Registration as Foreign Employer in Germany for remote workers
Registration as Foreign Employer in Germany for remote workers
Foreign employers to report employment in Germany to Social Security
If you are a foreign employer and wish to hire employees in Germany, we will explain the most important things to know in this article.
Employees hired in an EU member state are subject to social insurance obligations there, regardless of the country in which you as foreign employer are based. This is regulated by Article 21 (1) of the EU implementing regulation VO (EG) 987/09. It means that a foreign employer must register its employees in Germany for social insurance and pay contributions as if the company were based in Germany.
Exemptions
Two exceptions must be observed:
- The employee is only temporarily working for the foreign employer in Germany within the scope of a posting (secondment).
- The employee is subject to an exemption agreement between the social insurance agencies of the federal states. On the German side, the German Liaison Office for Health Insurance Abroad (DVKA) is responsible.
Withholding Tax & Tax Treaties
When you don’t have a place of business in Germany, you’re not required to conduct wage tax withholding in Germany unless
- labor leasing is involved
and - you’re permanently placing the employee in the German home office to conduct the work there.
You can structure the employment contract to foresee work in your country, but allow your employee to work remotely in Germany if this is not permanent and less than 183 days in a given fiscal year.
Your employee may have to register to remit tax on his or her own in Germany if he or she
- registers a residency in Germany
or
- stays here more than 183 days.
In a custom consultation, we offer to explore your particular options and review the tax treaty that applies to your case.
Major benefits of forming a new German company:
Note we may only be able to support you if you are willing to form a new German company.
- Shielding effect for profits and losses generated in Germany
- The new German company is eligible for benefits according to tax treaties
- You may already have a foreign parent company. You can make the new German company a wholly owned subsidiary of your parent company.
- In EU cases, net dividends can be disbursed tax free from Germany according to the EU regulation 90/435/EC (mother-daughter directive).
- In all other cases, net dividends may be disbursed at a preferential low withholding tax rate according to the tax treaty in place. - At your foreign parent company, you can treat the setup cost towards forming your new German company as an investment (legal fees from our cooperation partner Liesegang & Partner mbB law firm, notary public fees). Our fees forthe tax registration, ongoing monthly service, and annual closing & tax return preparation are charged after the German company’s formation and can therefore be treated as ordinary business expenses of the new German company.
- Tax-effective lease, loan and employment agreements are possible, even with the shareholders
Note: Transfer prices between related companies must be agreed at arm’s length.
Make it in Germany: form a new company!
How to make it in Germany – company formation
It’s worth your while to consider forming a German company to reduce your time to market entry. Until issuance of the tax number and VAT ID for your newly formed German company, it should only be a matter of a couple of weeks (3 up to 6 weeks, at the most, on average, it currently takes four weeks. Processing times vary by tax office.) The time for registering as a foreign business can be up to six months.
We can help with tax advisory, tax registration, accounting, annual closing, and tax compliance for a new German entity, for example a Limited Liability Company.
Liesegang & Partner mbB law firm - the formation lawyers
To form a new German company, please check the below information from our cooperation partner, Liesegang & Partner mbB law firm, the formation lawyers:
Limited Liability Company
a) GmbH
The basis fee of Liesegang & Partner for the formation of a GmbH is 2,050 EUR. However, the final amount depends on your requirements. The following additional services might be appropriate:
- At least one shareholder has its registered seat not in Germany but abroad + EUR 750 net (not necessary if all shareholders are individuals)
- Representation at the notarization +EUR 550 net
- Support with a bank account +EUR 500 (Please mention that only the bank decides about the account opening, hence we couldn’t guarantee a success. Furthermore the banks usually request the involved persons to appear in person in order to verify their identity and they could charge own account opening fees.),
- Bilingual formation documents in German/ English +EUR 500 net
- Registering with the Transparency Register. + EUR 250 net
- Business registration at the trade office + EUR 300 net
The fees for notarization and Commercial Register, approx. another EUR 1.000 in total, are not included.
Please see the website of Liesegang & Partner to get an overview about all the services and fees in this regard:
b) UG (haftungsbeschränkt)
The basis fee for the formation of an UG (haftungsbeschränkt) is 800 EUR net. However, the final amount depends on your requirements. The following additional services might be appropriate:
- At least one shareholder has its registered seat not in Germany but abroad. + EUR 480 net (not necessary if all shareholders are individuals)
- Representation at the notarization +EUR 550 net
- Bilingual formation documents in German/ English +EUR 300
- Support with a bank account +EUR 500 (Please mention that only the bank decides about the account opening, hence we couldn’t guarantee a success. Furthermore the banks usually request the involved persons to appear in person in order to verify their identity and they could charge own account opening fees.)
- Registering with the Transparency Register. + EUR 250 net
- Business registration at the trade office + EUR 300 net
Please see the website of Liesegang & Partner to get an overview about all the services and fees in this regard:
Do I need to lease an office to incorporate in Germany?
A German company will need a registered seat and maintain an office. If you don’t have a German address which you can use, you’ll have to rent at least a so-called shared office which costs approx. 180- 250 EUR net monthly + deposit and VAT. Oftentimes, VAT can be recouped from the tax office. Learn more about this in a personal, free initial video call with one of our tax advisors. On the other hand, Liesegang & Partner will gladly recommend you an appropriate provider for leasing an office (business center).
Engage us
To sign-on as new client, I’d need you to fill in the engage us form on our website using the following link:
We are here to help go through the form with you in a video call & screen share session on short notice. Just reach out to us by calling or sending us an e-mail with your available time slots. We’ll try our very best to accommodate your request pending confirmation of our availability, and send you a video meeting link for an online meeting on Microsoft Teams.
Onboarding
We will gather the formation documents from Liesegang & Partner mbB attorneys at law once you’ve granted us Power of Attorney. The engagement letter and Power of Attorney are generated automatically when you engage us on our website using the above link.
State-of-the-art digital accounting with DATEV eG
We’ll collaborate digitally when it comes to maintaining your accounting file. Unprompted, you can upload expense receipts and sales invoices to a secure web portal to which we’ll grant you secured access. For setting up your cloud access, you’ll need to download an app called “DATEV SmartLogin”, which is provided complimentary. You will need a PC/Laptop, and smartphone (iOS or Android) to work with us.
The additional cost for the state-of-the-art DATEV system we use is charged at 11 EUR net plus VAT monthly. In an onboarding video call, we’ll set up your online cloud accounting portal to DATEV Enterprise online for sharing expenses and income receipts of your new German company.
Special offer: No setup cost for onboarding*
As a sign-on bonus, we don’t charge for this call towards getting your accounting file set up with us
*Conditionally to you forming a new German entity through our cooperation partner, Liesegang & Partner mbB law firm.
Timeline for your tax number
Once your German company has been added to the commercial register, it may take a couple of weeks until your German tax number, and German VAT ID are issued. Processing times are based on our vast experience, and vary by tax office; since we’re dealing with the tax authority, this is not a service provider, and hence, we cannot guarantee a specific timeline for your tax number.
When can I start my business?
After the notarial act of the company formation is completed, you can start your business. All it takes is to commission your business license with the city where your office is located. If you don't have a German address yet, you can rent an office from a business center. Liesegang & Partner mbB law firm will gladly point you to appropriate providers.
Once you have the business license, which should only take 3 days, you can start raising invoices immediately, even before the tax number is issued. Once the tax number is issued, just re-issue your invoices with the tax number assigned by the tax office.
Do I need a visa to become a Managing Director of a German company?
Not necessarily. The Managing Director is an officer. To be an officer, employment at your new German entity is not required by law. Therefore, you can generally be appointed as Managing Director of a new German company without holding a visa. If you seek employment for pay at the new German company, you will need a visa to receive compensation if the work is also carried out in Germany. If your work on behalf of the German company is carried out abroad, you only need a visa for the country where you will actually carry out your work unless you're already resident of that State and legally allowed to work in that country.
Can I immediately hire staff?
Yes. Following notarization which completes the formal act of the incorporation, we can set up your company's payroll and obtain your German Federal Employer Identification Number, which will enable you to instantly hire staff in more than 90% of cases.
Please note that certain industries (e.g. construction, hospitality, catering, cleaning, to name only a few) require reporting new hires before their work commences. High fines including imprisonment for repetitive infringements on the underlying law could otherwise materialize and be brought agains the Managing Director(s) by the black work uncovery task force of the customs authority (Finanzkontrolle Schwarzarbeit). With an instant report to social security, we can ensure your compliance with German Social Security Law when running the payroll for your new German company, even if your company falls under an industry required to report new hires instantly.
How can I get a German bank account?
Our cooperation partner, Liesegang & Partner mbB law firm, can help at a small additional cost to obtain a new German bank account for your newly incorporated German business. Please inquire with them using above links.
Tax filings
Naturally, a German company comes with the obligation of legal and tax compliance. All legal compliance is offered by my cooperation partner, Liesegang & Partner mbB law firm. Our tax law firm can ensure your tax compliance if you hire our professional services.
Fees
Our fees as your certified tax advisor are regulated by law (Steuerberatervergütungsverordnung = Certified Tax Advisor’s Remuneration Ordinance). Fees for our consultancy vary by taxable income, balance sheet sum, and sales. Please check out the online quote calculator provided on our website (use the right hand side yellow banner to check our fees given your company's sales and profit/loss expected).
About me
by Patrick Rizzo
published: 17.05.2023
