Working for a German company, getting a German salary, while living in a warmer&more affordable place sounds like a great deal to you? Well, it is. However, there are various rules and regulations considering remote work. Ultimately, Germany is still a very traditional country when it comes to employment and how things are done at work.
You can work remotely in a German company and live abroad if your employer gives permission. In some cases, the employment agreement will be adjusted, e.g., becoming a contractor of the firm instead of the employee. Remote workers must comply with all residence and work permit rules in the country of stay.
Indeed, working for a German company and living abroad is possible and practiced by many freelancers in particular. In this article, you will learn about all legal sides of remote work for a German company regarding taxation, social insurances, and employment agreements.
How To Work Remotely for a German Company and Live Somewhere Else?
Though you can work for a German company and live in another country, it’s not that simple as it sounds. There are a few things to consider when working remotely from abroad, such as:
- Your residence
- Tax obligations
- Employment agreement
- Social security
In general, the employer determines the place of work and not the employee. In Germany, most people are working in the office, remote work and work from home are still not very common.
All rules and conditions in that regard will be written in your contract with the firm.
However, some employers allow employees to work from home regularly (if they want to), usually one-two days per week. Yet, if you decite to spend these working days in the coffee shop (let alone in another country), that will count as a violation of the employment contract.
Generally, Germany doesn’t have exact rules&rights for workers who decite to do their job from abroad. If an employer gives you that opportunity, he should specify the type and scope of the work performed abroad.
They also might give you only a limited amount of time and request you to live in Germany at some point.
Fewer regulations apply if employees are only living abroad for some time. You don’t have to worry much if your stay outside of Germany will be less than 183 days.
You might also want to read about working remotely while living in Germany.
1. Determine your place of the residence
In the entire process, one of the most important steps to take is to figure out in which country a remote worker is a legal resident.
Thus, you need to have a country of residence. If you move to Portugal, let’s say, live and work remotely from there, then Portugal will be your country of residence.
Therefore, when living there for more than 183 days in a year, you are working in Portugal, regardless of where you are employed, and the company is located.
Temporary or permanently?
Also, you need to understand in the beginning it is going to be a temporary stay abroad, after which you will move to Germany, or you are planning to reside in another country on a long-term basis.
In this case of permanent work from abroad, German labor laws will be no longer applicable.
Many German companies will prefer to change employment terms to the independent contractor agreement. The worker will become a freelancer and is no longer an employee.
EU and non-EU countries
Another consideration is in which country you are planning to live while working remotely in Germany. If you are an EU citizen, you have all rights to live and work in EU and EEA states plus Switzerland.
In other countries, EU citizens will need to obtain a residence permit which allows them to work in that country legally.
Similar rules apply for non-EU citizens, however, they aren’t even permitted to live and work from any EU/EEA state without a permit. Furthermore, since January 1, 2021, this rule also applies to UK citizens.
Even if you are working remotely for a German company in another country, you are indeed working there. This might seem not as obvious as working as a waitress somewhere, but your online activity is still considered work.
The factor of you working abroad can influence your residence permit situation there. In the worst case, remote employees are working illegally abroad.
In many cases, residence and work permits can only be obtained if a German company has a local subsidiary in that country. Alternatively, remote workers can apply a digital nomad or freelance visas. Read in this article about countries that are offering such visas.
Your residence permit in Germany
If you have a German residence permit for work purposes and are thinking about moving somewhere else while keeping your job in Germany – you might have some problems.
A German residence permit, be it EU Blue Card or a regular work permit, doesn’t allow you to stay in other countries for an extended period of time.
While EU Blue Card allows employees to go on business trips abroad, it doesn’t mean you can move out of Germany with that. Yet, you will be able to stay abroad and work remotely for some time, usually before you become a resident in another country – or 183 days. After that, you need to apply for a permit in that country.
Nonetheless, holders of the German EU Blue Card can stay outside of Germany for up to twelve months without losing entitlement to it.
2. Taxation while working remotely from abroad
How and where will you pay taxes while working remotely for a German company?
Remote work from abroad can lead to a change in taxation rights or in the employee’s tax and social security status. Most importantly, all relevant double taxation agreements and social security treaties must be considered before moving to another country with your remote job.
Well, if you live in one country and work in another, you have two countries that want to tax your income. Once you become a resident, most countries will tax your worldwide income.
Income taxes in Germany
A basic rule of German income tax law is that you must always pay taxes where your place of residence is. According to tax law, this is the place where you live most of the time in a year or have an apartment, property, etc. Hence, one must pay taxes in that country on foreign and local income.
Where are you tax liable?
If you live abroad for less than 6 month
When spending under 183 days in another country within a year, you will still be taxable in Germany or in the country where you are a tax resident. In Germany, it’s called unlimited tax liability.
If you live abroad for more than 6 months
You will become tax liable in that country with all your world’s income when staying longer than 183 days (within a year). However, this doesn’t apply to US citizens.
On the other hand, people who aren’t residing in Germany, but get an income from there, are subject to limited tax liability. Hence, your earned salary will be taxed according to German law.
However, the corresponding taxation treaties (double taxation) between your country of residence and Germany will apply in that case. Double taxation helps remote workers not to pay taxes twice.
All European countries have such agreements. So that when working for a German company abroad, you will receive a gross wage, and taxes must be paid in the country of the residence.
Therefore, there will be no requirement to file taxes in Germany. Yet, some employers might have automatic deductions, so it’s worthwhile to discuss it before. Because otherwise, you will have to file in Germany to get a tax return.
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.
3. Employment agreement
When considering working remotely from abroad for a German company, an employer and employee might want to change the current employment agreement.
Become self-employed or contractor
To avoid any legal and tax problems, you might want to become a self-employed or contractor. It’s always easier to work as a contractor or freelancer from abroad than as an employee.
In that case, many German labor laws won’t apply to you, so it’s also easier for the employer to handle such a work agreement.
To work as a contractor for the company in Germany, you need to register as self-employed in the country where you live or in Germany. After that, you can simply bill the German employer instead of working for a wage.
Registering as a freelancer in Germany
One of the options is to register self-employment in Germany. All EU&EEA nationals can do it without needing to obtain a visa or residence permit. Yet, you must have a German address.
To become self-employed in Germany, one needs to register as a freelancer with the local tax office.
By doing so, you will obtain several tax identification numbers, such as:
- Tax ID (Steuer-ID)
- The tax number (Steuernummer)
- VAT number (Umsatzsteuer-ID)
Getting Tax ID in Germany
Both self-employed and employees need to get a tax identification number or Steuer-ID in Germany. So you and your company can file income taxes.
To get a tax ID, you must register your address in Germany. Around 2 weeks later, you will get a tax ID by mail. Yet, you could go to the Finanzamt (tax office) and apply there to speed up the process. No appointment is needed.
Get a Tax Number – Steuernummer
The Steuernummer is required for German freelancers and businesses. A foreigner will get a tax number when registering self-employment with the Finanzamt.
Again, you will receive it by mail, 2 to 4 weeks after the registration.
By having this number, you can invoice your employer in Germany. Furthermore, as a self-employed, one needs to take care of income tax and tax claims. This should be done in the country where business is located and in the country of residency.
Getting a VAT in Germany
When you first set up your business as a freelancer in Germany, you must apply for a VAT number in the Finanzamt.
When working as a contractor for the company, your employer might pay VAT in Germany on your bill, instead of you charging it on top of your invoice and paying it in the country of living.
Not everyone must charge VAT in Germany. Here are some exceptions:
- Small businesses – revenue of less than 22,000 EUR in the first year, and less than 50,000 EUR in the following years.
- Certain professions such as, for example, doctors, dentists and other members of the healing professions (Freiberufe).
The VAT tax in Germany is 19% of the generated revenue from sales.
We recommend avoiding paying VAT since it will save you a solid amount of work to your self-employed activity.
Consequently, becoming self-employed is the best solution for someone willing to work remotely from abroad. You will switch from employee to service provider for a German company. Associated changes must be made in the employment agreement too.
Read about the difference between freelancers and self-employed in Germany.
4. Social Contributions
Another aspect of working remotely from abroad is where do you receive and pay for social security? It will depend on some factors. If these conditions are met, you will remain under German social security:
- The employee works regularly remotely in Germany AND abroad
- The employee’s place of residence is in Germany
- A substantial part of the employee’s work is in Germany, or the employer is registered in Germany
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 with the income tax, a person will be liable for social security in the country where they physically carry out the work.
As self-employed, you will be responsible for social security in the country of residence. As an employee, it will depend on the country where you are living.
EU and EEA states have social security agreements with Germany. Hence, your company might set up something for you to get benefits in that country.
Otherwise, you need to take care of payroll and social security taxes on your own.
Remote workers must communicate it with German companies, so they don’t withhold some obligations as a result. Because that way, you might end up paying for social security in two countries.
Americans who work abroad and who are self-employed still have to pay US Social Security taxes. In some cases, US citizens can opt out from the American system. They can do it by opening a company or becoming self-employed in Germany. Read above how to set everything up.
You must have a secure internet connection
When working remotely for a German company, you MUST ensure your internet connection is secure and stable. That’s why many employers only allow their employees to work from home instead of coffee shops or coworking spaces.
Remote workers should use VPN to secure their internet access, especially if they are abroad or working from public areas, like coffee shops. The top 3 best VPN providers in the world are:
What Else Do You 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 that country? Do you need a visa? Ask the advice of the lawyer here.
- Employment law: How do 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? Use VPN for security.
- Employer liability: Do you have any liability insurance for the work you do?
- 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 that provides coverage abroad.
- Travel and home insurance: Any policies you need while staying abroad?
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