Taxes and charges on salary from England
September 22, 2012 | 30,00 EUR | answered by Dr. Yanqiong Bolik
Dear Sir or Madam,
Are there any social security contributions, insurance premiums or other incidental costs for a temporary job with a British company on the German side?
In the specific case, Person X lives in Germany, is married, privately insured, but currently not employed (exemption amount 18,000 euros).
For small translation tasks, Person X would receive a salary of 624 GBP per month from a British LTD, totaling 7,488 GBP per year (approximately 9,400 euros). On the British side, no income tax or other additional costs are incurred up to this amount (neither by the employer nor the employee).
How does it work on the recipient/German side?
I read something on the internet that according to § 7a (1) SGB IV, a decision of the German Pension Insurance Bund is required in advance to determine the status.
Is this true? Can the result be influenced in any way? The goal should of course be to keep the salary tax-free.
Dear inquirer,
Thank you for your inquiry, which I am happy to answer taking into account your input and the rules of this platform.
Please note that my response is based on the information provided, and that any addition, omission, change of details, or ambiguity in the information can alter the tax result.
Based on the description of your situation, I assume that person X is an employee of the British LTD, that the British LTD is a foreign employer (without residence, habitual abode, management, registered office, place of business, or permanent representative in Germany), and that it does not involve temporary employment (if the British LTD (lender) commercially leases person X (temporary worker) to a third party (borrower)).
Since X is resident in Germany, Germany has the right to tax the income from non-self-employment. According to the principle of territoriality, X is also subject to social security contributions.
However, the British LTD is not obligated to withhold and remit income tax for X working in Germany. X must make income tax prepayments to the competent tax office. If X has no other income, no prepayment is likely to be determined for a salary of 9400 EUR.
In terms of social security, the British LTD must comply with employer obligations in Germany. However, the foreign employer can also agree with X that X will assume the obligation to pay the total social security contributions for the employer. In this case, X is entitled to the payment of the portion of the total social security contribution that the British LTD is responsible for. In these cases, X has additional obligations (reporting and recording obligations, and obligations to remit to the collection agency). The British LTD must inform the competent authority (collection agency) in Germany of this agreement.
- I read something on the internet that according to § 7a (1) SGB IV, a decision by the German Pension Insurance Federation must be obtained in advance regarding the status. Is this true? Can the result be influenced in any way?
If X is unsure whether his employment should be classified as self-employment or dependent employment, he can have it determined in the context of an inquiry procedure according to § 7a (1) sentence 1 SGB IV. In general, the actual circumstances should be provided. The pension insurance provider or the collection agency will then decide accordingly.
I hope I could help provide you with an overview.
If there are still uncertainties, please feel free to use the follow-up function.
Best regards,
Dr. Yanqiong Bolik
Tax Advisor
Bildstöckle 6, 70567 Stuttgart
Tel: +49 (0)711 / 2132 1815
Email: info@zdbz.de
www.steuerberatung.zdbz.de
