Taxes Archives - Russianvagabond

Remote work is nothing new nowadays. Even in a traditional place like Germany, more people would like to work from home. Additionally, the wave of digital nomads and expats is on the rise. These individuals prefer to living abroad but still having a sustainable job or online income. But what about Germany? Can you legally live here and work remotely? You can live in Germany and work remotely if complying with all residence and work permit rules. However, for a stay shorter than 90 days, none or only limited restrictions apply, hence, one can perform a remote job from Germany. Working remotely and living abroad is very tempting, however, one should always consider the questions about taxation, and social security law, among other things. Moreover, in many cases, a question of a residence and work permit comes into play. How To Work Remotely and Live in Germany? Generally speaking, you can work remotely for some company (German or foreign) or being self-employed and reside in Germany. BUT there are a lot of details to it. In some cases, remote work leads to a change in taxation rights or in the tax and social security status of the employee. Most importantly, all relevant double taxation agreements and social security treaties must be considered before moving to Germany with your remote job. In any situation, one must pay attention to tax and residence regulations. This doesn't apply to a tourist, if you stay only for a short time in Germany (less than 183 days) there is no problem. However, usually, tourists can stay for up to 90 days in the EU, if they aren't European citizens. Overall, EU/EEA citizens shouldn't worry much about working remotely within the EU. They can stay in Germany for up to 183 days in a year without any effects. But after that, they will become tax residents, which will be followed by some consequences. Non-EU citizens As you see EU/EEA citizens can get away with living or traveling abroad and working quite easily. But it's different for non-EU citizens. If they are working for a foreign company but living permanently in another country, they are theoretically working in that country (Germany). Hence, one must have a work permit in the first place, which is only granted with an associated residence permit. Moreover, when residing in Germany longer than 6 months, you will be paying the income tax there. Ultimately, we always need to think of the caveats when working remotely and living abroad. Residence Permit When Working Remotely Generally speaking, there are no concrete rules in regard to residence permits for remote workers in Germany. You can try your luck, but nothing is guaranteed. Ultimately, the German government wants to see that you have a job in the company within the country or German clients as an entrepreneur. It can be either a german firm or a subsidiary of a foreign one. Many nationalities don’t need a visa to visit Europe for a stay up to 90 days in a 180-day window. So theoretically you can live and work remotely in Germany for 90 days quite easily, as long as your employer is fine with it. To enjoy a longer stay you must apply for a residence permit within Germany in most cases, but some nationalities will have to travel to their home country and apply from there. Hence, you will need to get some sort of freelancer, self-employed, or working visa in Germany if you are planning to stay more than 3 months at once. There are few residence permits options you can apply for depending on the person's situation. You might also want to read this article about working remotely for a German company from abroad. https://russianvagabond.com/working-remotely-for-german-company-while-living-abroad/ German EU-Blue Card The main requirements to get an EU-Blue Card in Germany are: have a job offer in Germanyhave a recognized high degree associated with a job have a salary of at least 56,800 EUR (2021) and 44,304 EUR (2021) for high demand professions High demand (shortage) professionals are in the fields of mathematics, computer science, natural sciences, and technology as well as doctors. Your employer has a branch in Germany EU Blue Card will be granted without a problem if all requirements are fulfilled and your employer is in Germany. When your company doesn't have a branch in Germany If the company you work for doesn't have a branch in Germany, you must make it clear for the government why you want or need to stay there. Maybe the activity is somehow related to Germany, or you have German clients, etc. Therefore, expect the immigration office to request some proof, and also one should have German health insurance. Since you don't have an employer in Germany, you must get a private one: Ottonova and Feather are preferred choices for expats in Germany. But if you are looking for the cheapest coverage, check out this article, we have made a full in-depth review of all affordable health insurance providers in Germany. The coverage must be comprehensive than the "international" plans popular among expats in other countries. Hence these providers are your best bet. For the EU-Blue Card application you will need for sure: Foreign employment contract and its translation on GermanPassportCVHealth insurance policy Registration in town where you live in Germany (Anmeldung) German working visa/residence permit The standard working visa is granted to people with lower income than required by the EU-Blue Card but also for the professions in the shortage list and people without a high degree. In most cases, the government will need a working contract with a local employer in Germany or the corresponding branch. Your stay in the country should be really justified. German Freelancer Visa German Freelancer visa is a perfect solution for digital nomads, self-employed, or online business owners. It's a long-term residence permit with great advantages. The main requirement is to work as a freelancer or performing some kind of freelancing activity that can be recognized as such, but also to have clients or partners in Germany. Finally, keep in mind that the process of applying for a residence permit in Germany can be quite long and involve a lot of paperwork. In most cases, the government will require the following documents as a minimum: proof of income from abroad or in Germanyproof of health insurance coverage in Germanyproof of long term accommodations (lease) in Germanya letter of intent or motivation Read an in-depth article about Freelancer Visa and its requirements. https://russianvagabond.com/all-requirements-for-german-freelance-visa/ Working permit All these residence permits will give you a work permit in Germany, which you need! You can't legally work on a tourist visa. Although you could do it with a student visa and work for up to 20 hours per week. But you need to be enrolled in the university, of course. Paying Taxes While Working Remotely This is also a complex topic. As a rule, you pay taxes where you are present physically, and not where the work is contracted or paid for. Consequently, you are obligated to declare income tax in Germany even if the job is abroad. But a person can be also taxed in another country, like the country of their origin or where they are employed. Here are general rules for taxation when living abroad. If you live in Germany for less than 6 month When spending under 183 days in Germany within a year, you will be still taxable in your home country or where you are employed, without paying anything to the German state. If you live in Germany for more than 6 month You will become a tax resident in Germany on your whole world's income when staying longer than 183 days in Germany (within a year). (This doesn't apply to US citizens). So when it comes to paying taxes you won't pay them in your home country when you are no longer have a place of residence and no longer receive income there. But even if you aren't physically living in the homeland you might still be liable for taxes if receiving some kind of income from there. The same applies to Germany, you don't pay to the country's tax system if you aren't residing there and don't get paid there. US citizens US citizens are taxably liable for their worldwide income in the US even if they live abroad. Therefore, you must file a U.S. federal tax return every year and reporting your global income. https://russianvagabond.com/taxes-in-germany-vs-us-full-comparison-2021/ Know your tax liabilities in the home country As mentioned you will pay taxes in Germany when living there long-term, but you also might have to pay them somewhere else, like in your country of origin, for example. There are different rules that apply for different countries, but for example in Europe, if you still have an apartment in your homeland, you will pay taxes there. Or you might have certain contracts or subscriptions. However, it will be only a limited tax liability, you pay taxes on income generated in this country. If you moved out completely from your usual place of residence and don't have income from a business, rental, capital assets, or independent work there, then you will be exempt from tax liability. Hence, you will pay tax only in Germany. It can be difficult if you want to continue to operate your business registered in your homeland while living in Germany. It might get deregistered when the tax authorities figure out that you are no longer reside there. VAT taxes If you are residing in Germany and have an online business or work as a self-employed you will need to pay VAT in Germany if your client is: a private individual located in Germanybusiness located in Germanya private individual located in the EU The VAT tax in Germany is 19% of the generated revenue from sales. Double tax agreement The next step is to determine whether there is a double tax agreement between Germany and your country. For example, US citizens are paying taxes in both countries the US and in Germany. Nonetheless, they will contribute the biggest amount in Germany due to the double tax agreement. In fact, they will be paying taxes in Germany first, and only after they get a US tax credit based on the paid German taxes. Therefore, a US taxpayer will generally have to file returns in both countries. Nonetheless, when it comes to taxes, you are responsible for seeing what, where and how much you owe. In order to avoid unnecessary troubles, request a consultation with a tax advisor in Germany! Get your taxes sorted! Source: getsorted.de Are you a freelancer or planning to become one? In Germany, the bureaucratic nightmare can get you! But you can avoid it by getting Sorted. It’s an online tool for managing all your tax obligations, reports, payments, and communications with the Finanzamt (tax office) in Germany. The tool will do all the bookkeeping, tax, and VAT declarations. Not only freelancers can use Sorted, but also small business owners and people with the side income. So whether you are freelancing full time or want to do it as a side hustle, this tool will be super helpful. What can you do with Sorted? Legally register as a freelancer if you are just starting outCreate legally correct invoicesPrepare and submit tax reportsGet help from professional tax advisersConnect to your bank account for the full transparencyTrack your income and expensesFull overview over taxes Most importantly, it allows you to submit your tax reports to the German tax office. Based on your income and expenses, Sorted will automatically fill in all of your tax reports, and after you can submit it online in one click. Moreover, all necessary features are available at zero monthly costs, but you can sign for the Pro or Business version at any time. Sign for a free account here. Thousands of freelancers already happily use Sorted, read reviews here. Kontist app Kontist is another tax management option for freelancers and self-employed in Germany. It's comparable with Sorted but with even wider range of services. Kontist is virtually your private accountant in Germany but at a fraction of cost (free or 9 EUR/month). It's ranked 4,7 stars on Trusted.de and 4,5 on Trustpilot. With the Kontist app you can effectively: handle your taxes and communication with the German tax officeconsult experts Kontist also offers a special bank account for freelancers and self-employed in Germany. Hence, it's a perfect solution for banking and bookkeeping. Some additional features: service & customer support is 100% in EnglishSEPA transfers overdraft - between 500 EUR and 5,000 EUR You can start with the free plan, sign up here. Social Contributions When working remotely in another country you must pay attention to all necessary social contributions, otherwise, you might lose your right for a pension, etc. Like income tax, a person will be liable for social security in the country where he/she physically carry out the work. As a common rule for your home country, you are no longer subject to social security contributions if not having there a job or residence. Hence, you should get involved with the German social security system to ensure your future. As a self-employed in Germany, you can opt-out from the public retirement system and some other contributions, but you must pay health insurance for sure. The public will come almost to 15% of your monthly revenue, that is why we highly recommend signing for private insurance. Hence, self-employed can pay only for health insurance. If you are liable to social security overseas, then it is likely that your employer may also be liable for the employer’s social security in that country. Your employer may also have withholding obligations as a result. So some people end up paying for social security in two countries. American citizens Americans who work abroad either for an American company or who are self-employed still have to pay U.S. Social Security taxes. In some cases, US citizens can opt-out from the American system. It can be done by opening a company or becoming self-employed in Germany. If you work for a European company Same as with the double tax agreement there is an agreement about social security between EU/EEA countries. It will protect you from paying social security in Germany and in another EU/EEA state. Most of the time, the agreement states that an employee remains liable for social security if he/she was sent to Germany by the employer. Thus, if instead, you choose to relocate to Germany with your remote job on your own, it's not 100% clear where you and your employer will pay it. Whether you are working remotely from home or coffee shop, streaming movies, or want secure, unrestricted access to the web - VPN will help. The top providers in Germany are: NordVPNSurfshark Health Insurance For Germany for Remote Workers Since the immigration office requests proof of German health insurance all remote workers must have it. You can choose between two types of health insurance, depending on the kind of employment/work you are performing. If you have your employer in Germany you can get public or private coverage. But for remote workers employed outside of the country of self-employed people, only private health insurance will be available. Regarding private coverage, Ottonova and Feather are preferred choices for expats in Germany. Feather also provides public health insurance. Ottonova is customized for foreign employees, expats, freelancers, and self-employed Private health insurance is often chosen by self-employed, students, unemployed, and others, who don’t fulfill the requirements of a public health insurance provider. Especially self-employed benefit from private coverage, since they must pay 14,6 % of their income when taking out public health insurance. This rule, fortunately, doesn't apply to private insurance. Hence, the amount you pay for private insurance isn’t fixed, the rate also doesn't depend on your income. Overall, premiums vary from one insurance provider to another and depend on the selected package and coverage. For example, Expat health insurance is insurance that is open to many people, who stay in Germany short or long term and work remotely. The price starts at 72 EUR per month. This private insurance is good for: Employed person Self-employed person This insurance from Feather is perfect for a visa application, new arrival to Germany, unemployed as well as self-employed individuals. You can sign up completely online and get full English support anytime. But if you are looking for the cheapest coverage, check out this article, we have made a full in-depth review of all affordable health insurance providers in Germany. https://russianvagabond.com/cheapest-health-insurance-in-germany/ Ensure a Good Internet in Germany All remote workers must have good, reliable, high-speed internet, and we know it can be a problem in Germany. The country is famous for the terrible internet speed and the price you pay for it. For that reason, you should carefully select your internet provider and the monthly package. Here are my recommendations as a current remote worker: Provider O2: O2 my Home M – 19,99 EUR monthly, from the 13th months 29,99 EUR, 50 Mbit/s download, upload up to 10 Mbit/s. O2 my Home L – 24,99 EUR monthly, from the 13th months 34,99 EUR 100 Mbit/s download, upload up to 40 Mbit/s. Provider 1&1: DSL 100 – first 6 months 9,99 EUR, after 39,99 EUR monthly – best deal! - 100 Mbit/s downloadDSL 250 – first 6 months 19,99 EUR, after 49,99 EUR monthly, 250 Mbit/s download If you need super-fast internet: O2 my Home XL Flex – 34,99 EUR monthly, 250 Mbit/s download, upload up to 40 Mbit/s.GLASFASER 1.000 – first 6 months 39,99 EUR, after 69,99 EUR monthly, 1,000 Mbit/s download. DSL 250 – first 6 months 19,99 EUR, after 49,99 EUR monthly, 250 Mbit/s download.Surf-Flat 300 – first 6 months 14,90 EUR after 39,90EUR; 300 download, upload up to 100 Mbit/sSurf-Flat 600 – first 6 months 14,90 EUR after 54,90 EUR; 600 download, upload up to 200 Mbit/s Also read: Internet in Germany: Best Providers (deals with and without a contract). Don't forget to secure your privacy while surfing the web by getting a VPN. The top providers in Germany are: NordVPNSurfshark Getting Paid in Germany Another difficulty one might get is the payment process between a foreign employer or client and you living in Germany. Usually, there is no problem when transferring money within the EU/EEA. But as soon as you exit the borders - the frustration raises. Banking transfers between Germany and non-EU countries can get pretty expensive and take a long time. For freelancers in Germany, we recommend signing up for this bank. You might keep your foreign banking card in Germany to accept payments, but then withdrawals can get expensive as well. The best way is to set up a payment structure by using some online payment tools like Wise, PayPal, or Stripe. Wise is by far the cheapest and fastest solution. What Else Do I Need To Consider? There are many details one needs to watch out for when working remotely from another country. We can't cover all of them, but the following points are worth considering: Immigration law: Do you have a right to work in Germany? Do you need a visa? Ask the advice of the lawyer here. Employment law: How you and your employer comply with all rules for remote work? Do they know foreign labor laws? In case of doubt, request an online consultation of an employment lawyer. Data protection: How do you handle employer's or client's data when working remotely? Is it protected enough? Employer liability: Do you have any liability insurance for the work you do in Germany? Health and safety: Employers have certain legal responsibilities regarding the health and safety of the employee, which must be reviewed when working remotely.Medical insurance: You must have health insurance which has comprehensive coverage in Germany. Travel and home insurance: Any policies you need while staying in Germany? Alsa read this article about working remotely for a German company from abroad.