Working Remotely for a Foreign Employer While Living in Germany

As remote work becomes increasingly common, many expats living in Germany find themselves employed by companies located abroad. While this offers incredible flexibility and opportunities, it also brings unique challenges, particularly when it comes to navigating German tax and labor regulations. This guide will help you understand the key aspects of working remotely for a foreign employer while residing in Germany.

1. Tax Obligations: Where and How to Pay Taxes?

1.1 Tax Residency in Germany:

If you have your permanent residence (“Wohnsitz”) or establish your habitual abode (“gewöhnlicher Aufenthalt”) in Germany, you are typically subject to unlimited tax liability in Germany. This means, your global income, including your remote work earnings, is subject to German income taxation.

1.2 Double Taxation Treaties:

Germany has concluded agreements with many countries to prevent double taxation. These treaties determine where you should pay taxes and in some cases allow you to credit foreign taxes paid against your German tax liability.

2. Social Security Contributions: Understanding Your Obligations

It is a common misconception that working for a foreign employer automatically makes one a freelancer. However, this is usually not the case when the working relationship resembles an employment contract. Even if your foreign employer does not establish a legal presence in Germany, you are typically classified as an employee for social security purposes. In most cases, the employee is responsible for remitting both, the employee and employer social security contributions to the German authorities.

3. Practical Tips for Expats

• Plan well in advance to meet your tax obligations.
• Keep track of work-related expenses by maintaining detailed records of all costs incurred in the course of your employment. These may include expenses for a dedicated home office, utilities, equipment purchases, or software subscriptions.
• Proper documentation not only helps with compliance, but also ensures you can claim eligible deductions, reducing your overall tax burden.
• For questions around social security, the German statutuory health insurance of your choice is a good first port of call. In more complex situations, seek support of a lawyer who is specialized in social security matters.

4. What We Can Do for You

We are here to assist you with the following:

• Assessing your unique situation and tax obligations, taking into account relevant tax treaties and German regulations
• The calculation of your presumed income and reporting it to the tax office for the assessment of income tax advance payments
• Preparing your income tax returns while considering all possible tax deductions.

If you have questions about your specific situation, our team at INSIGHT TAX is here to assist. Contact us today for a consultation!