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Working in Germany
Thread poster: Will Kelly

Will Kelly
United Kingdom
Dutch to English
Jan 9, 2016

Hi all,

I’m British, my partner is German. We have two young kids, and we currently live in England. I am a translator (Dutch>English), and I work through my limited company, as a result of which I am able to pay myself and my partner (who works for me as a PA) the most we can pay without incurring a tax liability (c. £20K). Once expenses are deducted, the company pays 20% corporation tax on the profits and the rest I can take out as a dividend. Due to ongoing health issues, I work part time, and so I’m not paying much tax at all. My partner doesn’t currently work as she’ll be a full-time mother for at least another year or so.

We want to move abroad because house prices in the UK are insane. My partner wants to return to Germany. However, talking it through with a German friend of mine, it sounds like a huge chunk of my gross income would disappear. He suggested that I would be in the ‘freiberuflich’ category (broadly: a freelancer), and that 15-16% would go on health insurance, another 2.35% on elderly care insurance, and 18% on state pension (voluntary for people who are freiberuflich, but probably advisable). That’s already 36% of gross income (not net)! I presume there are other expenses – income tax and solidarity money. The question is, how on earth does a translator living in Germany make any money?

I'm also worried that I might have to charge VAT, whereas over in the UK we don't have to register for (and charge) VAT until turnover is somewhere in the region of £75K. Would this make me uncompetitive?


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Soonthon LUPKITARO(Ph.D.)  Identity Verified
Thailand
Local time: 13:08
Member (2004)
English to Thai
+ ...
My experience Jan 10, 2016

Will Kelly wrote:

We want to move abroad because house prices in the UK are insane. My partner wants to return to Germany. However, talking it through with a German friend of mine, it sounds like a huge chunk of my gross income would disappear. He suggested that I would be in the ‘freiberuflich’ category (broadly: a freelancer), and that 15-16% would go on health insurance, another 2.35% on elderly care insurance, and 18% on state pension (voluntary for people who are freiberuflich, but probably advisable). That’s already 36% of gross income (not net)! I presume there are other expenses – income tax and solidarity money. The question is, how on earth does a translator living in Germany make any money?

I'm also worried that I might have to charge VAT, whereas over in the UK we don't have to register for (and charge) VAT until turnover is somewhere in the region of £75K. Would this make me uncompetitive?


I planned to do a short-term interpretation job for about 5 months in Germany in January but I finally decided to cancel. The main reason was that the agency in Germany told me that I needed not pay the taxes to Germany by quoting a law written in German. I was not convinced since it was too good to be true and the agency sometimes gave me critically wrong signals.
My last visit to Germany was neither impressive; many travelers and I were blocked for nearly 2 hours before our departure from Frankfurt to New York. There were no mistakes on our side not to leave the country of Germany after a 5- day visit.

In your case, please carefully check before deciding to stay there.

Soonthon L.


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Erik Freitag  Identity Verified
Germany
Local time: 07:08
Member (2006)
Dutch to German
+ ...
Some thoughts Jan 10, 2016

Will Kelly wrote:

I'm also worried that I might have to charge VAT, whereas over in the UK we don't have to register for (and charge) VAT until turnover is somewhere in the region of £75K. Would this make me uncompetitive?


Most certainly not. The only case where this is relevant is when your clients are private individuals. In any business to business transaction, charging VAT or not does not change the price your clients have to pay. On the other hand, if you're VAT registered, you will be able to reclaim your own VAT expenses. The hourly rate that can be achieved by handling VAT is difficult (if not impossible) to reach with translation. I'm always surprised why people are so reluctant to register for VAT.


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Erik Freitag  Identity Verified
Germany
Local time: 07:08
Member (2006)
Dutch to German
+ ...
Leaving Germany? Jan 10, 2016

Soonthon LUPKITARO(Ph.D.) wrote:

My last visit to Germany was neither impressive; many travelers and I were blocked for nearly 2 hours before our departure from Frankfurt to New York. There were no mistakes on our side not to leave the country of Germany after a 5- day visit.

Soonthon L.


Well, I dare say that the problems you encountered aren't related to leaving Germany, but rather to entering the US.


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Peter Zhuang  Identity Verified
Germany
Local time: 07:08
Member (2014)
German to English
+ ...
Hello, hope this helps Jan 10, 2016

Will Kelly wrote:
We want to move abroad because house prices in the UK are insane.


Depending on where you want to live, housing prices here may be quite steep too.


However, talking it through with a German friend of mine, it sounds like a huge chunk of my gross income would disappear. He suggested that I would be in the ‘freiberuflich’ category (broadly: a freelancer), and that 15-16% would go on health insurance, ..., and 18% on state pension (voluntary for people who are freiberuflich, but probably advisable).


Other factors notwithstanding (eg. age, health status), the cost of health insurance depends largely on the level of coverage you want and the amount you can afford upfront yearly. If you can do away with the bells and whistles (eg. treatment by head physician, single-bed rooms) and willing to pay higher excess ('SB'). My health insurance is considerably cheaper this year because I don't expect my medical expenses to be higher and therefore opted for a higher 'SB'.

I pay into a private retirement fund only available to a selected group of professions. IMO, the advantages are flexibility (I can make withdrawal if needed, albeit losses apply) and okay returns.

Back to health insurance, you may want to consider public health insurance instead because you have children. Since I don't have children, I can't give you more information on this. It'd probably be good if you could speak to an insurance agent.

Also, if your partner is German, she probably knows about child subsidies ('Kindergeld') already.


I'm also worried that I might have to charge VAT, whereas over in the UK we don't have to register for (and charge) VAT until turnover is somewhere in the region of £75K. Would this make me uncompetitive?


You don't have to charge VAT if you don't expect your revenue to be 17,500 euro or above per year (Kleinunternehmer). Companies outside Germany also don't have to pay you VAT for your services, even if you are VAT registered.

Most agencies I've worked with aren't particularly bothered by the VAT charges, so I wouldn't be too worried. Erik has already mentioned the advantages of being VAT registered. For example, I bought a new laptop this year and the VAT was deductible.

[Edited at 2016-01-10 10:55 GMT]


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Ben Senior  Identity Verified
Germany
Local time: 07:08
German to English
Experience of both Jan 10, 2016

Having lived and worked in England for the vast majority of my life and for the last sixteen years in Germany, I find the overall situation of being self employed roughly the same. Here there is a small advantage, there there is a small disadvantage, but all in all about the same.

I don't find myself at all uncompetitive and having worked collaboratively on projects with translators in the UK I find my rates higher than my UK colleagues. German life is different from English life so if the life suits you I think that you would well advised to seriously consider Germany. As you have a German partner I don't think that you would be unsuited to living in Germany.

As in the UK property prices vary a lot between regions, where I live a three or four bedroomed semi-detached house costs around €150 000 to buy or €800 a month to rent. In Berlin or Munich you would pay easily four to five times that amount. I was in southern England just after Christmas and equivalent houses in estate agent windows costed around 800 000 GBP.

But house prices should not be the deciding factor on whether you relocate to Germany or not, there are many more fundamental issues that you should consider before making a decision.

Ben


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Thomas T. Frost  Identity Verified
Member (2014)
French to Danish
+ ...
Pros and cons Jan 10, 2016

If you think 18 % for pension contribution is too much, just pay whatever you want into a private scheme. The idea with the Freiberufler scheme is exactly that you are free to opt into these things or not. You also have the option to go private on health, but it's unlikely to be cheaper at that income level, particularly for a family, and it bans you for life from the public system if you do it. You get one option in a lifetime to go into the public scheme, and then never again (unless you change into a salaried occupation where it is mandatory to be in the public system). They clearly don’t want people switching back and forth to skim the best of each system.

I don't see the problem with VAT either. You don't sell translations to many consumers, do you? It may take an initial effort to understand how it works, but from then on it's quickly dealt with. Get a Steuerberater to do your annual tax and VAT returns, it doesn't have to be expensive, and German tax law gives you a lot of deductions. You don't pay tax of the first €801 of interest per year per adult, for example.

You don’t mention your wife’s occupation, but I presume she will be working. £20k per year is not enough to live for in Germany for a family like yours. €2,500-€3,000 of disposable income per month in additional to housing costs is the minimum I’d suggest. House prices in many parts of the former GDR are still extremely low, and you can buy detached houses with land for as little as €20,000 to €30,000 if you don’t mind living in a province. The local Germans here in Saxony-Anhalt are very easy and uncomplicated to deal with, and it’s a pleasant region near the Harz.

Many of all those British translators who opt out of VAT end up paying more VAT because they lose the VAT paid on expenses, whereas VAT is utterly irrelevant for business clients. I frankly don't understand why they opt out. There is very little administrative work to do in relation to VAT. I have always opted in when I had a choice because I'm not running a shop where I sell to consumers, the only type of occupation where it's an advantage to opt out.

You get €190 per month in not means-tested child benefit tax-free, probably a bit more than in the UK. It is due from the first day in the month in which the child arrives in Germany. Contrary to the UK, you have to go to the town hall and register as residents within the first few days of your arrival.

Beware the extremely high electricity tariffs, which are the result of an insane and incoherent energy policy of shutting down perfectly good nuclear power stations in a fit of hysteria and plastering the landscape with expensive and useless windmills and solar panels as part of the 'climate change' hoax. More than half the bills are various sorts of taxes, 'green' or not. Germans pay at least twice as much for electricity as the French. All the green hysteria has actually increased pollution, and I sometimes have to shut my windows not to get my living room filled with smoke from the neighbours' 'green' fireplaces or wood chip heating systems or whatever, and I live on the edge of a small town in a province. Germany is unfortunately more polluted than the green image they like to give. All the intermittent energy requires backup, and that backup is coal. So as not to be ruined by electricity tariffs, it is advisable to keep switching provider once a year to get 15 % “new client” rebates. At least you can keep the tariff at €0.25/kWh that way. Otherwise, you end up paying €0.30 or more. All this can be done online and fairly easily.

You have presumably read about the problems in Germany on New Year's eve, and while this is not the place to start an immigration debate, you need to be aware of the situation and take the possible consequences of this into account. I'm actually considering leaving Germany in the long term because of this.

It was a bit of a fight to get my 32 years of no-claims bonus from elsewhere in the EU accepted, as German insurance companies try to wiggle out of admitting you into the corresponding German no-claims class (they count 35 years) and then try to trick you into a 'special' class for foreigners where they will refuse to confirm your no-claims status when you cancel unless you emigrate from Germany. It was a bit of xenophobic and protectionist behaviour I met from the insurance companies, certainly not in the EU spirit Germany likes to boast about, but at least I managed in the end. But British insurance companies gave me just as much xenophobic trouble over my driving licence back in 1996 because it wasn't a UK licence, even if EU licences are and were mutually recognised by law.

Overall, moving to Germany was the right choice for me, but the immigration situation may change that, particularly when you have children and worry about what sort of environment they will live in in the future, and Germany does not have the situation under control.


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Will Kelly
United Kingdom
Dutch to English
TOPIC STARTER
Thanks all! Jan 10, 2016

Thanks for your comments everyone!

I see I was a bit naïve about VAT. If the customer is VAT-registered they can claim it back. I presume that's the same in any country. I do have end customers, but most of them are VAT-registered, though some aren't.

With regard to house prices here, I did mean insane. We have to talk in terms of average house price to average annual gross wage, and when looked at from that perspective Germany is significantly cheaper.

When I talk of paying my partner and I £20K, that's not all we're earning. That's the most we can pay ourselves without having to pay tax or national insurance yet still qualify for state pension, etc. The rest of my earnings come out of the company as a dividend. It's purely a tax-saving measure.

The important thing, however, is that I'm currently paying out very little of my income. My accountant here has told me what I can get away with writing down as expenses (e.g. a proportion of rent and bills due to working from home). Once my partner and I's wages and all expenses are deducted, we're paying 20% corporation tax on the company's profits. Given that I can't work full-time because of my health, I don't have to pay much tax. Health care is free here (no need to pay health insurance premiums). I don't know what proportion of rent and bills, etc., I could write down as a legitimate business expense in Germany, and already the long list of potential outgoings (health insurance, elderly care insurance, solidarity surcharge, etc.) would mean a huge difference in my net pay.

Private health insurance wouldn't make sense. With the public system it's a percentage of your earnings. A private premium might be expensive for me (I have a long-term health condition) and would mean I'd have to get separate policies for my family, whereas the public system is, I believe, inclusive of family members.

The only other thing worth noting is that our daughter is mildly autistic, and we get £450 a month in disability living allowance over here.


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xxxAdrian MM.
Local time: 07:08
French to English
+ ...
Keep tax-domiciled in the UK Jan 10, 2016

Ever thought, Will, of volunteering for VAT registration in the UK. It saves a lot of bother and aggro in the rest of the EU - where you would not need to charge UK VAT on the reverse charging scheme - plus your accountant will tell you about the flat VAT-rate scheme if your output VAT charged on invoices far exceeds any input VAT on purchases and supplies you buy in https://www.gov.uk/vat-flat-rate-scheme/how-much-you-pay.

Pros: you can stay IT/income-tax, CT/corporation-tax and NI/national insurance-contribs registered in the UK as a foreign resident and will be assigned a number for the purpose (out of a Merseyside/Birkenhead, Bradford/Shipley or other tax office).

Cons: UK residence (+ 6 months a year) or a plausible family address is still required for (usually chaotic, so oft clawed-back) HMRC child tax credit, child benefit and, speculatively, disability claims, plus for some UK life assurance & private pensions.

As for UK house prices and getting on to the property ladder, house prices in a remote part of North Wales or on a Scottish island are a fraction of what they are, say in West London or mid-Surrey.

Tax tip: if your partner doesn't mind being in a 'virtual-German' City (once German Bavarian at the time of Mozart), then do a 'Kaiser Franz Beckenbauer' retirement tax move as he did, namely from Munich to Salzburg or salubrious environs.


[Edited at 2016-01-10 17:34 GMT]


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Dan Lucas  Identity Verified
United Kingdom
Local time: 06:08
Member (2014)
Japanese to English
Look further afield? Jan 10, 2016

Will Kelly wrote:
With regard to house prices here, I did mean insane. We have to talk in terms of average house price to average annual gross wage, and when looked at from that perspective Germany is significantly cheaper.

Will, if buying a house is your key concern, then why not move somewhere cheaper in the UK? You're currently within commuting range of London so you're going to be competing with an affluential demographic. That inevitably pushes up property prices.

The difference is that London commuters need to be within striking distance of the capital whereas translators can live anywhere. Why not take advantage of that?

I just searched rightmove.co.uk and found 354 properties in West Wales within 30 miles of me that cost GBP 120,000 or less. That's about what, 5-6x your joint income? Of course, they're not all lovely places nor are they all necessarily in the best locations, but if you're dead set on owning, it may yet be possible.

Or you could look in the West country, places like this. Or go north to Northumberland.

However in more rural areas you'd need a car, so you'd want to consider the expense implications. And houses do cost significant money to maintain, as I have learned to my cost.

There's a lot to be said for the flexibility of renting. I did it for over quarter of a century!

Regards
Dan


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Thomas T. Frost  Identity Verified
Member (2014)
French to Danish
+ ...
Why complicate life so much? Jan 10, 2016

Adrian MM. wrote:

Pros: you can stay IT/income-tax, CT/corporation-tax and NI/national insurance-contribs registered in the UK as a foreign resident and will be assigned a number for the purpose (out of a Merseyside/Birkenhead, Bradford/Shipley or other tax office).

Cons: UK residence (+ 6 months a year) or a plausible family address is still required for (usually chaotic, so oft clawed-back) HMRC child tax credit, child benefit and, speculatively, disability claims, plus for some UK life assurance & private pensions.



German is not a high-tax country but more or less on the UK's level, so I fail to see why anyone would want to set up so complicated situations for so little benefit if any, as if travelling back and forth, maintaining two households and uprooting everything and everybody all the time were free.

Will said health care was "free" in the UK. Well, no, you pay employee's plus employer's NICs, amounting to some 23 %.

Furthermore, such 'creative accounting' could get you into hot water what the German tax authorities are concerned, whether legal or not, as they may consider it borderline tax evasion, depending on your actual circumstances. Registering in the UK if living permanently abroad is not a legal option under the most common double tax conventions, which commonly determine that the activity is taxed where it effectively takes place, regardless of where it is registered.

Be careful before setting up that sort of situation.

As for house prices, for the €25k I paid for a 110 m2 detached house with two annexes and a workshop, with 2000 m2 land in Germany, the best I could find in the UK was a small, used mobile home on rented land in the North of England, and then I save the council taxes in Germany too, as there aren't any - at least not here.


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xxxAdrian MM.
Local time: 07:08
French to English
+ ...
Maintaining the British status quo Jan 10, 2016

Thomas T. Frost wrote:

Be careful before setting up that sort of situation.



It's not 'setting up' any sort of situation or indulging in any creative accounting.

With a UK tax stay-put scenario, Will & partner - whilst keeping a business address in the UK - can dip their toes into regimental Germany (or preferably non-regimental Austria) and exit stage-left at the drop of a hat.

[Edited at 2016-01-10 18:49 GMT]


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Dan Lucas  Identity Verified
United Kingdom
Local time: 06:08
Member (2014)
Japanese to English
Wow Jan 10, 2016

Thomas T. Frost wrote:
As for house prices, for the €25k I paid for a 110 m2 detached house with two annexes and a workshop, with 2000 m2 land in Germany, the best I could find in the UK was a small, used mobile home on rented land in the North of England, and then I save the council taxes in Germany too, as there aren't any - at least not here.

That's astonishingly cheap for a developed country. I congratulate you!

Dan


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Thomas T. Frost  Identity Verified
Member (2014)
French to Danish
+ ...
Ta Jan 10, 2016

Dan Lucas wrote:

That's astonishingly cheap for a developed country. I congratulate you!



I took my time (months) ploughing through thousands of online ads over several months for the entire country before closing in for the kill on this one, but there are many more in that price level if one is flexible. There simply isn't much demand in the former GDR, but I'm really impressed with the massive renovation and modernisation that has taken place since the fall of the Berlin Wall, such as hundreds of kms of new motorways. In the meantime, London is still bickering over a new airport or runway while capacity is exhausted.

Sure, the house is from 1930 and would benefit from renovation, but so would many properties in the UK, and it can be lived in as is. The seller was insolvent, so I paid a debt collection company, but the main factor is the low level of demand here. But I can work anywhere, so why would I pay ten times more to live near a city? Annual property tax: €240 plus services (refuse collection, water etc.). I still have three supermarkets within 1 km and another three if I'm willing to drive 3 kms more. I have an international airport within one hour's driving. I can make do with driving 3,000 kms a year.

A real 'steal' if one doesn't crave city life. Besides, it's a mini-piece of local history, as it was the main railway station for a narrow-gauge mining and passenger railway that young locals don't even know about.


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Patrick.D
Local time: 07:08
Russian to English
Odd comparison. Jan 10, 2016

What is the point in comparing property prices of the former East Germany with the UK? I would more likely compare land prices of the old GDR with land prices of the old West Germany. Aren't Germans fleeing the eastern states of Germany for the western states?

Cheap property in the EU, with mild winters? Croatia, Bulgaria?


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