Options for living in Germany but paying tax in UK

Hello. Is it possible to live in Germany and not be resident (for tax purposes)? I am a self-employed illustrator, UK resident and tax payer. I've just moved to Germany with my wife and child for three to five years to work on a personal creative project (which is uncommissioned). My income comes from commissions from British companies (I can do the work from anywhere it the world, then send it to the UK -- where I am paid into my UK bank account).

Here in Germany we've registered our arrival (as we've rented an apartment) and have been given our Anmedlebestaetigung. But only my wife and child (as non-earners) have been granted their Freizuegigkeitsbescheinigung (right to reside, I believe).

The Bezirkamt tells me that to get mine I must get a Steuernummer from the Finazamt first.

Not surprisingly, I don't want to spend time, money and energy getting into the German tax jungle, only to have to extract myself from it (and back into the Uk system) in two or three years. Is there any way that I can stay here without visiting the Finazamt, and so probably setting a train a chain of events which will make me a full-fledge German tax payer?

Officially, no, as far as I'm aware. Under the 180-day rule, you have to pay tax in whichever EU country you spend more than half a year in. Maybe someone else will be able think of a get-out clause.

Unofficially, you could probably get away with it for a few months or even a year or two, but five years seems rather optimistic. This is especially so as you have a family and will presumably be claiming all kinds of handouts for the kid. If your wife was working then you could try claiming to be a house-husband, but the authorities will become suspicious of a fully-unemployed family. The point is you're not a "UK resident and taxpayer" any more; you said yourself you've registered your address here.

I think however you are worrying too much about the German tax system. Get yourself a decent accountant (whose charges are themselves largely tax deductible) and you needn't have any more headaches than if you were in the UK.

Boris Becker had exactly the same idea and only just managed to avoid time in jail.
The case revolved around the prosecution's allegation that Mr Becker had maintained a residence in Munich while claiming to live in the tax haven of Monaco.

Indeed not. Why on earth should you pay money for the German services and infrastructure that you'll be using for years?

You should get it all for free. You're British. You're entitled to live in any country you want without going to any sort of effort to accommodate the policies or systems of that country. Let alone fork out a penny of your own money.

The Germans should regard it as a privilege that you expect them to fund your free ride here.

In a word: No. If you live here you are resident and residents pay taxes here and the finanzamts have a reputation for being bastards so if you try to con them you will probably fail, then regret you ever tried it.

That said you possibly could legally create a company in the UK and have all money for your work paid to that company and pay yourself in dividends. You will have to pay German tax on any payments you make to you while you live here but anything you don't need you can leave in the company. As you are married with a child you get a generous allowance from the tax system here so horror stories of 50+% lost to tax probably won't apply to you. This is especially true if one of you earns a lot and the other not much. This is a complex area so get professional advice to make sure what you are doing is legal.

Interesting idea. Wouldnt setting up a company in the UK for this purpose would cost as much time and money as asking a german tax advisor to deal with your german tax declaration?

Oh and btw - although german Finanzamt would probably never find out - setting up a company with the only purpose to avoid paying taxes is illegal. It´s called "Gestaltungsmissbrauch".

Oh no Mr. Freising, you are setting up a company as you want to grow your business and need a professional image, your customers are UK based and you must have a legal presence there, you are thinking about VAT registering, and of course limited liability should it all go tits up... . You must be careful to pay all taxes due, but AFAIK you would still pay any taxes your company was liable to to the UK not to Germany. Your personal liability is to Germany and anything you pay yourself in the UK is also taxable in Germany, that much is clear. You should ask a professional.

To your questions, it depends how much money is involved. I'm no expert but AFAIK the more money you have the better advice you can pay for and the less tax you pay...

If you are working as a freelancer and living in Germany then you have to pay German taxes. Your customers may be in a foreign country but the business, i.e. you, is German. You are effectively working for a German company, yourself, and are liable for taxes here.

Setting up a UK Ltd is cheap, less than £100 but it will liable for German corporation tax as control of the company resides in Germany so it's hardly worth it. It's not how HellesAngel mentioned.
BUT
There are plenty of people working here through UK Ltds, some for more than 180 days a year. Who just carry on exactly as if they were in the UK and will deal with the "issues" in the unlikely event they arrive.
BUT
You're well on the radar, renting apartment, family here, planning to stay a long time. It's German tax for you all the way, which as others mentioned, probably isn't that bad in your circumstances.

My experience is that setting up as a freelancer is pretty simple; a couple of hours to register, and then a tax return once a year. In the first year, when I didn't owe any tax, it was a question of spending a couple of hours filling in the forms myself. Since then, it's a couple of hours getting the numbers together for the accountant. Over the course of a year, it's not exactly much time. It gets more complicated if you register for MwSt. (VAT), but if your clients are all in the UK then this doesn't apply to you (usual caveat, check with a professional).

Moreover, you may find yourself paying less by registering here. The stories of 50% tax don't, in my experience, apply to freelancers unless you're really doing well for yourself. In addition, costs such as health insurance, pension payments etc. are generally tax-deductible, something that you may not get if you continue to pay tax in the UK, where this is covered by your NI contributions.

Ok, I stand corrected about the simple approach by creating a UK Ltd company but I'm sure that if the amounts of money are large enough and you can pay for good advice there's a way around the 'controlled from Germany' limitation. It's always Mr. Average that gets screwed - most of these restrictions have been brought in to nobble single person companies (aka. contractors/freelancers) who play the system for all it's worth. I know several who as ollya says just carry on regardless... But as ollya says you're well known to the finanzamt and they're good at figuring out what's going on.

just one small correction to STB: for a freelancer/self-employed, AFAIK only 2400.- EUR per year of health insurance costs can be written of against taxes, not the full amount yet in case your health insurance costs are higher then that. Having said that: this is probably going to change in near future as there is a dispute about this already being dealt with by the German supreme court and from what I heard the court leans in favour of being allowed to write of the whole insurance costs against income...

However: no-claims-bonus-payment received by the insurance are tax-free! Therefore it can make sense for a freelancer with good income to have a good private insurance coverage with 2400.- EUR/year costs or even a bit more if he choses to have a health insurance which, for instance pays up to 6 monthly premiums back as no-claims bonus. But this has to be seen in each case individually... but is just one more reason not to totall disregard being a tax resident in Germany.

Cheerio

When you say it's easy, can you point me in the direction as to how you actually go about doing it?