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feature - ask
the accountant |
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Many
major companies in the Aerospace, Automotive and IT
industries are asking TAC Europe to source highly skilled
consultants to work on a freelance basis at sites across
mainland Europe. For this issue of intouch,
Michael Marks responds to a reader wanting to know how
he is going to benefit through contracting in Germany
rather than here in the UK. Michael is a Chartered Accountant
and Partner of International Tax Solutions – the
leading international tax firm for expatriate contractors.
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The
question comes from Tim in Brighton:
TAC
Europe wants me to accept a contract in Germany. Am I really
going to be better off by working overseas?
Aside from IR35 and S660, probably the most talked about
topics in contracting today are the dos’ and don’ts
of working overseas. Many readers of this response will
recall the stress of moving from a secure, employed environment
into contracting. However, moving from the familiarity of
a UK Personal Service Company or UK umbrella contract to
an unfamiliar overseas working environment can prove to
be even more traumatic – but only to those contractors
who failed to do their research first!
The
thought of living and working as an expatriate in a foreign
country can be both exciting and somewhat daunting when
you start to consider the tax and administration issues
involved.
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are many attractions to working abroad:
•
TAC contract rates are very attractive, as Tim certainly
knows!
• Living costs tend to be less than main UK
cities such as Brighton
• Regular flights home are cheap thanks to budget
airlines
• The culture and lifestyle of another society
• And let’s not forget the new working
environment and work challenges of the project
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But will Tim really benefit financially? How can he avoid
being “stung” by heavy tax and social security
demands from the UK and German authorities?
buyer
beware!
If
you think British legislation is confusing, German tax rules
and labour laws are absolute minefields to the unprepared.
To compound this situation, the high volume of overseas
contractors has attracted unregulated but strongly marketed
management companies offering false illusions with regard
to compliance and providing “one size fits all”
solutions even though no two contractors are the same.
Thankfully,
there are highly experienced organisations available to
arrive at a compliant and legal structure, appropriate and
tailored for each individual contractor, as well as dealing
with all the necessary tax administration.
proper
planning is everything!
So,
Tim’s first task should be to seek good professional
advice from a specialist, regulated, international tax firm
who will recommend a bespoke, compliant, practical and highly
tax efficient solution – thereby meeting all his needs.
Modesty forbids me from acknowledging my firm as the most
suitable first contact for Tim!
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TAC Europe and Tim have to plan:
1.
TAC Europe has to comply with statutory agency regulations
2. This requires Tim to be represented by an appropriate
intermediary able to contract with
TAC Europe
3. Although the UK limited company is the intermediary
of choice for most contractors working in
the UK, it is usually not appropriate when working
in Germany
4.
One suitable intermediary is Project Service Beta
SA whose self-employed solutions will be very appropriate
for Tim to meet compliance in Germany and certainly
more appealing in terms of tax efficiency than any
employed routes.
5.
Using such an intermediary will help Tim take advantage
of all the relevant tax treaties, residency rules,
registration rules, etc to make him legal, compliant
and very tax efficient.
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get
personal!
Because the taxation
and legal issues of working in Germany are very complex,
it is vital the intermediary fully understands Tim’s
individual circumstances and future aspirations to ensure
he will be properly registered and paying the correct amount
of tax and social security according to his personal status.
This is important, not just for him but also for TAC Europe
and the client. Tim should not try to take advantage of
his temporary residence in Germany to illegally avoid any
due tax or social security liabilities. If the authorities
do check, they are likely to hold the client responsible
with serious repercussions back to TAC Europe and, ultimately,
to Tim.
just
do it right!
Properly organised
and well planned, Tim’ overseas contracting experience
will prove to be emotionally and financially rewarding.
However, ignoring basic issues before he goes could prove
very costly and, as the saying goes, “forewarned is
forearmed”.
To find
out what a properly structured intermediary should be providing,
please email info@itstax.com
and enter Overseas Compliance on the subject line.
Questions can be addressed
either by letter or by email to: ‘Ask
The Accountant, c/o The Editor at intouch
(email: intouch@taceurope.com).
We regret that we are unable to respond to unpublished letters
and, in order to facilitate publication, letters may be
edited. International Tax Solutions is a specialist,
regulated, international tax firm providing free advice
to expatriate consultants wanting to contract overseas and
requiring compliant, practical and highly tax efficient
solutions. You can call them on 020 7477 2660.
International Tax solutions, TAC Europe and their respective
employees cannot be held responsible for any actions undertaken
as a result of the opinions expressed in this feature. As
individual circumstances vary, you are advised to seek individual
expert advice.
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