self employed tax question

work_to_live

im trying to find out information for a friend.
hes thinking of setting himself up as a translator, proofreader and editor. is the job of translator protected or can anyone practice as one? he will be doing this in the uk but also plans to go to germany for a year to do this. will he continue to pay his taxes in the uk whilst he is in germany or will he have to pay taxes in germany instead? the internet isnt shedding much light on this and there are alot of knowledgable people on money saving expert so thought someone might be able to help?

thanks

TheCyclingProgrammer

Working in Germany may make him liable to pay taxes in Germany. Your friend should speak with an accountant with knowledge of the German tax system.

chrismac1

On the basis of your post, it seems unlikely that your friend will stop being a UK tax resident by virtue of the time spent in Germany. If you Google "Statutory Residence Test UK" you'll find a large document outlining the rules on this, the critical bit starts on about page 10 taking you through the key questions.

Germany has a very similar test, though one key difference is that the tax year is a calendar year instead of our daft system 6 April to 5 April. This means - as with most countries in the world - that it is possible to be both a UK and a German tax resident at one and the same time.

However, in my view your friend should be able to arrange affairs to avoid most German taxes, other than possibly VAT depending on whether taxable sales exceed the German threshold. Firstly, just as it is unlikely he or she will be "severing the ties" with the UK to stop being a UK tax resident, so it is unlikely he or she will form enough ties to become a German tax resident.

So then the question is whether a Permanent Establishment (Google this too!) will be created in Germany such that business or self-employment taxes become payable. Each country has slightly different rules on this, the only countries I know in any detail are the UK, Bulgaria and USA. Given that the PE rules are largely governed by the OECD, it's a safe bet Germany is similar to the UK and USA - Bulgaria in 2005 or so was a bit different due to its Communist past.

On the basis of your post, my view is that he or she is capable of setting things up such that a German PE is not created.

work_to_live

Thank you!

TheCyclingProgrammer

work_to_live wrote: »

Thank you!

I'm not questioning chrismac1's advice but do bear in mind he isn't your friends accountant and can only answer the question based on the facts presented here.

I still think your friend should obtain proper professional advice as I'm aware of contractors and freelancers who have been caught out and ended up with hefty German tax bills. The cost of an accountant now may save a lot of money in the long run.

chrismac1

I agree the last post, would normally have added that caveat but got distracted earlier.

work_to_live

thanks u both for the advice. he wont do anything without knowing hes doing the right thing anyway