equity, home sales, etc gets taken away by a country to which I have no ties other than citizenship. The FTC/FEIE, which by the way you can’t combine and which allows only one selection per eight years, does not free you of this and leaves you still sending huge amounts of your earnings to the IRS pointlessly after paying taxes to where you actually live and work.
No other developed nation does this. The US’s extraordinary system of extraterritorial taxation severely harms me and 9 million Americans abroad. We are already paying taxes where we actually live and work. No one else but American citizens have to “send money home.” And forget about self employment - it’ll destroy you. Solely by virtue of your passport. Don’t even start me on FATCA, a horrific intrusion preventing many of us from getting bank accounts - for the same issue domestic politicians recently defeated (remember the outrage over Treasury wanting to inspect accounts with over a certain amount of money deposited? We actually live that).
In case it’s not obvious, I am an American living abroad balancing a career and financial plan with this horrid system. Definitely not someone who’s “never done it.” There are activist groups for this among other Americans dealing with this draconian nonsense, but we are up against the aforementioned - as well as, I’m sorry to say bluntly, poorly informed sentiments from people who actually have “never done it” - or for whom it was trivial, as you say, because they were lucky or young enough to have no serious financial obligations or concerns.
Never mind the fact that it’s wholly unnecessary and legally simply a relic of the Civil War, likely generates very little for IRS vs how much it costs, and continues only because the tax prep industry (eg TurboTax) has a strong lobby vs disempowered citizens writing to disinterested lawmakers. This is the only reason it still exists. Defending this ridiculous practice makes absolutely no sense if you don’t work for one of these companies.
As an American working abroad who is about to wire the IRS a ridiculous sum of my money earned while living and working in a home for a company that happens to not be in the US, I assure you the exemption you refer to (FEIE), which is CAPPED at that $107K, is insufficient. That is because it covers wage income only and has numerous other limitations, including complete ineligibility if taken in conjunction with the other weak avenue (FTC) to only mildly offset a policy that should not exist to begin with.
Retirement, foreign investment (which is local to me) such as company equity, home sales, etc gets taken away by a country to which I have no ties other than citizenship. The FTC/FEIE, which by the way you can’t combine and which allows only one selection per eight years, does not free you of this and leaves you still sending huge amounts of your earnings to the IRS pointlessly after paying taxes to where you actually live and work.
No other developed nation does this. The US’s extraordinary system of extraterritorial taxation severely harms me and 9 million Americans abroad. We are already paying taxes where we actually live and work. No one else but American citizens have to “send money home.” And forget about self employment - it’ll destroy you. Solely by virtue of your passport. Don’t even start me on FATCA, a horrific intrusion preventing many of us from getting bank accounts - for the same issue domestic politicians recently defeated (remember the outrage over Treasury wanting to inspect accounts with over a certain amount of money deposited? We actually live that).
In case it’s not obvious, I am an American living abroad balancing a career and financial plan with this horrid system. Definitely not someone who’s “never done it.” There are activist groups for this among other Americans dealing with this draconian nonsense, but we are up against the aforementioned - as well as, I’m sorry to say bluntly, poorly informed sentiments from people who actually have “never done it” - or for whom it was trivial, as you say, because they were lucky or young enough to have no serious financial obligations or concerns.
Never mind the fact that it’s wholly unnecessary and legally simply a relic of the Civil War, likely generates very little for IRS vs how much it costs, and continues only because the tax prep industry (eg TurboTax) has a strong lobby vs disempowered citizens writing to disinterested lawmakers. This is the only reason it still exists. Defending this ridiculous practice makes absolutely no sense if you don’t work for one of these companies.
Aren't us US citizens the only people who get taxed regardless of where we live and work ( yes I know the first 130k is exempted, it's still outrageous).
Depends on how you define it.
Australians can still be required to submit tax returns/pay taxes when living and earning money while overseas.
The rule is "Australian resident for tax purposes", and even if you never set foot in the country for the whole year, you can still be a resident for tax purposes.
Australians can still be required to submit tax returns/pay taxes when living and earning money while overseas.
The rule is "Australian resident for tax purposes", and even if you never set foot in the country for the whole year, you can still be a resident for tax purposes.
When moving to Europe from Australia I just filled out a small form basically saying "I won't be living here anymore" and have not had to look at an Australian tax form since.
It very much depends on your individual circumstances.
For instance, a friend had problems with this because he made the same declaration, but after returning to Australia some years later, the ATO had issues with his declaration. He ended up having to do tax returns for the years he was away.
The ATO provides some examples for their rules.
https://www.ato.gov.au/Individuals/coming-to-australia-or-go...
For instance, a friend had problems with this because he made the same declaration, but after returning to Australia some years later, the ATO had issues with his declaration. He ended up having to do tax returns for the years he was away.
The ATO provides some examples for their rules.
https://www.ato.gov.au/Individuals/coming-to-australia-or-go...
Eritrea as well.
He still has to deal with taxation in his own country
yes but at least his taxes are paying for healthcare and other social services he wouldn't be able to access as an american.
> yes but at least his taxes are paying for healthcare and other social services
This is not exactly true in the german system. Social insurances are separate from taxes. For example I am a self-employed German, and I am exempted of paying into the government pension fund (as a result I am also not eligible for pension and have to make my own arrangements). Same for health insurance; while you cannot be legally exempted from it, you can be exempted from the government system ("gesetzliche Krankenversicherung") and pick a private health insurance company (which has its own advantages but also drawbacks).
This is not exactly true in the german system. Social insurances are separate from taxes. For example I am a self-employed German, and I am exempted of paying into the government pension fund (as a result I am also not eligible for pension and have to make my own arrangements). Same for health insurance; while you cannot be legally exempted from it, you can be exempted from the government system ("gesetzliche Krankenversicherung") and pick a private health insurance company (which has its own advantages but also drawbacks).
No, they have to pay their own health insurance in Germany and deal with taxes themselves as a self-employed person. Additionally, most likely they have to foot in for pension and a couple of insurances to be on the safe side. Germany is €€€.
I’d also recommend getting a Steuerberater. They’ll need it. Mistakes are expensive. And don’t spend any money in the first year. Second year taxation will be 3x the nominal rate: tax for the first year, most likely full prepayment for the second year and quarterly payments of 25% for the following year. Ah, and Gewerbesteuer, unless they qualify as Freiberufler…
I’d also recommend getting a Steuerberater. They’ll need it. Mistakes are expensive. And don’t spend any money in the first year. Second year taxation will be 3x the nominal rate: tax for the first year, most likely full prepayment for the second year and quarterly payments of 25% for the following year. Ah, and Gewerbesteuer, unless they qualify as Freiberufler…
As a german freelancer for >8years, I can confirm and highly recommend you stick to exactly this advice.
You will also have to check with the tax authority (Finanzamt) whether you can become a "Freiberufler" (all income taxed as personal income) or whether you need to register a business ("Gewerbetreibender"). Whether or not the Finanzamt accepts your status as a Freiberufler depends on different jurisdictions, there is no uniform decision making in place. Most will grant you the status if you have a university degree in Engineering (or Computer Science). If they decline it, I would recommend to create a limited liability company (GmbH, stay away from UG). In any case, get a tax accountant to assist with this.
You will also have to check with the tax authority (Finanzamt) whether you can become a "Freiberufler" (all income taxed as personal income) or whether you need to register a business ("Gewerbetreibender"). Whether or not the Finanzamt accepts your status as a Freiberufler depends on different jurisdictions, there is no uniform decision making in place. Most will grant you the status if you have a university degree in Engineering (or Computer Science). If they decline it, I would recommend to create a limited liability company (GmbH, stay away from UG). In any case, get a tax accountant to assist with this.
damn that sounds about as bad as the american system..
You can but it kinds of sucks to do this from Germany. I am also from Germany, foreigner but living here long enough to know how things work over here.
The laws and regulations available in Germany makes it kind of bad to work as a contractor, it is also terrible for the company contracting you. The social insurance contribution you'll need to pay out of your pocket will be quite high and the list goes on.
It is too painful to be good. Other countries it is much easier to work as a contractor(such as Great Britain, Portugal etc), but Germany is definitely not in that group.
If working abroad is such a priority for you, you are probably better off getting a visa to work in the US and move there, or move to an EU country that is a bit more progressive in that regard.
I personally made the decision to not work as a contractor and got a job in a North American company that has an entity here to do payroll. That is becoming more common and even some companies such as Remote, do payroll for American companies, enabling them to hire people around the EU, not as a contractor, and this works quite well for folks who live in Germany.
Best of luck :-)
The laws and regulations available in Germany makes it kind of bad to work as a contractor, it is also terrible for the company contracting you. The social insurance contribution you'll need to pay out of your pocket will be quite high and the list goes on.
It is too painful to be good. Other countries it is much easier to work as a contractor(such as Great Britain, Portugal etc), but Germany is definitely not in that group.
If working abroad is such a priority for you, you are probably better off getting a visa to work in the US and move there, or move to an EU country that is a bit more progressive in that regard.
I personally made the decision to not work as a contractor and got a job in a North American company that has an entity here to do payroll. That is becoming more common and even some companies such as Remote, do payroll for American companies, enabling them to hire people around the EU, not as a contractor, and this works quite well for folks who live in Germany.
Best of luck :-)
Yes. There are no restrictions for US companies to hire you (often as a contractor, or as an employee vie PEO providers like Deel/Remote/Oyster/Papaya etc). You do not need a visa - visas are relevant only when working inside the US.