Tax options for self-employed moving to Germany

Hello TTers from a new member:

I have a question regarding living in Germany while maintaining my consulting business in another country (New Zealand, a non-EU state) and I am hoping you can weigh in with your experience and advice.

I have decided to move from New Zealand to Germany, with my wife, who is a German national and our 1-year old son, while still running my business in New Zealand -- I develop computer software and so my business is not dependent on where I work from on a day-to-day basis.

What I am trying to determine is the best way to present this arrangement to the German tax authorities. Although I will not be seeking new customers in Germany, as a resident I will be subject to taxes in Germany, and I need advice about whether it would be better (financially) to set myself up as self-employed in Germany or whether it's better to present my situation as simply being employed by a foreign (non-EU) employer and living in Germany.

I have read a lot of TT posts about self-employment, and I understand it fairly well; one complicating factor with self-employment is that probably 90% of my software is sold to one customer -- I have heard that maximum 80% of income can be with one customer in order to avoid accusations of "false self-employment".

The unknown for me is the alternative: employment by a foreign employer. Since I am self-employed in New Zealand, the foreign employer would be -- myself! I am finding it very hard to determine whether that means my company in New Zealand would have to deduct and pay Lohnsteur, social security taxes etc. If possible, I would like to avoid having to pay social security and pension taxes since I would be unlikely to ever require these in Germany.

Is anyone here willing to offer some advice from your own experience of a similar situation? I am particularly interested in what hoops a foreign employer has to jump through on behalf of their employees living in Germany, because this is the key question: does the German taxman collect more from a self-employed person earning X dollars, or from a company+employee where the company earns the same X dollars?

Wouldnt your company have to be incorporated to employ you? Do you really want your company to deal with NZ and german tax authorities?


An employee would have to pay more social contributions I guess. A self-employed person could avoid some of it.
On the other hand as an employee you could avoid the whole "german VAT" chaos, because your NZ employer would write the invoices to clients.

This is too complicated a topic for an online forum. You need to talk to a tax advisor.

Is that really the "key" question? Most people are advised when running their finances / businesses that it's not usually a good idea to have paying the least possible tax as your main business / life objective? To let that be more important than the "bigger picture".

Even if it is, then there are trade offs. Less tax doesn't come for free. It can mean more risk, lots more personal (unpaid) admin etc. You have to factor all that in.

Surely the key question is which option provides the best sustainable overall business / life solution for you (and as a migrant where you wonÄt get the same state support as you do in your home nation)? You decide that and *then* you find the best tax solution.

Agreement Between New Zealand and the Federal Republic of Germany for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Certain Other Taxes

I don't have much helpful information to add, except that I think you are mixing up "freelance" which is where there is a limitation on how much of your income comes from one employer, and "self-employed", in which all your income can come from one source. I don't know the exact difference (hence your need for a financial advisor) but I know my ex is "self-employed" and works exclusively for Allianz, and I was a "freelancer" for Berlitz language school and had to make sure I had some other income from other sources to make sure I was truly "freelance".

I don't know if he can help you on your specific issues, but TT's very own Starshollow is our respected, resident expert on many things finance and he may be able to point you in the right direction.

You need the advice of both a German and a NZ accountant to find the best solution. There are many possible approaches, and you have to find the most suitable. For example, instead of being an employee or self-employed contractor to your NZ company, you could receive the income in the form of emoluments, ie. fees as a company director. You could leave the money in the company in NZ, and receive dividends on your 100% shareholding. You could let the company buy things like pension plans or insurance for you. Each possibility could fall under a different tax category. What works best depends on both NZ and German regulations.

So: seek professional advice.

Yes it is incorporated in New Zealand, and dealing with the NZ tax authorities is not onerous. Point taken however.


Yes, this is an important factor. In New Zealand, GST (equivalent of VAT) is not charged on exported goods and services, so as most of my customers are outside NZ, I don't have to charge them GST. I'm not sure whether the German taxman requires VAT to be charged on software exported from Germany.


Of course, and that is my next step. I wanted to get some comparison though with others situations, particularly their experiences as employees of a foreign (non-DE) employer.


It's not the key question in my business or my life! However it was the key question in my forum post. The business-end of my business will operate very similarly whether I run sales through my NZ company and pay myself while living in Germany, or whether I run them as a self-employed person in Germany... it is the administration end that will run differently. I am more than willing to pay professionals to render assistance where necessary.. it's just that from what I have seen, the TT crowd have more combined expertise in trans-national affairs than a lot of accountants and lawyers.


Based on my understanding of the helpful information presented by Herr Michael Schröder (http://www.steuerschroeder.de/freiberufler.htm) the distinction between being freelance and merely self-employed has subtle nuances such that even the Finanzamt has difficulty sometimes... the key difference from a cost perspective being that if one cannot be classed as freelance, one must pay Gewerbsteur and Gewerbeanmeldung to an appropriate organisation. The type of computer programming I do would be able to be classed as freelance, if other constraints can be satisfied, I believe.


Some very good points here. Thanks.