Taxes and the freelancer in Germany

Tax obligations for contractors

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geek
I'm a British national about to start as a freelance contractor in Munich. Can anyone tell me what Steuerklasse I'm in? I'm married with 3 kids, wife not employed.

Vielen Dank.

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YorkshireLad6
Assuming you wife and kids live with you in Germany you'll be Tax Class III. Your 3 kits will qualify for child benefit, which can either be taken as a tax rebate, or paid out directly (€154 per child, per month up to 3 kids, thereafter €179 per child per month).

There are no end of tax advisors around, but be sure you find someone who not only understands the issues of self employment, but also speak English and realise the international nature of your situation.

YL6
geek
Forgot to ask if anyone can tell me if the following are mandatory for someone in my position (i.e. Freiberufer/contractor):

- Krankenversicherung
- Arbeitlosenversicherung
- Renntenversicherung
- Pflegeversicherung

Thanks
YorkshireLad6
Krankenverischerung and Pflegeversicherung are a requirement to live her, not just to work here. You must show evidence of sufficient cover (not necessarilly German) to be here for the longer term. Arbeitslosenversicherung and Rentenversicherung are voluntary (but recommended) for freelancers...
geek
The big dilemma seems to be whether it's better, as a British IT freelance contractor, to set up a company in Germany or to use a company in the UK.
Does anyone have any recommendations on this?
Thanks again.
planetmoni
the debate of setting up a German company or an English Ltd is widely debated in the Tax Consultant field in germany. it is a very complex quetstion. I work freelance for a Tax Consultant and I would advise you to speak to a tax consultant who knows the stuff. There are so many different things to consider.
geek
Thanks YL6

From what I've read in these postings, it seems that I'll have to pay a small fortune (up to 25k Euros) to set up a company, although I guess for me the cheaper GbR is more applicable (although I'm not clear how much it would cost to set up a GbR). As a freelance IT contractor, the only reason I can see to set up a company (namely the 'prestige' value) is somehow lost.

I think, I'll register a limited company in UK, but trade from, and bank in Germany. I'll ask my dad (who happens to be an accountant) if he can submit my annual returns to UK Companies House, and get a German accountant to submit a tax return/accounts to the German taxman.

I hope I haven't missed anything. I'm just a bit surprised my Steuerberater hasn't mentioned to me the cost of setting up a company.
YorkshireLad6
There's a cost to setting up any company, but most of it is administration. The €25k for a GmbH is only capital that is required to setup the company (in practice only €15k is actually needed), which as soon as the company is formed, can be spent...

Whichever form you take there with be, say €2-3k paying the various folks who help you (accountant, lawyer, notary), depending on what form and how complicated the company agreements are.

As a "simple" freelancer, why do you need a company in any case? Why not be registered self-employed? There's little or no cost to set this up. (Note in any case a GbR is a partnership, so needs other people involved)

YL6
Anwalt
I am a freelancer too and YL6 is right, there is no need to set-up a company. You can be registered with the KVR as self-employed.

I'm American, so it should be easier for you (i.e., Geek) than it was for me to set things up. Which, I might add, was pretty damn easy.
geek
Thanks again YL6 and Anwalt.
MZD
Can any of the independent contractors out there give me advice about the procedures for registering at the tax office? I have my work permit but now I need to get my tax id number, etc.

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Anwalt
Call Christina Westphal, who advertises on TT, and meet with her. She will get you sorted out, is very knowledgeable, speaks fluent English and has tons of experience helping English speaking Selbständigers from TT.

Do yourself a HUGE favor and don't try to go the cheap route and figure out everything yourself. Even if you speak fluent German, the tax system is much too complicated, and it will be impossible to coherently piece together the odd bits of info you are able to glean from TT.

Christina is very reasonably priced and, in my case, I haven't been charged anything until she does my 2005 taxes later this year.

BTW: I am self-employed and have been through all of the growing pains that you are going to experience getting things straight with the Finanzamt.
iscream
Is there a difference in being a freelancer and being self-employed here? Finanzamt told me that as a foreigner i cannot be a freelancer. The woman did not sound too convincing so i am trying to confirm, but without much luck. Thanks.
WhiskyHammer
As I am currently going through the process of starting my own business here in Germany I can relate to much that has been said so far.
Yes, get a good tax advisor!

Another excellent point of help is the IHK.

They have a special department for business start-ups and can help and advise on what you need to consider to start your own business.
They also speak excellent English, just call them and ask for an "English" appointment.
They also have lots of info sheets in English which they can send you.

I was with them today and it was a very informative meeting.

WH
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