I am a freelance web developer with all clients in UK but looking to move with family to Germany

Question

I am a freelance web developer with all clients in UK but looking to move with family to Germany.

So would I need to register as a freelancer in Germany and how soon, if I travel back to England a lot to do meetings and work?

If I do have to register for tax how does it work as a freelancer, I was told I would need a large insurance bound in case someone sued me?

Can I just pay tax in the UK or would I have to move and stop tax there? I understand it maybe only a few months and then you have to change.

I am English, she and our kids are German if it matters.

Answer 1

I'm not an expert, but will try to answer you some questions here. As soon as you register your residence in Germany (which you are legally required to do) you becomes liable to German taxation. That means that you will need to do your tax declaration at the end of the year. Not sure if Germany and UK have double taxation avoidance treaty, you need to check this.

In order to legally work as a freelancer, you need to register at tax office. In Germany you can be a Freiberufler or Selbständig. Both are freelancers, but the difference is in their legal and tax obligations regarding income tax, retirement contributions and health insurance. As a web designer you should qualify for Freiberufler, which gives you more choice and less taxes.

To get you started, my advice would be to consult with some tax advisor which could guide you how to setup your business in most profitable ways regarding taxation and liabilities. You can also get some good starting information at http://www.clever-selbstaendig.de/ in German, but at least your wife can translate it for you :)

Regarding liability insurance, it's your call. Here in Germany people are more obsessed with different kind of insurances than in the rest of the Europe, and everyone here in Germany would advise you to have all possible insurances, but coming from different background you may decide is it worth to you or not.

Another possibility would be to just keep your UK based Ltd company and use it as a liability shield for yourself. That way, you don't have to open a German company with all bookkeeping and legal requirements it brings to the table. But, to repeat again, you won't get definitive answer here, you'll need to consult with tax expert what is the best way to proceed.

EDIT: British Ltd can serve as your liability shield, in the same sense as GmbH or UG, but for the tax reporting purpose, as long as you as an owner live in Germany, your company will need to do all kind of the tax reporting as if it were a German GmbH.

Answer 2

There are a number of questions here to be answered, tax being just one of them, especially if a wife and kids come to play. For example, you also need to check for health insurance, which may be cheaper or more expensive depending on your wife's employment status.

And basically, given the situation you describe I would say it depends a bit on what you are looking for.

First of all, you need to sort out if you are a kind of sole proprietor (i.e. you write your invoices as Mr. John Doe) or if you have a UK Limited company.

In case of a UK Limited Company writing invoices to customers on the UK, that UK company would be taxable in the UK.

If you pay yourself a salary off that company or if you have your gains from the company transferred to you and you live in Germany on a permanent basis, then that money which goes from the UK company to you would be subject to taxation in Germany and in Germany only; unless you stay less than ~180 days per year in Germany.

If moving to Germany is more of a temporary thing and you don't need any money from your UK customers right now to sustain your living (because your wife makes enough) you could even keep the money you make in the UK Limited company. If nothing goes into your personal pocket, then the basis for taxation in Germany will be zero and you could use that money later on after moving back to the UK. Of course, you would have to work out UK taxes then.

For example, if serving your customers in the UK requires frequent and extended travel to the UK so you are typically staying more there than in Germany, you will not be taxable in Germany. But you have to be prepared to document that fact very clearly, i.e. being able to produce airplane tickets, hotel bills, etc.

This is a highly complex and dangerous matter, so getting professional advice is indeed adviseable. The problem with that is that tax advisors will either give you some verbal information in a first meeting which you will not be able to fully appreciate immediately or if you want something in writing that they will want some serious money for that.

Before looking for advice, make sure you make a list of clear and distinct questions you want answers to.

A distinct question will be for example:

I live in Germany and work for my UK company. My wife is employed with a German company. We have a child. How does health insurance work in that scenario? Will I and the child be covered by her insurance or not?

A too broad question would be:

What are my options in terms of tax if I live in Germany and work for customers in the UK?