Working remotely for a US company in Germany

Are you thinking about moving to Germany but want to keep your job in the USA? This situation is far more common than you think. People from all over the world are moving to Europe with their remote jobs. If you are lucky enough to be able to work from anywhere and your employer doesn't mind you moving to Germany, there are several ways to do this.

You can live in Germany and work remotely for a US company if you comply with all residency and work permit requirements. Your main options are:

• Work as an employee
• Use of a payroll office in Germany
• Work as a freelancer

Whether you're moving to Germany to explore Europe or to live with your significant other, you may be able to keep your job in the US. In this case, you should, among other things, pay attention to questions regarding residence permits, taxation and social security law.

For your US company, employing someone living in Germany involves a lot of additional work and costs.

How to work remotely in the US but live in Germany?

International labor and tax law is a complex topic. In some cases, remote work leads to a change in the employee's tax rights or tax and social security status. Here are just our recommendations.

It is always best to seek professional advice, such as a lawyer and a tax advisor in Germany.

In general, you can work remotely for a US company and reside in Germany. However, there are a lot of subtleties.

You must comply with tax and residency regulations. However, this does not apply to a tourist; If you only stay in Germany for a short time, there will be no problems. Normally, tourists, including US citizens, can stay in the EU for up to 90 days if they are not European citizens.

The exact plan on how to do a US job in Germany depends on several factors, such as:

• your employer's willingness to make extra efforts
• Your budget (possible costs for the lawyer)
• your nationality
• Your job

Overall, EU/EEA citizens shouldn’t worry much about working remotely from Germany. They can live and work in Germany freely and with almost no paperwork. Besides, Europeans can stay in Germany for up to 183 days in a year without any tax effects. But after that, they will become tax residents, which will be followed by some consequences. Whereas US citizens (non-EU) need to consider the type of residence permit they can get to stay longer than 90 days. There are a few residence permit options you can apply for, depending on the person’s situation.

In addition, Europeans can stay in Germany for up to 183 days a year without having any tax implications. However, they will then become tax citizens, which will have some consequences.

US citizens (non-EU citizens), on the other hand, need to consider what type of residence permit they can get if they want to stay longer than 90 days. Depending on your situation, there are different options for a residence permit that you can apply for.

However, the main ways to work for a US company while living in Germany are as follows:

1. Working as a US employee

The first thought that comes to your mind is probably to stay as an employee of your American employer and simply move to Germany. This is indeed doable, but requires some preparation.

1. Firstly, your employer must accept and approve the fact that you are working from Germany. Typically, remote work in the US means working within the US. To enable working from Germany, you must take further steps.

2. If you live and work from Germany for more than 183 days a year, you must pay German taxes and social security contributions on your worldwide income.

In addition, your US employer must pay its share of your social security contributions in Germany. You and your employer must cooperate with the German tax authorities.

However, the employer can pass this responsibility on to you if you pay income and social taxes in Germany yourself.

In this case, the employer transfers your entire gross income, and you complete all the paperwork to ensure that the money is transferred to the correct authorities in Germany. As you can imagine, this can mean a lot of work for you every month.

If you have an income of more than EUR 50,000.00, you can opt for private health insurance, which can save you money in the long run.

Ultimately, your employment contract must comply with German labor law and not American labor law. The rules regarding layoffs, working hours, paid vacation, sick days, and others must be followed by your US company.

For example, in Germany you can only be fired in certain cases, you are not allowed to work more than 40 hours per week on average, you must have at least 20 days of paid vacation, etc.

Your employer does not have to be present in Germany for this to work. He or she can contact one of the many German law firms and accountants who specialize in handling all the paperwork for foreign companies employing someone in Germany.

Residence permit for a US employee

Remember that working for a US company does not qualify you for a residency or work permit. Therefore, as a non-EU citizen, you must find a way to obtain a visa to live in Germany.

2. Hire a payroll accounting company in Germany

Alternatively, your US employer may employ the services of the employer to account for your employment and taxes. There are a large number of such companies in Germany; you can find them here.

A payroll company works as an intermediary between employer and employee and takes care of the human resources, legal and financial aspects of hiring employees abroad.

In this way, your employer does not have to set up a legal entity in Germany and you enjoy all the benefits of employment.

3. Work as a freelancer for a US company

Another way to work for a US company in Germany is to work as a freelancer for that company. This way you bill your employer for the hours worked and the employer can avoid all of the steps above.

However, certain requirements must be met for this to happen:

• Who can work as a freelancer in Germany?

To work as a freelancer from Germany, you must either have a residence permit for freelancers or another permit that allows freelance work, or you must be an EU citizen. If you only have customers from abroad, you are not entitled to a residence permit in Germany.

• You must be officially registered

In Germany, you must officially register your company or self-employed activity and adhere to German laws when running your company. This includes accounting methods, taxes you pay/collect, etc.).

As a freelancer, you pay German taxes and social security contributions.

• You must qualify as a freelancer in Germany

Not everyone is counted as a freelancer. In Germany there are strict rules for self-employment. If you are thinking about switching from an employment contract to a freelance contract but retaining your old tasks, this violates German law.

In Germany this is called "pseudo-self-employment" - when a freelancer works for a company almost like an employee.

Under German law, employers are not allowed to classify their employees as freelancers in order to reduce their costs (by not paying social security contributions).

Only real freelancers can register and work as freelancers in Germany; read more about it below.

Here are the main criteria that you and the German authorities can use to distinguish a freelancer from a "bogus self-employed person" or a freelancer on paper and an employee in reality:

1. You work for more than one client, and no single client can account for more than 85% of your income. However, work for a single customer can still be recognized on a temporary basis.
2. You set your own working hours and are paid based on performance rather than time - no fixed monthly salary.
3. You are free to decide where you want to work.
4. You are free to accept or reject work.
5. You are not wearing your client's uniform.
6. You do not identify yourself as part of your customer's organization. For example, you don't have an email address in your customer's domain, your business card doesn't have your customer's name on it, and your email signature doesn't mention your customer.
7. You only have limited access to your customer's internal IT network.
8. You are not a member of your client's All Employees email list.

If you work as a freelancer for only one company in the USA while living in Germany, this falls under the term "false self-employment", which can jeopardize your residence permit. You'll probably need multiple customers in the US or Germany for this plan to work.

Otherwise, you can take the risk and pursue this option anyway.

Registration as a freelancer in Germany

In order to work as a freelancer for your US employer, you must be properly registered in Germany. You will also pay your income tax in Germany.

Registration takes place at the tax office. The tax office is the authority that issues you the tax number and collects the taxes from you for your freelance work.

This is a handy software that allows you to manage all your freelance activities in Germany within a few minutes.

Or you can do it yourself by submitting the tax registration questionnaire. After the process is completed, you will receive your tax number.

How many days can you work in Germany before you have to pay taxes?

You pay taxes in Germany when you become a tax resident. This is the case if you stay in Germany for more than 183 days in a calendar year.

So you can travel to Germany, stay there and work within a 3 month Schengen border (for US citizens) without paying taxes.

Visa for remote work in Germany

Non-EU citizens must consider which residence permit they can get in order to stay in Germany for longer than 3 months.

In order to live and work in Germany, you must also have a legal work permit. This is possible if you have a residence permit that also includes a work permit. Some of them are:

• German work residence permit
• blue card EU
• Visa for German freelancers
• Permanent residence permit
• Residence permit due to family reunification
• Residence permit for students
• Residence permit for interns
• Residence permit for interns and trainees

German work residence permit

The standard work visa is issued to people who have a job offer in Germany. So if your US employer doesn't have a branch in Germany, you probably won't qualify.

In most cases, the government requires an employment contract with a local employer in Germany or the relevant branch. Your stay in the country should really be justified.

Visa for remote work in Germany

There is currently no special visa for remote workers in Germany. Qualified freelancers can apply for a German freelancer visa.

Visa for German freelancers

A German freelance visa is one of the best options to work as an independent contractor or freelancer in the USA from Germany. However, you must meet the requirements to receive it.

Your profession is by far the most important factor in obtaining a visa. It must be one of the freelance professions that are referred to as “liberal professions” in Germany.

According to EStG §18, freelance professions in Germany include activities in the following areas:

• Healthcare
• Right
• Tax and business consulting
• Scientific/technical (+IT)
• Linguistic and information-conveying activities

This includes artists, teachers, scientists, engineers, software developers and other freelancers. See a more detailed list.

To prove that you have the necessary skills, you must provide a license or other authorization when applying for a visa. This is particularly necessary for careers in law, taxation and medicine. In many cases you will also need to have customers or partners in Germany.

As already mentioned, false self-employment is not a legitimate reason for a residence permit and is illegal in Germany.

Required documents for the visa for German freelancers:

• Proof of income from abroad or from Germany - you must earn enough money to cover your living expenses. The amount must be enough to cover your rent and health insurance, plus EUR 449.00 per month.
• Proof of health insurance coverage in Germany
• Proof of long-term accommodation (rental agreement) in Germany
• Clients in Germany - it will be very hard to get a freelance visa if you have no clients and work in Germany. Ultimately, Germany wants to see interest in your freelance work in Germany.

Therefore, at your interview you must present letters of intent from German companies or customers who would like to hire you.

Taxes in Germany

Depending on how long you plan to stay in Germany, you may have to pay taxes there. In general, a person becomes a tax resident if they stay in Germany for more than 183 days without leaving the country.

Additionally, the rule is that you pay taxes where you are physically present, not where the work is commissioned or paid for. As a result, you are obliged to declare your income tax in Germany, even if the place of work is abroad.

U.S. citizens

US citizens are subject to US tax on their worldwide income, even if they live abroad. Therefore, you must file a U.S. federal tax return and report your worldwide income each year. A double taxation law comes into force when you become a tax resident in Germany.

Double taxation agreement

Thanks to a double taxation agreement, you don't have to pay taxes in both countries. US citizens can deduct taxes paid in Germany from their annual tax return.

So you first pay taxes in Germany and only then receive a US tax credit based on the taxes paid in Germany. Therefore, a U.S. taxpayer typically must file a tax return in both countries.

Social taxes

As with income tax, a person is subject to social security contributions in the country in which he or she actually performs the work.

When working remotely in Germany, you must pay all required social security contributions in both the US and Germany, otherwise you may lose your right to a pension, etc.

If you work for a US company as an employee, you can remain on the US payroll. If you pay taxes in Germany, you also pay social security contributions, e.g. pension, health and nursing care insurance.

As a self-employed person in Germany, you can be exempt from statutory pension insurance and some other contributions, but you will definitely have to pay health insurance contributions. The statutory contributions amount to almost 15% of your monthly income, which is why we strongly recommend that you take out private insurance.