Does a Ph.d student need to pay tax as freelancer?

26 posts in this topic

Hello All,

 

I am a Ph.d student in an industry and I am getting my full salary without tax deduction. In my contract it was written that I have to take care of my taxes by my own. I am here for couple of months but don't know what to do. I asked few fellow students about taxes but some said that they don't pay taxes because they are working as freelancer (we are not employed by company) and other told otherwise. I am disturbed as currently I am not enrolled in any tax authority and wondering if I am committing a crime! My company's HR people can't help me because we are contract employees and not getting salary directly from company. In addition, I am not a german resident so I don't know why should I pay a social security or pension like things which I can't get in future. I have health insurance and I pay it by my own. I will appreciate a quick response.

 

Best Regards,

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I would think that if you are a resident of Germany and earning over the threshold, then yes of course you must pay tax. Whether or not you are a freelancer, you are still liable to pay tax (or there would be a hell of a lot more freelancers in Germany than there are already!). It just means that you must do a tax return instead of having it automatically deducted from your salary. I'm sure someone else will post and confirm this.

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As far as I know, whether an employee or a freelancer working in Germany, you will have to pay taxes. Why would you think you wouldn't have to pay taxes?

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Well, I didn't say that I don't want to pay taxes but which tax should I pay. One of my colleague is only paying yearly tax of around 500€ while doing the same job (Ph.d), while another fellow who is also doing Ph.d is paying ~400€ per month! with all the health insurance etc. I couldn't understand the difference.

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Call me stupid, but what makes you think you are freelancing while you are getting a fixed salary?

 

Most probably, you simple get a fellowship ("Stipendium" called in German). Does your contract states anything about scholarship, fellowship or something similar? For this you neither need to pay taxes nor contributions to pension/unemployment insurance. At least I did get a fellowship during my PhD, and I didn't paid any taxes. It was also written in my contract that I need to take care of paying taxes, if any, by my own. It is simply a safety phrase in case laws are changing...

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@sloth: yes, sorry, I am not a freelancer.

In contract my company says that "we promote your dissertation by paying you... till the end of contract" and " you are liable for payment of taxes..."

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Why don't you also check your residence permit? Was it issued under §16 (student), §18 (employed), §20 (researcher), or §21 (self-employed)?

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Well, I believe that every Ph.d student get residence permit of §18 as they get money for their living but not necessarily have to pay taxes.

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@ali.pak: The formulation "we promote your dissertation by paying you" does not look like a typical employment, so I guess you are receiving a scholarship. However, I just found out that not necessarily every fellowship is tax free...if you get the fellowship directly from a company, you might need to pay taxes. Example: If VW pays you a scholarship, you need to pay taxes, if its the VolkswagenFoundation, you don't need to pay taxes.

 

From whom exactly you receive the money?

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Thanks for reply. I receive money from company not from any foundation. Do I have to pay certain proportion of monthly tax (like one of my colleague is paying around 35%) or annual tax (another colleague is paying around 500€/year)!

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I think you need to file a tax return in 2012 for 2011 - therefore you would need to pay an annual tax.

I guess your colleague who pays monthly tax has a regular employment contract (PhD or not doesn't mattter much)

and pays therefore also for all the compulsory insurances.

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@Sloth: Thank you very much for guidance. I will be thankful if you provide any reference of the statement or you are guiding me based on your personal experience. Thank you anyway.

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ali.pak: if you are living or going to live for > 183 days in Germany, you are a tax resident and thus have to pay taxes on world wide income. This includes what you are paid on your "job" - though it is unclear to me what legal status this job has, too - and any other income you may have from interest or rent from your home Upon leaving Germany there might be some tax return due, too. But in order to spare you nasty surprises later with a tax liablity for money you have in error already spent, get yourself a tax advisor for this.

 

Cheerio

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@Starshollow: Thank you very much for your reply. I appreciate your valuable comments since you are a professional. However, I am not doing a "Job" instead a doktorand. I think sloth cleared the point that I need to pay annual tax but not monthly (35%-40%) as these are for employed persons. This is what I noticed about other students who are doing Ph.d in universities but I was not sure since I am doing it in industry.

 

All the best,

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ali.pak: as said before, your actual legal situation was not entirely clear to me because you were referring to employment initially which comes with a certain legal meaning in Germany. Obvisouly your are not employed and it would look like the money paid to you is more in the line of a grant where different tax laws apply, too.

 

Good luck

Cheerio

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.
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Well, I believe that every Ph.d student get residence permit of §18 as they get money for their living but not necessarily have to pay taxes.

 

No. I've heard of PhD students who have had permits under §16 as a student and others who've had one under § 18 as an employee. If you received a residence permit under §18, the Ausländerbehörde considers you an employee. If the Finanzamt agrees is another story.

 

 

However, I am not doing a "Job" instead a doktorand. I think sloth cleared the point that I need to pay annual tax but not monthly (35%-40%) as these are for employed persons. This is what I noticed about other students who are doing Ph.d in universities but I was not sure since I am doing it in industry.

 

Being a PhD student and being employed are not mutually exclusive. Many PhD students are "angestellt". Since you are working as a reseacher in the private sector, your earnings could be taxable.

 

 

ali.pak: as said before, your actual legal situation was not entirely clear to me because you were referring to employment initially which comes with a certain legal meaning in Germany. Obvisouly your are not employed and it would look like the money paid to you is more in the line of a grant where different tax laws apply, too.

 

Starshollow, if the Ausländerbehörde issued him a permit under §18, they consider him Beschäftigt based on the documents he filed to receive his residence permit. Can private companies then circumvent the social security system by declaring the payments as "research support"?

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I think I have found part of the answer. Based on the information the OP has provided to date, I doubt his earnings are tax free under § 3 S. 1 Nr. 44 EStG.

 

I think the OP needs a tax lawyer (unless someone else here can figure it out).

 

 

Stipendien, die unmittelbar aus öffentlichen Mitteln oder von zwischenstaatlichen oder überstaatlichen Einrichtungen, denen die Bundesrepublik Deutschland als Mitglied angehört, zur Förderung der Forschung oder zur Förderung der wissenschaftlichen oder künstlerischen Ausbildung oder Fortbildung gewährt werden. 2Das Gleiche gilt für Stipendien, die zu den in Satz 1 bezeichneten Zwecken von einer Einrichtung, die von einer Körperschaft des öffentlichen Rechts errichtet ist oder verwaltet wird, oder von einer Körperschaft, Personenvereinigung oder Vermögensmasse im Sinne des § 5 Absatz 1 Nummer 9 des Körperschaftsteuergesetzes gegeben werden. 3Voraussetzung für die Steuerfreiheit ist, dass

 

a)die Stipendien einen für die Erfüllung der Forschungsaufgabe oder für die Bestreitung des Lebensunterhalts und die Deckung des Ausbildungsbedarfs erforderlichen Betrag nicht übersteigen und nach den von dem Geber erlassenen Richtlinien vergeben werden,

 

b)der Empfänger im Zusammenhang mit dem Stipendium nicht zu einer bestimmten wissenschaftlichen oder künstlerischen Gegenleistung oder zu einer bestimmten Arbeitnehmertätigkeit verpflichtet ist;

 

 

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Thanks for providing the detail law. When I translated the para you pasted here, I got the following:

 

"Scholarships directly from public funds or from intergovernmental or supranational institutions, which the Federal Republic of Germany is a member, be granted to promote research and the promotion of scientific or artistic education or training.

2 The same goes for scholarships to the remedies specified in clause 1 for purposes of a facility that is built by a public body or managed by, or by a corporation, association or of assets within the meaning of § 5, paragraph 1, point 9 of the corporate Income Tax Act be given.

3 requirement for tax exemption is that

i) one of the scholarships necessary to carry out the research project or to defray living expenses and meeting the training needs and will not exceed the amount awarded in accordance with guidelines adopted by the donor,

ii) the recipient in connection with the scholarship is not committed to a particular scientific or artistic consideration or to a specific employee activity"

 

and It says certain things regarding the exemption for tax. I am also thinking to approach a tax advisor so he can guide me whether I need to pay monthly health insurance (14.9%) pluse pension (9%) or only annual income tax. My confusions were:

1: Since I won't get pension back (as I am not a German resident) then why should I pay?

2: I have a private health insurance then why should I pay 14.9% additional?

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I am not a tax specialist and I really think that you need professional advice (especially as you've not mentioned who is paying you and this is central to the point of whether your stipend is tax-free).

 

If you have an Aufenhaltstitel you are a German resident. It is possible under certain conditions to reclaim any pension contributions you pay, but that is a secondary issue. You need to first determine your status.

 

 

Körperschaften, Personenvereinigungen und Vermögensmassen, die nach der Satzung, dem Stiftungsgeschäft oder der sonstigen Verfassung und nach der tatsächlichen Geschäftsführung ausschließlich und unmittelbar gemeinnützigen, mildtätigen oder kirchlichen Zwecken dienen (§§ 51 bis 68 der Abgabenordnung). 2Wird ein wirtschaftlicher Geschäftsbetrieb unterhalten, ist die Steuerbefreiung insoweit ausgeschlossen. 3Satz 2 gilt nicht für selbstbewirtschaftete Forstbetriebe;

 

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Ali, go and see a tax advisor who really knows about your situation - it seems to me that you haven´t given 100% of the relevant information right from the beginning, and expect others to come up with quotations of relevant laws for you - surely as a PhD student you know how to conduct research yourself, oder?!

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