Running a UK limited (Ltd.) company from Germany

Hypothetically speaking...

Does anyone know what the situation would be (and whether it is possible) if I lived here working as the sole employee and director of a UK company? I would guess that I would pay my personal tax here and company taxes in Britain, right? That would be the simple way Or do the Germans say "oy, you are your company, and you're here, we want to tax the company here too"? I wouldn't be selling anything physical (software products, downloaded from a website which I would make sure was based in the UK) so nothing would actually be in DE. Except me, all the admin, all the work, and a few assets such as company computer equipment. I mean, I'm thinking it sounds dodgy to me, let alone what the taxman and so forth might think I suppose part of what I am asking is whether the company will be considered to be doing business here (and therefore pay taxes here and have to run under German laws).

The company would most likely be UK resident for tax purposes so would pay corporation tax there (and vat if your turnover is above the statutory limit/or you decide to register anyway) as the majority of business would be based there, and head office is there. there are some subtelties around that though as the operating decisions would be taken in germany.

you would be german resident for tax purposes

the company would pay german social security as you are based here.

uk ltd's can have sole directors. check the rules though about them being non resident.

the german's wouldn't say you are your company because the company is a legal entity in its owj right. as a director you are simply one of its officers.

best to get a tax accountant to confirm as I took my tax exams in 2002 so rules may have changed slightly (though i doubt fundamentally so)

companies house

dti

inland revenue/hmce

good luck

These sites may answer some of your questions

http://www.bolimited.com/home.php

http://www.limited24.de/i_home.html

TVM.


Sorry. Yeah, I know that. I didn't put it very well. What I meant was that all the work would be done here, so wondered if they'd basically be of the opinion that I had by default created some sort of niederlassung and company tax liability here as a result (in fact wondered if they might even make me create a subsidiary legal entity here to cover such things).

OhFFs.

You are the controller of the company. Even if you were not a director, or even a shareholder the company it is clearly being "controlled and operated" from Germany - unless you can prove otherwise with UK employees, UK payroll, UK offices etc etc. I think you will find that the company is liable for taxation on its earnings generated here in Germany.

Chances are of course that you could "fly under the wire" from the sounds of your business, but if you imagine the bigger picture you can see why this is the case.

Imagine if you like that your UK company XYZ ltd grows in Germany, employs 50 employees in Germany, buys a factory, sells motorcars etc etc. That is an exaggeration from your point of view but the same legal situation arises - the ACTION is here in Germany and therefore the taxes.

Otherwise big companies would play lots of merry games setting up offices in Malta etc. They do this of course, but it is a cat and mouse game. Yours is much simpler legal case for me - the "action" is all here in Germany.

I have been in exactly this situation but with an Irish company. The key issue is location of control, and that means where executive decisions are made, and where the accounting is done.

If the board of directors meet in the UK, not in Germany, and the accounting/bookkeeping is performed in the UK, then it is a UK based company, and not liable for German taxation.

In Ireland there must be at least 2 directors for a company, and at least one director must be in the country at all times. This is because directors can be prosecuted for coroporate crimes, so if your company goes and say dumps nuclear waste in the river they will want to criminally prosecute the directors, and this is not possible if all directors are out of the country.

Being the sole director over here will not make your company liable for German tax, as long as you obey the control and accounting requirements above, but you may be breaking the law by not have at least one UK resident director.

Hi,
I don't know if this is still an issue for you, but I have done exactly that in the last couple of months, founding Emenda Software Ltd in the UK (www.emenda.eu)
and running primarily in Germany (I'm a German resident). Basically business corporation tax is paid in the UK, personal tax in Germany. It's fairly easy to sort out.
If you need any help with this, I'm keen to help out (I'm keen to help anyone around this unbelievably complex system, that seems to want people to fail even before they start out).
It's much easier to set up UK Limited and just happen to live in Germany as a Director. This is fine, and saves months of paperwork compared to forming AG, GmbH etc. All legal too, of course.
Let me know if you'd like more info. Mobile no is 0173 691 3617.

Good luck,
Neil.

I know it may be running slightly off course but I was wondering if I lived in Berlin but was still paid and employed by my existing Uk based company. How would I work that then? Would I be paying tax in UK because thats whos paying me or would i have to pay Tax in Germany?

I'm sure this post will be moved after the moderators awake from their weekend excesses, but most of your questions, and maybe others have been answered Working in UK while living in Germany

Does anyone know of a good contact for legal/financial advice (in English) about this stuff in Berlin?

I'm trying hard to work out how to get paid to do some software development for my old employers in Canada, and such a system seems to be the answer.

My plan at the moment is to set up a UK Ltd, bill the Canadians from the UK Ltd, I plan to leave the money in the UK Ltd, for now. (The Canadian's require a company to bill)

I don't know how long I will be in Germany, and don't know where I will be next (depends on the other half) so basing everything in UK will at least mean it can stay there for a while, and I will have a chance at understanding the rules!

I would very much like to talk to an expert face to face. Any recommendations?

Why do they "require a company to bill"? Why can't they simply pay you as a freelance entity?

Work is being done in Germany, so taxable in Germany. It really is that simple.

Just because it is a UK Ltd company makes it seem all dandy because we are all in Europe etc. But ask yourself this...

If instead of using a UK Ltd to do the invoicing you chose to use a Panama based company, controlled by a holding company in Belize. Any money earnt whilst living in Germany would be offshored until you decide to access it at some later date, perhaps after leaving Germany.

Technically it is the identical legal situation and just as dodgy.

To legally pay your company tax in the UK you need to prove that you have a substantial UK base (e.g. office, staff etc) and that the income is being GENERATED in the UK - i.e. the workers or sales staff are based in the UK.

Canadian's can only bill an 'incorporated' person. That's what you do over there. I nearly did it while I was there, but I got taken on full time, so I didn't have to do the paperwork in the end. As I understand it, they don't have sole trader, they kinda just have private (un)limited, in effect.

So, if I have to be a company, and I have to live in Germany, I have to be a German company then.

The bummer is that I might be leaving Germany in a few months time. I imagine leaving the country would not help matters.

Nope. Didn't say that. You are 100% fine to have a UK Ltd company, I do and so do plenty of others (including plenty of Germans). Just in the example you gave the Ltd company would be liable to pay company tax in Germany and not in the UK.

Its a drag 'cos UK corporation tax is 19% up to 300k and this year over here nearer 29% (down from last year!!).

But what will they accept as a "Company"? You could easily form an Ich-AG or (with someone else) a GbR which are all formal forms but are simply created (and dissolved). Depends on how much the business is worth, I suppose.

Johnny English, I just realized we are talking at cross-purposes.

I don't care where I pay tax, or more correctly where the company pays tax, if I pay tax in Germany that's fine with me.

The point is that if I have to set up an entity to bill from, I would rather it be a UK one, as if it was a German one, then I would more than likely have to close it down within a year.

I'm investigating if a Freelancer is enough after advice from Thomas Zitzelsberger, who seems very good by the way. He suggests that the paperwork for the above system probably isn't worth it.

The question is exactly what the Canadians need... So, I have to find out.

Unless you particularly want a limited company, to set up a freelance company in Germany you just have to apply for a "Gewerbeschein". Setting up a German limited company (GmbH) isnt worth the bother if all you are essentially doing is freelancing.

Although the idea of "Business Angels" is still pretty fóreign to German business, there are bound to be a range of start-up centres in Berlin which can offer advice. Have you tried looking here?

andy M