Working for a foreign company
November 13, 2014 | 25,00 EUR | answered by Anton Pernitschka
Hello,
I am a computer science student involved in game development. Through some contacts in Asia and America, I have come across a small project that has offered me a job. The project involves marketing a new game, including in Germany through various localizations. My task would be to market this game in the German market. There would not be a 'real' employment contract with a fixed salary, but rather a compensation based on commission. I would receive 5% of the net revenue for each game sold in Germany.
Therefore, my question is: What do I need to do to ensure my tax security in this situation? In the event that only 100 games are sold per month, I would apparently remain below the tax-free threshold. However, there is a possibility that this game could boom in the German market, and I could end up selling over 50,000 copies in one month.
Thank you!
//Excerpt from contract:
Sales manager will receive sales commission over each direct and indirect sold game copies based on net revenue for Germany. For the first six (6) months the manager commission is 5%, after this six (6) months the sales commissions become 3% on net revenue for Germany.
Dear questioner,
In the context of an initial consultation and your fee commitment, while considering the regulations of this forum, I would like to answer your question.
Due to the planned activity in Germany, you will likely generate income from business operations. The commission income is subject to both income tax and sales tax.
A business operation must be registered with the local municipal administration. The municipal administration will also inform the relevant tax office. Subsequently, you will receive a questionnaire from the tax office in which you will need to provide, among other things, the estimated profit and revenue for the current and following year.
Entrepreneurs starting a new business must estimate and substantiate their revenue for the founding year and the subsequent fiscal year to the tax office. If the business activity is only carried out for part of the calendar year, the revenue generated during that period must be extrapolated to an annual total. If the revenue is expected to exceed €17,500, the application of the so-called small business regulation according to § 19 UStG is excluded.
The small business regulation is a simplification rule in sales tax law that grants entrepreneurs with low revenues the option to be largely treated like non-entrepreneurs. Essentially, small business owners can opt out of declaring and paying sales tax. If the revenue exceeds €17,500 in the founding year, the small business regulation cannot be used in the following fiscal year. The same applies if the annual revenue is expected to exceed €50,000 in the following year.
Since it depends on the estimated revenue in your case - which you have to estimate - it generally doesn't matter if you have "miscalculated".
If you have chosen the small business regulation, you may (or must) switch to the regular sales tax (19%) in the next or subsequent years. If you initially chose the regular sales tax, you are bound to this choice for 5 years before you can possibly switch back to the small business regulation.
The response was provided based on the information you provided. Missing or incorrect information about the actual circumstances can affect the legal outcome.
