I had a call today from a potential new client looking to outsource their payroll. All employees are based within the UK and ROI. They are now going to employ a worker in Germany. This employee lives and works in Germany but will be paid by this uk company.
Does anyone know how to approach this payroll and how the German government work? Could this employee declare himself as self employed and pay his own taxes to the German government or can we pay the taxes for him??
I'm not sure that I can help you much but I just wanted to say that getting involved in german taxes can be very complicated. Its not just about payroll but other things are involved too. Its a mine field unless you are experienced in these matters.
I worked for a company that employed a German resident and we ended up using him a a self employed consultant to avoid his tax issues, even then you have to record certain things on your VAT return.
There are accounting firms that specialise with taxes in other countries and these can be helpful as they have local knowledge but obviously they have a charge. I have also used these companies to employ anyone abroad as the legislation is very different to ours.
Others on the forum will probably be able to help, I just wanted to say be careful of what you may be letting yourself in for.
121 Employees going abroad The normal PAYE system applies to all employees of a UK employer even if the employees are working abroad for all or part of the time. When you send an employee to work abroad you should provide the employee with a letter giving the following details: the date the employee went abroad the gross pay and tax deducted whilst in your employment for the period from 6 April last to the date the employee was sent abroad. Employees who spend most of their time abroad over a period of a year or more may be able to get full relief from UK tax on their earnings. You can make special PAYE arrangements with us in these cases. If you have employees on an overseas contract, the overseas Revenue authorities abroad may get in touch with you about making foreign deductions from the employees pay. It is advisable that you contact the overseas authority on or before the start of the overseas contract to establish your obligations in that country. This is because you are likely to have obligations to both UK and overseas Revenue authorities. Although foreign deductions may be due, you must explain to the overseas authority that you are still responsible for operating PAYE under UK arrangements for these employees. Find out whether, and why, the foreign Revenue authority wants you to make deductions for them and when you have this information contact us. We will tell you what you can do to make things easier for the employee who will have two lots of deductions made from their pay.
This is taken from HMRC booklet CWG2(2009) Chapter 4 section 121
