Filing for bankruptcy in Germany

31 posts in this topic

 

Where I can see good benefit ...is in the different turnover limits for obligatory registration for VAT and the VAT rate itself.

UK Limit = €67000 / 15% Germany limit = 17500 / 19%

 

So, if I was running a small online selling operation from UK, I'd register as a sole trader in UK and set up in Germany a Nichtselbständige Zweigniederlassung (non - independent subsidiary) where I employ myself as manager on a minimal salary.

I don't like to miss points. Makes me feel like a thicko. There are rules governing where your business is trading from (e.g. does it qualify as a permanent establishment in each country?). But roughly speaking it is where you do the REAL trading from, or if you have a permanent establishment in BOTH countries then the sales for each are apportioned accordingly. As such there isn't much in the way of "choice" when it comes to VAT registration. Rules are pretty much set in concrete - gimme a real world example and I can tell you if and when you need to register.

 

Unless you are being a bit "dodgy" in which case, sure, fuck it, register in Panama if you like.

 

Other than it says "where I can see good benefit" which implies the benefit of being Ltd over Sole Trader (or vice versa) when in fact VAT rules are identical for both, so I just cannot see how it matters which you are?

 

 

I'm sure you're right. Convincing Germany is the problem.

I'm not bothered about the great unwashed Hermans. Just a bit of advice for fellow TTers. Herman is welcome to his Gmbh and a pick sharp stick up his arse from the authorities if he gets it wrong. Not my problem.

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Sorry about the late response. I've had a mumber of pressing deadlines last couple of days but will try to respond fully over the weekend. In this respect I've also just seen that Switzerland has a CHF 75000.00 limit before VAT become obligatory. I'll have to give that some thought.

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gimme a real world example and I can tell you if and when you need to

 

register.

I admit this is not a 100% real world example but much of it is based on fact. It's not intended to be a facetious response.

 

Charlie, a UK cititzen, has a moderate web-based business which offers a booking service for holiday home owners in Europe. Charlie's website is hosted in Luxembourg and utilises a "booking engine" service in Dublin. He has a "correspondence" address in Sheffield via an inexpensive office services company where, in addition

to his being registered as a sole trader, his post is scanned and uploaded to his server. One of the reasons he chose this business model is flexibility of location, as he has elderly relatives living in Helsinki, Berlin, Nicosia and Malaga, where he spends respectively 90 days each year, the remaining 5/6 days being taken up by travel. Charlie maintains his website via whatever online connection he can access, wherever he is. Should he ever need to intervene in the fully-automated online system he's set up he does that from wherever he happens to be.

 

Charlie's website only makes the arrangement on behalf of his clients, whether landlord or renter. The contract is actually made between the two active parties as is the reservation processing. Charlie does not handle any payments. The VAT element of the rental costs - if any - is processed directly by the landlords in their appropriate countries. Charlie is rewarded in commission from the landlord, payable on fulfillment of the arrangement he made. This commission is Charlie's only income.

 

Where VAT's concerned, Charlie business has very low operating costs so there's no benefit to be gained in "reclaiming", and he doesn't in any event exceed the £67.000 limit for mandatory registration so he's not registered for VAT in UK. During one of his stays in Berlin he receives a visit from an officer of the local authority who observes him carrying out "maintenance" jobs on his system. Charlie explains jokingly that's he's "running his company". Three days later he receives a letter informing him of the

necessity to register his business and if necessary to register for VAT at 19%, the threshhold being €17.499,- p.a This would be a significan loss of income for Charlie so he explains that his business is registered in UK, without the need for VAT but Berlin presses and requires that he register his business in Germany at least for the time that he's there, after all he's "resident" in Berlin for 90 days of the year but not "resident" in UK at all.

 

My questions are:

 

Where does this business operate from?

Where would the best place be for it to operate from?

Where is the service provided, i.e. where is the place of supply?

If Charlie were to register for VAT when and where would it become liable and to whom should he pay it?

 

I don't know the answers and it seems that most authorities also throw the enquiries into the tray marked "too difficult". It seems to me that if Charlie operates as a VAT liable business, then the VAT liable on the commission is that of the country where the "property" is located. In this case should Charlie register for VAT in all countries in Europe or only in those where the commissions for the properties he "arranged" exceed the threshhold of that country?

 

I'm sure there are definitive answers but I've never got to them so I take the view that until the experts agree he should work only on the principle of "where's the best benefit ?"

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#1 is "Where does Charlie live?"

 

This is not as simple as "wherever I lay my hat" 'cos it is not just based on a 90 day or 186 day rule. Sounds like he lives in Europe to me. Therefore 1 country can claim the rights to be Charlie's place of domicile.

 

It might be where Charlie's cat lives (I shit you not - pets etc are considered in this type of equation). If he owns a house in the UK it might be there. Where does he own a bed?

 

Charlie cannot hide and pretend he lives nowhere. There will be a country that can claim the rights to Charlie's domicile and tax.

 

We then get closer to where the company is also domiciled, as he is clearly the CONTROLLER of the company (regardless of whether he is a Director or not, regardless of his shareholding).

 

p.s. The authorities don't really care where your server is based - that's all just tosh. So is the correspendence address in Sheffield - neither would qualify as a PERMANENT ESTABLISHMENT in the UK.

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#1 is "Where does Charlie live?"

 

Charlie cannot hide and pretend he lives nowhere. There will be a country that can claim the rights to Charlie's domicile and tax.

I'd never considered the concept of domicile until Graham Greene died and the UK and Switzerland embarked on a long battle over the death duties. If I'm not mistaken it was decided at some point that despite not living in UK for eons his place of domicile had always been UK because of his frequent letters to the Times (pre Murdoch !) It was worth millions to the British taxpayer and entirely incomprehendible to a normal bod.

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Where does this business operate from?

It's a little one-man band. It has no UK staff. Even if it was a UK Ltd and UK registered company, it still operates from wherever Charlie lives.

 

Where would the best place be for it to operate from?

Charlie is a bit like a golf professional. He has ONLY end users as customers, so VAT for them is a significant issue. He has no costs to reclaim. So clearly

it is advantageous to keep his business below any VAT thresholds.

 

Where is the service provided, i.e. where is the place of supply?

If Charlie, and therefore the business, is deemed to operate from the UK then he obeys UK rules. Therefore if his total European sales (inc UK sales) are below the £67k

per annum limit, he does not register. But if sales in any 1 country hit the trigger limit (e.g. €17,500 to German customers) then he also needs to register in the country.

Although ironically that "could" help because then that lowers his UK sales and stops him hitting the limit again.

If Charlie, and therefore the business, is deemed to operate from Germany - you know the answer to that already!!

 

If Charlie were to register for VAT when and where would it become liable and to whom should he pay it?

If he is deemed to be German based he registers here. If his UK sales then exceed £67k in future then he must also be registered there. Once registered for VAT in 2 or more countries

then of course the VAT is apportioned to each. If Germany based then the sales to Finland/Italy etc that are below the thresholds for those countries are charged at 19% and

included in the German return. IF UK based the £67k rule applies.

 

In this scenario, it sounds advantageous for VAT reasons to be UK based. Proving that to the German authorities is the next problem of course.

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I'd never considered the concept of domicile until Graham Greene died and the UK and Switzerland embarked on a long battle over the death duties. If I'm not mistaken it was decided at some point that despite not living in UK for eons his place of domicile had always been UK because of his frequent letters to the Times (pre Murdoch !) It was worth millions to the British taxpayer and entirely incomprehendible to a normal bod.

UK rules on domicile are a strange standalone issue. Incredibly for example a child, who had never been to India, could claim "non-domicile" status in the UK because his father (or even grandfather) was born in India - and therefore he was reserving his right to return to his homeland at some later stage.

 

And do not confuse domicile with residence either!!

 

 

One of the reasons he chose this business model is flexibility of location, as he has elderly relatives living in Helsinki, Berlin, Nicosia and Malaga, where he spends respectively 90 days each year,

Ironically whilst Charlie is a UK citizen, it sounds like he is never actually in the UK? This is gonna make it tricky/impossible to prove the business is UK based.

 

Lots more potential questions therefore to be asked if the man does not own a bed or a property:

 

1. Does he have a personal bank account? Where?

 

2. Does he have a mobile phone? Where registered?

 

3. Does he have any personal possessions? Where are they kept?

 

4. What type of structure is the company formation?

 

5. Where does Charlie pay the tax on his income?

 

p.s. I think Charlie sounds like a deliberately slippery geezer and the German authorities are liable to think the same!

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In this scenario, it sounds advantageous for VAT reasons to be UK based. Proving that to the German authorities is the next problem of course.

OK - assuming that Charlie is not the dodgy character that the taxmen assume him to be (and you're right they do, as they do with any enterprise which doesn't fit into the 'easy' box) and assuming that Charlie has a kindly relative (or somesuch) in UK with a very limited tax liability, income or otherwise, who suggests Charlie transfers the business to him/her. Knowing that Charlie has no other income he employs him at a moderate salary, say at a level equivalent to the value of the commisions less the operating costs and tax liablities of the business. Charlie incurs possibly a moderate income tax liability which is hopefully less than the income loss brought about by the application of VAT at 19% applied from € 17500 instead of £67000.

 

This is where I was heading. Is there any great obstacle to such a concept? Could it be defined as evasion as opposed to avoidance?

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Dear All

 

I have read this thread and am after a little advice. Please can you see this thread. Any advice greatly accepted -

 

http://www.toytowngermany.com/forum/index.php?showtopic=337305

 

Thanks

 

B

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