Question Tax minimisation for German resident

[fopiro5391]

I'm a resident in Germany, self-employed

My idea is to incorporate a offshore company in the UK or Delaware to save on taxes

My question is: would i still be liable to pay taxes in Germany? I'd be the only employee/director of the company and will be still based in Germany
My clients are mostly in UK, France and the US

As i see it right now, there is probably no way to escape the tax burden except having a residency in a tax heaven

Also would it maybe work if i register the company with a Nominee Director residing in the foreign country?

 

[Risehigh]

Foreign control rules, the authorities will try to label your foreign company as local company (in your case german) bcs you control the company from germany.

 

[fopiro5391]

Sure, but what if i register the LLC to a sockpuppet based in the UK? On paper it would be a British person running a UK company, in reality it would be me here in Germany

Otherwise i'm considering registering a UK LLP using anonymous offshores as directors for that 0%

 

[Sols]

If you are a German citizen, it's really easy to reduce your tax burden enormously. Just move to Malta or Cyprus. Ireland and Portugal can also work.

My idea is to incorporate a offshore company in the UK or Delaware to save on taxes

Your idea is flawed and will not work long-term.

Look at it objectively and critically. If it were possible to do what you have planned here, why isn't everyone doing it?

My question is: would i still be liable to pay taxes in Germany? I'd be the only employee/director of the company and will be still based in Germany

Yes, German corporate tax, German payroll tax, and German income tax. For German tax purposes, there is no difference if a company is incorporated in Germany or Delaware. If the business is owned or operated from Germany, it's a German tax resident.

As long as you are in Germany, you are subject to German tax laws. Any other arrangement is illegal.

It all comes down to how much you value not living in prison and/or paying back a tax debt plus fines relative to taxes you would save until the tax authority catches you.

 

[fopiro5391]

Thanks for the reply!
Couldn't i just use my business' money to purchase cryptocurrency, transfer it to an unknown wallet and declare it as operational expense/loss? Thus not paying profit tax?

 

[Sols]

Thanks for the reply!
Couldn't i just use my business' money to purchase cryptocurrency, transfer it to an unknown wallet and declare it as operational expense/loss? Thus not paying profit tax?

Of course you can.

It's illegal, though. You're already looking at a few years in prison for the tax evasion but now you've added a few more years for accounting fraud and related crimes. It's up to how creative the prosecutor get, if/when you are caught. You're probably looking at money laundering charges now as well. You'll be spending quite a bit of your prime adulthood in prison. Hope you don't have kids or a family.

In a world with increasing transparency, due diligence, and exchange of information (CRS/AEOI, TIEA, FATCA), especially resident in an aggressive, competent, and high-tax jurisdiction like Germany, you're not just playing with fire. You're dipping your hands in lighter fuel first and then playing with fire.

Consider this from beginning to end. A lot of people don't think beyond corporate tax. But that's only one part of the whole picture. You also need to account for your own income tax, and your ability to explain Source of Funds and Source of Wealth in the future. If your business goes well and you end up with hundreds of thousands of EUR that you embezzled out of your own company through crypto, how are you going to explain that to a bank or a tax authority? If you can't, banks will not accept you as a client and tax authorities will dig into your past.

Up to you if it's worth the risk.

 

[fopiro5391]

Ok, that's pretty depressing
then what's the best way out if i'm not leaving Germany? How do other companies exist in this environment?

 

[Sols]

The absolute vast majority comply fully with German tax law. You can always sit down with a tax adviser and look into all possible legal ways to lower your tax, or a financial adviser to optimise your finances. That's something people often overlook. You'll still be paying a lot of tax, but no more than absolutely necessary.

Some are of course engaged in tax evasion, but that gets more and more difficult each year. You can do it short term (a few years), but it might come back and haunt you and when it does, you'll wish you had paid taxes all along, or had relocated.

Bigger companies have very different circumstances. They can set up actual offices with employees in tax havens and shift income there, which is something small businesses just can't do. Arrangements like that costs more than your annual revenue, but it's nothing to big companies.

 

[JackAlabama]

Ok, that's pretty depressing
then what's the best way out if i'm not leaving Germany? How do other companies exist in this environment?

You have only two options. You pay up everything they demand of you or you move (ideally out of EU if you are on it already).
There is no practical middle path there (there are options of course, but you would dig yourself in a hole filled with legal s*it).

Some legal and obvious ways are:
You can just reduce/optimize work time and increase your leasure time and enjoy vices more and lower your tax burden (tax brackets) that way and move within Germany to low cost areas where your reduced remote-work income goes further. And try to deduct as many business expenses as you can.
It is not the entrepreneurials personality way of doing things normally and if you are really hell bent on making it, you need to move to a place which provides you with tailwinds instead of headwinds. The country on the south border of you is also an obvious choice which is akin to relocation-light depending where you from and speaking even somewhat the same language, although completely out of EU is best.

 

[carz]

Only one solution, move. And check exit taxation rules in Germany before you do.

You’re unlucky in that Germany is a taxation bitch, but lucky that you can move to other EU states with lower taxes as others have suggested (assuming EU tax harmonization isn’t a thing soon).

I’d gtfo of the EU whilst I still can if I were you, if you can bare it.

 

[Marzio]

ou have only two options.

There's a third option. Germany has passive CFC rules meaning that if you operate an offshore company in Switzerland and you commute daily to work from there you are taxed with Swiss rates at the company level and taxed in Germany on your salary. This has to be verified with a skilled lawyer / accountant but it should work if you demonstrate that you commute daily so the place of management is Switzerland.

 

[Konstanz]

In reality there are really no workarounds of high tax living in high tax country, unless you can hire people who would work in other country.

 

[JackAlabama]

There's a third option. Germany has passive CFC rules meaning that if you operate an offshore company in Switzerland and you commute daily to work from there you are taxed with Swiss rates at the company level and taxed in Germany on your salary. This has to be verified with a skilled lawyer / accountant but it should work if you demonstrate that you commute daily so the place of management is Switzerland.

Not doable depending on where OP lives and it adds a lot of complexities in real life. It also sounds like a very nice invitation to bored bureaucrats to have a look at this case due to its nature of being in low complexity to verify as it will boil down to just commute/immigration record crunching and there is not even a slight language barrier to overcome.
Better move to Switzerland altogether as a whole and go visit home on weekends etc and not base your whole case on daily commute.

In reality there are really no workarounds of high tax living in high tax country, unless you can hire people who would work in other country.

There is, but most is just not worth the efforts unless you run 8 or even better 9digits big businesses and can hire an army of lawyers who can figure out the latest tricks and twists to exploit backed in the legislation to keep the status quo hence the top at the top and the bottom at the bottom.
The only halfway "easy" way out solution without depending on expert advice is to move as long as you still can do so without having your whole assets "confiscated".

 

[MarkT]

If you have any kind of power over a place to stay in Germany that isn't rented out long term like a house, appartment etc. i.e. you physically possess keys, then you are "unbeschränkt steuerpflichtig" in Germany. Any income will be taxable through EStG articles. You also have to declare foreign company ownership on tax return. Any dividends, salary etc. will also fall under EStG. Doesn't matter if your company is abroad or not. Because this is 2022, chances are 99% your tax office will find out through foreign country reporting it OR reporting in the future. Because your non CRS country suddenly decided it is too nasty to stay on black/graylist, or they want the next batch of weapons. Burning match...

As others have mentioned, moving abroad is the only clean option. But be careful with 2022 new exit tax rules. If you have a corporation like AG, UG or GmbH, you have to get rid of all shares on your name first (sell, donate to family etc.), otherwise Finanzamt will calculate profits of average last three years x 13 x 60% (Halbeinkünfteverfahren) x your personal tax rate and send you an invoice for tax on a sale that has never happened. Or liquidate it first before moving. Then move and only in the new year, start a new company.

If moving is no option then forming a UG or GmbH will provide methods of lowering tax burden. As >=50% owner+CEO you are no longer required to pay social insurance. Which is a big chunk in exchange for a murky promise from the state pension system. You can further try to pull other big expenses into the company. Like phone, internet, private car used for company (30ct per km driven, as declared by you on rather free form sheet, paid out without tax; this is not the 1% rule and also not a car in the company run with a Fahrtenbuch), electricity, devices, internet hosting, etc. Your company will pay no VAT on these expenses, which is 19% right now. Another chunk. Furthermore you can shift profits or losses from the past to the future and vice versa. Keywords are "halbfertige Waren- und Dienstleistungen" ("incomplete stuff and services"). Good if you have spiky business with fat years followed by meager years, because it lowers your income tax when you don't have to pay out the big chunk in one full year but can strech at lower progression rate in following year(s).

You will need a tax advisor that will do the Bilanzbuchhaltung for you and ideally, he will advise you on possible deductions and such models aka "Gestaltungen". But make sure it's not one of those former-Finanzamt-now-Steuerberater types, because in the depths of their mind, those still work for their old master.

 

[Risehigh]

Go the only proper german way: a double holding and under it active companies, which includes a gmbh & co kg in between.
Reduced your tax burden on profit distribution by 95% to a total of 1.5% if you distribute to your holding (use that as your investment vehicle) and even allows you to shift/calculate profit& losses against each other from active companies if needed.

Edit: some say this would even avoid your exit tax problem in the future due to the legal nature of a gmbh & co kg in between.
Structure is not easy, but some tax advisors specialize on it

 

[fopiro5391]

Just to clarify: i'm a foreign citizen (not US) with a "Unbefristete" visa

 

[Martin Everson]

I'm a resident in Germany, self-employed

Accept my sympathy my friend

 

[fopiro5391]

Accept my sympathy my friend

1.4 Million are self-employed in Germany

https://de.statista.com/statistik/d...age/freie-berufe---selbststaendige-seit-1992/
I must add, that i have never seen a business/individual that does not accept "Schwarzgeld"

Unfortunately, this is not an option for me, since i'm conducting (serious) international online business and thanks to the CRS the Finanzamt (Tax agency) knows about the money upfront

 

[stevy777]

I'm a resident in Germany, self-employed

My idea is to incorporate a offshore company in the UK or Delaware to save on taxes

My question is: would i still be liable to pay taxes in Germany? I'd be the only employee/director of the company and will be still based in Germany
My clients are mostly in UK, France and the US

As i see it right now, there is probably no way to escape the tax burden except having a residency in a tax heaven

Also would it maybe work if i register the company with a Nominee Director residing in the foreign country?

if you don't mind living in Austria i found a way to be tax free with a crypus company .. check out the trade agreement to see it