UK Limited company opening an office in Germany

I work for a Limited company based in the UK and we are considering opening an office in Germany. My manager has asked me to find out whether to register it as a German company or remain a limited company working in Germany and what the benefits and disadvantages are.

I am completely in the dark on this matter so any assistance / advise would be really helpful.

Think this has been discussed before if you use the search feature up in the corner there. Johnny English (who I see reading this now) is probably the man to ask as he knows everything about everything.

I have searched but couldn't really understand if people were asking the same question as me as I don't even know what a GMbh is that everybody keeps mentioning.

Been there, done it, bought the T-shirt.

We are a UK Ltd, but in fact now 99% operating from Germany. It is legally allowed of course in Europe, and you will probably need to also get registered for VAT over here. The banks can be a pain in the arse about opening an account but if you threaten them nicely they will do it. They will need translated copy of your Ltd company details, signed in triplicate and all that jazz. Once your are earning income here in Germany then you need to pay company tax over here - so that means splitting the accounts etc.

In theory your other options are actually:

1. Set up ANOTHER Ltd company - but only use it for your "German" trading

2. Set up a Gmbh (squarehead's version of a Ltd)

3. Use the UK Ltd to trade at both ends.

Downside of the Ltd over here is that lots of Germans assume you are a crook. UK Ltd has a poor reputation here because it is so cheap and easy to set up - so quite a few Germans do this and then go bust.

The Gmbh you need €25,000 invested to start (actually you only need to cough up 50% in cash I think, but legally committed to the rest). This is still working capital but if the company goes bust you have lost your cash. But of course you must then do all the official paperwork etc with a Gmbh - whereas a UK Ltd is easier.

VAT is a pain in the arse here. When you first register they want a return done EVERY month within 10 days of the month end.

We know nothing about your business. Depending on your sector you may kinda "need" to be a German GMBH just from a sales/reputation view trading here in Germany. If that is unimportant then my personal instinct would be to set up a new XYZ (Germany) Limited 'cos then you can keep the 2 sides of the business nicely apart - and if the Hermans drive you bonkers (which I 100% promise they will) at least it cannot effect your main UK business.

Yeah, you'll need twelve and a half grand at the bank and the notary will request a letter from the bank proving the same. You are committed to the other 12.5k, but don't need that in cash up front - though bear in mind if it goes tits up and you've not got it you'll be in trouble. On top of that figure reckon on a couple of thousand Euros in legal fees I'd say (prolly about 3k). GmbH is "Gesellschaft mit beschrankter Haftung" - literally company with limited liability. They also have a partnership model and limited partnership model if that is of interest, though limited partnerships (GmbH & Co. KG) are yet more expensive to incorporate as you have to register two companies - one partnership and one GmbH that then acts as general partner (thus limiting liability).

Ltd status is gaining a rep all over Europe - I regularly deal with foreign companies incorporated in England and then trading back in their countries of residence - commonly Italy and Germany. It's easily done as there are so many management companies in London these days so the directors never need even leave Italy/Germany. Not only that, but there are of course ways of then concealing who the true directors and shareholders of the Ltd are - principally because foreign lawyers aren't au fait with Companies House and how it works.

Still, I'd say perhaps the best advice is dip your toe as a limited, and consider GmbH status later on if things seem viable - dunno if JE would agree with me on that?

I agree with Jimbo. I would avoid going the Gmbh route unless you MUST for the sake of looking Germanic etc to customers. It might even be that you wish to trade on your "Englishness" and therefore a UK Ltd might even be an advantage - e.g. you are in the business of selling Lady Di plates or summat.

Ltd is gonna be cheaper and easier, but I would go for a new one so that in 18 months time when you are in a meeting discussing the latest problems and the boss finally says:

"For fucks sake, I am sick of all these buggering problems with the German office. If I had known at the start what a bloody bureaucratic pain in the arse it was gonna be I would never have happened the German office. I don't care what it costs, just shut the damn thing down"

It will be much easier to jam a UK Ltd down the tubes.

As you can tell I am quite the little optimist when it comes to business over here :-)

And also when you forget to file your accounts you won't be disqualified from holding a directorship in Germany for the next 3 years (IIRC). Winding up a limited is a walk in the fucking park compared with the year long nightmare that is winding up a GmbH.

Nice idea that JE - Lady Di plates. I might look into that. "Lady Di Lives on Limited" coming to a dodgy shop near you soon.

I've still got a warehouse full of "Di and Dodi" engagement plates I have been trying to shift.

Give Harrods a call - they'll sell 'em.

Follow-on question:

Person "A" resides in Germany and sets up XYZ Ltd with a Niederlassung in Germany. Proceeds to make sales and profits...pays the relevant Income/Sales/VAT taxes for the Niederlassung. Profits after tax are repatriated to XYZ Ltd's offshore bank account.

1) Can the Finanzamt track monies in this account to Person "A"?
2) Can "A"'s Ex-wife track monies in this account to person "A"?
3) Must profits be taxed in the UK as well?

I'm asking for a friend.

Repatriated to an offshore account? Bit of an oxymoron that one, isn't it?

Person "A" is no Herrman so he likes to think of it as repatriation. :-)

1) Can the Finanzamt track monies in this account to Person "A"?
Of course - if they wanna go looking. I wouldn't mess with the Germans. 2nd only to the USA in tax nastiness. If you wanna be slippery I suggest moving to Latvia.

2) Can "A"'s Ex-wife track monies in this account to person "A"?
No. She doesn't have the same access/powers as a government.

3) Must profits be taxed in the UK as well?
Basically you pay profits based on where you make the money. So if you make 100% of the profit from trading in Germany, you pay 100% company tax in Germany and 0% in the UK. In effect the UK company has emigrated. Gets more complicated if you run 2 offices, depends on whether you have a "permanent establishment" in each country, location of the "control" of the company, and whether sales can be attributed to that base. For instance having a warehouse in the UK would not necessarily be enough to trigger a UK liability if the sales were completed in Germany etc. Would need more details.

Note to self: Owe Johnny at least one beer.

Next question: If Person "A" falls within the German tax regime, would such monies be taxable when made or could Person "A" wait until he pays himself dividends from the Ltd before declaring taxable income?

Well put it this way. I have never earnt a penny since I have been here in 4 years. The Ltd company earns money, and pays taxes, but doesn't pay me anything. I don't earn a salary and I don't take any dividends. This probably needs to change but I can't be arsed to talk to the accountant 'cos I have enough issues.

Two beers.

I would have also thought that Mr. A's company could/will also naturally pick up some invoices along the way from other companys or individuals in the UK or Germany for marketing/PR/web design/management training/accountancy advice etc and that would decrease his profits.

If it's offshore even the Finanzamt may struggle - depends where the cash is held of course. Big problem isn't banking it, but rather getting it back out.

I believe that starting next year, you will be able to start a GmbH here for 1 euro. I don't have anything to back this up, just something that was mentioned when I spoke to my accountant. I don't know any further details.

Me thinks alot of people come on here asking questions to skirt the law... I don't know Fuck all about setting up a business in Germany or England for that matter... but I do know this...

A Uk Citizen is required to pay taxes on their world wide income, just like a US Citizen is. So regardless of where you hold your company whether its in your hands with your nuts or Germany/England You're going to pay taxes to someone. I don't know about the UK and Germany, But when I lived in the UK and paid taxes to the UK I had to submit that info to the IRS showing I had paid taxes - because the US and UK have a reciprocal tax agreement. My future husband is British - he has to do something similar.

Bearing in mind that Germany is a socialist country they are dependent on taxes to support their government infrastructure, as well as provide social programs for the inhabitants of Germany who are entitled to them. You set up shop and not give these hooligans their cut, well you're just asking for the white glove treatment from the UK and Germany. Remember to cough and breath.

On that note, being an Ex-wife myself... You know what they say Hell Hath No Fury like a woman scorned. Do you want to scorn her twice ? You must really enjoy pain. She may not be able to track a rat with dirty sneakers, but you can bet her attorney... along with help of relevant government bodies can and will if you are indeed breaking the law which would include avoiding paying court ordered alimony or child support.

Why are some of you people so slimy ?

In this world nothing is certain but Death and Taxes - Benjamin Franklin

Don't forget the fiscal requirement for the GmbH is going to be reduced to 10k.

DanHessen -In response to your private message. If you don't want to be open for judgment then don't post your personal problems on a public forum. Secondly, if she fucked you over that badly then she shouldn't be morally entitled to anything... however... the law is the law. Where there's smoke there's fire sweetheart...You must have some reason to hide something, otherwise she couldn't get it unless she was LEGALLY entitled to it. Last but not least, include the facts if you want them taken into consideration. Your post comes across as sneaky and slimy - which if that isn't your true self you're doing a poor job as showing otherwise.

I am new to this board, but im not here to make BFF's. I will help who I can with the information I get, because life here isn't easy for someone who isn't up on all the lingo and I've learned alot from the threads here from people doing the same.. For the most part my posts are to be taken light heartedly and are meant to be funny - not character assassinations. I do however, call a spade a spade with little or no regard if it upsets you.

Last note, I don't do pissing back and forth on private messenger...

Nice to meet you too. If you knew the particulars you would have a decidedly different point of view.

regards

@Pmohsgrl

You said:


Nope. You don't know.

There is a huge difference between being a US Citizen and being a UK or German Citizen. If you are a US Citizen you pay taxes on your worlwide income regardless of where you live. So even if you move to Monaco, Gibraltar or the moon the US still wanna tax you. This onerous system does NOT apply to a UK or German citizen. If they move to a low tax country, then they only pay taxes applicable to their new country of abode.

Then when you say "regardless of where you hold your company you're going to pay taxes" is also hugely inaccurate. It is the company that is taxable NOT the individual. So if the company is based in Panama and earns money overseas it doesn't matter a monkeys where the shareholders live if they are not taking an income or dividend. They may choose to later on live in another country and take their profits then at lower rates.

Then when you state that a UK Citizen is required to pay taxes on their worldwide income that is also vague and inaccurate. Citizen is not a word we use. We use terms like RESIDENT, NON-RESIDENT, DOMICILE and NON-DOMICILE to explain different possible tax scenarios. If you read the papers you will see that there are non-domicile billionaires living in the UK just because they most certainly are NOT taxed on their worldwide income.

There is a big difference between tax evasion (naughty) and tax avoidance (legitimate).

PM comments shouldn't be posted on the board without consent I don't think...

Anyway:


Bollocks. Try getting details of a Panamanian bank account. You won't. Nor will your government (not unless they invade again)


Two reasons. 1 - it annoys people like you no end 2 - it pays to be slimy. Well.

Good luck Dan. You can buy me a beer too

This might be true but if possible I would like to have some influence over where, when and how much. Just 'cos your hubby shafted you - no need to take it out on the rest of us. But whatever it cost him from where I am sitting it looks like a cheap cut.

1) No. The monies in this account are owned by company xyz and can only be attributed to A when A gets the money. Until that time A is not involved. If using offshore use a juristiction where there are no public records of the beneficial owners.
2) definitely not
3) There are no profits on most offshore companies, usually it's a set yearly fee regardless if the company trades or not

PM if you want specifics. I got slammed last time this discussion came up for providing tax avoidance information which is legal as distinct to tax evasion information which is not...

No one shafted me Johnny - I still get on with my ex-husband. We had an amicable divorce in 2004 thank you. No one screwed anyone with money hiding schemes. We divorced because I don't want to have children - he knew that going in and for some silly reason thought it would change after the fact. I don't know why he married me if he wanted Children that badly. I didn't change my mind about having children and here we both are 4 years later, happy and remarried (me on Jan 3rd) to people we love. Has has two kids and I'm very happy for him. However, had he tried to screw me he would of met the wrath of the meanest attorney I could of found. We didn't even use attorneys as a matter of fact, we handled it via a marriage settlement agreement where between us we split our assets - down the middle.

If you want to boil something down to semantics be my guest its a free forum. However, as a UK citizen you do report to HM Revenue and Customs that you have paid taxes in another country so contributions can be made to your pension, you also do it to declare if you pay mortgage in the UK. If you aren't doing this then you are screwing yourself because it actually gives you money in the long run. There is an agreement in the EU for this. This is much like the US system, however we have Social Security - not pension. I think you more than anyone on here would understand what a reciprocal tax scheme is.

Furthermore, what people say on this board doesn't annoy me. It's actually entertaining (which is why I come here) to see you lot dreaming up ways to get around something just because you couldn't bear the thought of having to play by the rules because after all you're special and should live by a different set of rules than the rest of us right ? I just hope none of you actually end up in the clink over the brilliant content you post here.

Dan - If you want to start a thread about the particulars and discuss it, I'd love to participate. Perhaps we just have different ethics. I don't care what someone does to me - I wont ruin my own reputation, or drag myself down to their level just for the sake of getting even - because there is no even. In the end its just two people hurting. When she sees you living your life happily and without her - thats going to keep her pain alive. If you want to make her pay, thats the best way to do it. I wasn't cheated on by my ex-husband, but I have been cheated on. I have an ex-boyfriend who decided to go off with one of my best friends - thought the grass was greener. He married her in 2006. I stayed friends with both of them - She and He did me a favor, showed who they really are and saved me from having to be in that situation. To this day, they fight like dogs and cant stand each other. He complains she doesn't want to have sex and is getting fat, and She complains that he might be cheating on her (duh you think) and that he doesn't treat her like he use to (no flowers, sneaking away, no hotel rooms, no excitement of being a whore I guess) . Absolute perfect misery and I didn't have to do a thing... but take the high road. They are stuck with each other in Sacramento and I've been traveling around Europe and living where I please which has lead to me to my future husband. I wouldn't of gotten here without going through that. Sure, it hurt like hell but I feel free.

Panamanian shelf companies and locked boxes in Zurich are a lot more James Bond though - you can't deny that.

Jimbo I think you might belong in Panimanian locked box on a shelf in Zurich. Perhaps less dangerous there.

About founding a ltd in Uk to do business in germany a couple of reliable sources (Ernst & Young for example) say, that it might be cheaper and easier in the beginning, but as soon as the first legal problems come up, you will start crying for your mommy (and wish you had chosen a Gmbh). Ok they didnt say it with these words and they are adressing germans mostly...

For example lawyers or tax advisors who know both legal systems will be a lot more expensive, or you will have to hire one in Uk and one in germany. Maybe it´s not that big a problem if you already have another ltd that does business in UK.

OK, I think we have to regretfully accept your statement in light of your previous posts.

So...I guess you are more of a specialist in relationships then?

No you don't. I have never reported anything to HMRC in the 20 years that I have been here. I don't pay any contributions in the UK for my pension and haven't done since I've been here. I live in Germany therefore I pay in Germany.

Dude, I think we have already ascertained that "bitter-and-twisted-moi?" knows jack all about tax, business or keeping a man. However, probably very skilled at pottery or something.

Wrong!!! You seem to be applying US tax rules (which I know nothing about) to UK tax rules (which you know nothing about) and all in a couple of sentences - if only life was that simple . A 60-70 page booklet explaining liability to tax in the United Kingdom based on your residency can be found here:
HM Revenue & Customs: International series

And nothing slimy about tax avoidance (this is legal). But tax avoidance seems to be near impossible as a US citizen:


Source: Wikipedia Tax avoidance and tax evasion