Working remotely for a German company while staying abroad

Does working for a German company, getting a German salary while living in a warmer and more affordable place sound like a great offer to you? Well, that's it too. However, there are various rules and regulations for remote work. After all, Germany is still a very traditional country when it comes to employment and the way things are done at work.

You can work remotely in a German company and live abroad if your employer gives his consent. In some cases, the employment contract is adjusted, for example if you become a contractor of the company instead of an employee. Remote employees must comply with all residency and work permit regulations of the country of residence.

Working for a German company and living abroad is possible and is practiced by many freelancers in particular. In this article you will learn everything about the legal aspects of remote work for a German company in terms of taxes, social security and employment contracts.

How can you work remotely for a German company and live somewhere else?

The preparation can be very complex - source: pexels.com

Even if you work for a German company and live in another country, it's not as easy as it sounds. There are a few things to consider when working remotely, for example:

• Your place of residence
• Tax obligations
• employment contract
• social insurance

In general, the employer determines the place of work and not the employee. In Germany, most people work in the office, remote work and working from home are not yet very common.

All relevant rules and conditions will be set out in your contract with the Company.

However, some employers allow their employees to work from home regularly (if they wish), usually one to two days per week. However, if you decide to spend these working days in a café (or even in another country), this will be considered a breach of the employment contract.

In general, there are no precise rules and rights in Germany for employees who want to do their work from abroad. If an employer gives you this opportunity, they should specify the nature and extent of the work carried out abroad.

It may also be that he only gives you a limited amount of time and requires you to live in Germany at a certain point in time.

There are fewer regulations for employees who only live abroad for a short period of time. If your stay outside Germany is less than 183 days, you don't have to worry too much.

1. Determine your place of residence

One of the most important steps in the entire process is finding out which country a remote worker is legally based in.

So you need a country in which you are resident. If you move to Portugal, say, live there and work from there, then Portugal is your country of residence.

Your possible place of residence - Source: pexels.com

So if you live there more than 183 days a year, you work in Portugal, regardless of where you are employed and where the company is located.

Temporary or permanent?

You also need to be clear at the beginning whether it is a temporary stay abroad after which you move to Germany, or whether you plan to stay in another country for the long term.

In this case of permanent employment from abroad, German labor law no longer applies.

Many German companies will prefer to convert the employment relationship into a contract with a freelancer. The employee then becomes a freelancer and is no longer an employee.

EU and non-EU countries

Another consideration is the country you want to live in while working in Germany. If you are an EU citizen, you have all rights to live and work in the EU and EEA countries and Switzerland.

In other countries, EU citizens must apply for a residence permit that allows them to work legally in that country.

Similar rules apply to non-EU citizens, although they are not even allowed to live and work in an EU/EEA country without permission. Since January 1, 2021, this rule also applies to British citizens.

Even if you work for a German company in another country, you still work there. This may not be as obvious as a job as a waitress somewhere, but your online activities are still considered work.

The fact that you work abroad may affect your residence permit. In the worst case scenario, remote employees work abroad illegally.

In many cases, a residence and work permit can only be issued if a German company has a branch in the country in question. Alternatively, remote workers can apply for a digital nomad or freelancer visa.

Your residence permit in Germany

If you have a German settlement permit for work purposes and are thinking about moving to another country while keeping your job in Germany, you could face some problems.

Your possible whereabouts - Source: pexels.com

A German residence permit, be it one EU Blue Card or a regular work permit does not allow you to stay in other countries for a longer period of time.

The EU Blue Card allows employees to go on business trips abroad, but it does not mean that you can use it to leave Germany. However, you can stay abroad and work remotely for a period of time, usually before becoming a resident of another country - or 183 days. You will then need to apply for a permit in the relevant country.

However, holders of the German Blue Card EU can stay outside Germany for up to twelve months without losing their right to the Blue Card.

2. Taxation when working remotely from abroad

How and where will you pay taxes if you work remotely for a German company?

Where is the journey going? But first you have to do a few things - source: pexels.com

Remote work from abroad may lead to a change in the employee's taxation rights or tax and social security status. Above all, all relevant double taxation agreements and social security agreements must be taken into account before moving to another country for your remote work.

If you live in one country and work in another, you have two countries that want to tax your income. Once you become a resident, most countries will tax your worldwide income.

Income tax in Germany

A basic rule of German Income tax law states that you always have to pay taxes wherever you live. According to tax law, this is the place where you live or have an apartment, property, etc. for most of the year. Therefore, one has to pay taxes on foreign and local income in this country.

Where are you liable to pay taxes?

If you live abroad for less than 6 months

If you stay in another country for less than 183 days within a year, you are still subject to tax in Germany or in the country in which you are tax resident. In Germany this is called unlimited tax liability.

If you live abroad for longer than 6 months

You will be liable to tax in this country on your entire worldwide income if you stay there for more than 183 days (within a year). However, this does not apply to US citizens.

On the other hand, people who do not live in Germany but receive income from there are subject to limited tax liability. The salary you earn is therefore taxed according to German law.

However, in this case, the corresponding tax agreements (double taxation) between your country of residence and Germany apply. Double taxation helps remote workers avoid paying taxes twice.

All European countries have such agreements. So if you work for a German company abroad, you will receive gross wages and taxes must be paid in the country of residence.

Therefore, you do not have to pay taxes in Germany. However, some employers may make automatic deductions, so it's worth discussing this beforehand. Otherwise you will have to submit a tax return in Germany.

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 every year and report your worldwide income.

3. Employment contract

If employers are considering working for a German company from abroad, they may want to change the current employment contract.

Always read your employment contract carefully - source: pexels.com

Become self-employed or freelance

To avoid legal and tax problems, you should set up as a self-employed person or freelancer. It is always easier to work remotely as a contractor or freelancer than as an employee.

In this case, many German labor laws do not apply to you, so it is also easier for the employer to manage such an employment contract.

To work as a freelancer for a company in Germany, you must register as a self-employed person in the country where you live or in Germany. After that, you can simply invoice the German employer instead of working for a salary.

Admission as a freelancer in Germany

One of the options is to register for self-employment in Germany. All EU and EEA citizens can do this without needing a visa or residence permit. However, you must have a German address.

In order to become self-employed in Germany, you must register as a freelancer with the local tax office or online using this tool.

This way you will receive different tax identification numbers, such as:

• The tax ID
• Tax number (tax number)
• Tax ID

Obtaining a tax ID in Germany

Both self-employed people and employees need a tax identification number or tax ID in Germany. This is how you and your company can file income tax returns.

Plan taxes carefully - Source: pexels.com

To get a tax ID, you must register your address in Germany. About 2 weeks later you will receive a tax ID in the mail. You can also go to the tax office and submit an application there to speed up the process. An appointment is not necessary.

Apply for tax number

The tax number is required for German freelancers and companies. A foreigner receives a tax number when he registers self-employment with the tax office.

You will also receive this by post, 2 to 4 weeks after registration.

You can use this number to invoice your employer in Germany. As a self-employed person, you also have to take care of income tax and tax returns. This should be done in the country where the company is based and in the country where you reside.

Applying for a VAT identification number in Germany

If you are setting up as a freelancer in Germany for the first time, you must apply for a VAT number from the tax office.

If you work as a freelancer for a company, your employer can pay the VAT in Germany on your invoice instead of you having to show it on your invoice and pay it in your country of residence.

Not everyone has to charge VAT in Germany. Here are some exceptions:

1. Small business - income of less than EUR 22,000 in the first year and less than EUR 50,000 in subsequent years.
2. Certain professions such as doctors, dentists and other healthcare professionals (freelance professions).

The sales tax in Germany is 19% of the sales revenue generated.

We recommend avoiding paying VAT as it saves you a lot of work for your self-employment.

Consequently, self-employment is the best solution for someone who wants to work from abroad. You go from being an employee to becoming a service provider for a German company. Corresponding changes must also be made in the employment contract.

Do your taxes in Germany

Would you like to avoid the bureaucratic nightmare as a freelancer or self-employed person in Germany? Then get yourself Sorted .

It is an online tool for managing your registration, all tax obligations, reports, payments and communication with the tax office in Germany.

The tool takes care of all accounting as well as tax and VAT returns.

Not only freelancers can use Sorted, but also small business owners and people with additional income. Whether you freelance full-time, own a business, or are considering a side hustle, this tool will be very helpful to you.

All necessary features are available at zero monthly cost. Thousands of freelancers already enjoy using Sorted, read the reviews here.

Open a German bank account from abroad or online

You also need an attractive bank account to work in a German company and receive payments. However, opening a German bank account while living abroad can be challenging.

4. Social security contributions

Another aspect of remote work abroad is the question of where you will receive and pay social security contributions. That depends on a few factors. If these conditions are met, you will remain in German social security:

• The employee regularly works remotely in Germany and abroad
• The employee's place of residence is in Germany
• A significant part of the employee's work takes place in Germany, or the employer is registered in Germany.

If you work in another country, you must pay attention to all necessary social security contributions. Otherwise you could lose your right to a pension etc.

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

As a self-employed person, you are responsible for social security in the country where you live. As an employee, you are subject to social security contributions in the country in which you live.

The EU and EEA states have concluded social security agreements with Germany. Therefore, your company could set something up for you to receive benefits in this country.

Otherwise, you have to take care of the wage and social security contributions yourself.

Remote workers need to discuss this with German companies so that they do not hold back some obligations. This way, you may end up having to pay for social security in two countries.

US American citizens

US Americans who work abroad and are self-employed must continue to pay US Social Security taxes. In some cases, US citizens can opt out of the American system. You can do this by starting a company in Germany or becoming self-employed.

5. Health insurance

If you live abroad and work for a German company, you need to consider optimal health insurance coverage.

Cigna Global is the perfect global health insurance solution. Since Cigna insurance is international, you can use your policy not only in Germany, but almost anywhere in the world.

With 74,000 employees, 200 years of experience and more than 100 million customers worldwide, Cigna is one of the largest international insurance providers anywhere.

With Cigna, you have instant and easy access to medical facilities and professionals around the globe.

You must have a secure internet connection

If you work remotely for a German company, you need to ensure that your internet connection is secure and stable. For this reason, many employers only allow their employees to work from home rather than in cafes or coworking spaces.

Remote workers should use VPN to secure their internet access, especially when working abroad or in public areas such as coffee shops.

What else do you need to consider?

There are many details to pay attention to when working from another country. We can't address them all, but the following points are worth considering:

• Immigration law: Do you have the right to work in this country? Do you need a visa? Get advice from a lawyer here.
• Employment Law: How do you and your employer comply with all remote work regulations? Do you know foreign labor law? If in doubt, request an online consultation from an employment law attorney.
• Employer's liability: Do you have liability insurance for your work?
• Health and safety: The employer has certain legal obligations relating to the health and safety of the employee that must be reviewed when working remotely.
• Health insurance: You must have health insurance that is also valid abroad.
• Travel and household contents insurance: Do you need any insurance during your stay abroad?