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Incorporating a limited company in Germany

thomas.skowron.biz

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Re: Incorporating a limited company in Germany

#91

Post by sparkling »

therealmarv wrote: post #89
sparkling wrote: post #84

Earlier quoted context omitted.

> good luck in describing to German tax authorities why you have founded it there and not in Germany Why would you need to explain my business choices to any german authorities? It's none of their business. On top, Estonia is a member of the EU, not some off-shore tax-evasion island.

It was an example. If you are a German citizen you have to explain the tax authorities your business (and I'm pretty sure this is also valid for every or most other EU country)... this includes foreign companies which you own because you need to pay taxes to the country where you live (and it does not matter if your companies are abroad!!!).

Forgive me if im wrong, but as long you don't receive a salary (or money transfers in general) from the Estonian company entity, you should not be paying any personal taxes in Germany since all the money remains in the company?

Obviously, if you take out money, that will be subject to taxation in Germany.

Re: Incorporating a limited company in Germany

#92

Post by therealmarv »

sparkling wrote: post #86
syllogism wrote: post #62

Earlier quoted context omitted.

If you direct the company from Germany, you'll be accountable for taxes in Germany anyway, regardless of where you incorporated.

Forgive me if im wrong, but as long you don't receive a salary (or money transfers in general) from the Estonian company entity, you should not be paying any personal taxes in Germany since all the money remains in the company?

German tax authorities will get information that you founded the company in Estonia... don't think that you are anonymous. When you make your yearly tax credit you have to tell somehow there that you have this company abroad. You have to tell and make evidence to German tax authorities that you don't earn a buck there. Does not matter if you transfer money to yourself or not.

Re: Incorporating a limited company in Germany

#93

Post by WildUtah »

pantalaimon wrote: post #82
WildUtah wrote: post #76

Earlier quoted context omitted.

It's not a company's responsibility to pay more than it owes. It's the people's responsibility to elect a government that will write rules without such gross and long standing loopholes. Or at least to elect a government that will close them after a decade or two of abuse instead of keeping them permanently.

According to that logic, if I found a software exploit that allows me to order anything for free on Amazon, I should be allowed to keep all the stuff without any consequences, because it's the resistibility of Amazon to prevent such loopholes from being used?

Imagine how nasty Amazon would be and how much money they would lose if they just blamed their users for bugs of that magnitude. That's how Europe's tax authorities are running their business.

And the USA isn't all that much better.

Re: Incorporating a limited company in Germany

#94

Post by sparkling »

therealmarv wrote: post #92
sparkling wrote: post #86

Earlier quoted context omitted.

Forgive me if im wrong, but as long you don't receive a salary (or money transfers in general) from the Estonian company entity, you should not be paying any personal taxes in Germany since all the money remains in the company?

German tax authorities will get information that you founded the company in Estonia... don't think that you are anonymous. When you make your yearly tax credit you have to tell somehow there that you have this company abroad. You have to tell and make evidence to German tax authorities that you don't earn a buck there. Does not matter if you transfer money to yourself or not.

Sure. But if all the money remains in the estonian company (no personal payments/salary), i should not be owing any taxes for that?

The goal here is not tax evasion but reducing some of the bureaucracy of founding and running the company.

Re: Incorporating a limited company in Germany

#95

Post by therealmarv »

sparkling wrote: post #94
therealmarv wrote: post #92

Earlier quoted context omitted.

German tax authorities will get information that you founded the company in Estonia... don't think that you are anonymous. When you make your yearly tax credit you have to tell somehow there that you have this company abroad. You have to tell and make evidence to German tax authorities that you don't earn a buck there. Does not matter if you transfer money to yourself or not.

Sure. But if all the money remains in the estonian company (no personal payments/salary), i should not be owing any taxes for that? The goal here is not tax evasion but reducing some of the bureaucracy of founding and running the company.

Well, if you are NOT the company leader of the Estonian one then it's like an investment and I think you don't have to pay taxes or much less taxes. But if you ARE the company leader and decide what to do on Estonian one you are doing business with an offshore company in German eyes. It get's more complicated (not less if you live in Germany!) because you have to prove everything to German tax authorities no matter if you pay no salary to yourself... there is also some kind of law that you cannot just create a company abroad and be safe not to pay taxes in Germany (don't know the name of the law currently, sorry).

Re: Incorporating a limited company in Germany

#97

Post by helge5 »

sparkling wrote: post #87
helge5 wrote: post #73

Earlier quoted context omitted.

You pay personal taxes on your personal income (the salary the company may give you). That is completely distinct to the type of the company discussed in the link, a GmbH/UG. A company construct like that is its own legal person and it pays its own taxes (which usually works different to your 'personal taxes'). Where it has to pay them is a question for your tax accountant, I think (ignoring loopholes) a company prod…

Just to clarify, as long as all the money remains in the Estonian company entity (e.g. you are not paying yourself a salary), you should not owe any personal income tax in Germany since their is no income, correct?

If you have no personal income from a company (profits or salary) you do not owe personal income taxes - wherever. No personal income, no personal income taxes. That seems kinda obvious :-)

However, the company itself very likely has to pay German company taxes and need German business permits if you operate from Germany / generate the income in Germany.

But if you have 10 Estonian developers in your Estonian company doing programming for you in Estonia and you are only the founder/investor living in Germany, you probably wouldn't have to pay anything in Germany if you don't pay out profits.

To get a dependable answer you really have to discuss that with a tax lawyer. And finding one which can deal with multinational businesses is going to be really tough and presumably expensive. Which is another reason why this whole thing is more headache than gain, IMO.

Re: Incorporating a limited company in Germany

#98

Post by _up »

sparkling wrote: post #86
syllogism wrote: post #62

Earlier quoted context omitted.

If you direct the company from Germany, you'll be accountable for taxes in Germany anyway, regardless of where you incorporated.

Forgive me if im wrong, but as long you don't receive a salary (or money transfers in general) from the Estonian company entity, you should not be paying any personal taxes in Germany since all the money remains in the company?

Germany is different and has something called "Aussensteuergesetz". As a result you get to pay income taxes for your foreign companies, if they are located in tax havens like US or Estonia. Unless you can prove that you aren't managing them from Germany, like paying for an Office and a CEO.

Re: Incorporating a limited company in Germany

#99

Post by helge5 »

sparkling wrote: post #94
therealmarv wrote: post #92

Earlier quoted context omitted.

German tax authorities will get information that you founded the company in Estonia... don't think that you are anonymous. When you make your yearly tax credit you have to tell somehow there that you have this company abroad. You have to tell and make evidence to German tax authorities that you don't earn a buck there. Does not matter if you transfer money to yourself or not.

Sure. But if all the money remains in the estonian company (no personal payments/salary), i should not be owing any taxes for that? The goal here is not tax evasion but reducing some of the bureaucracy of founding and running the company.

Any taxes => any personal taxes.

Assuming the company isn't operating at a loss it is producing company income. Companies have to pay taxes on their profits too! AFAIK that income (excluding loopholes) needs to be taxed where it is generated. So if that company made 100k Euro using software you developed in Berlin, you'll pay the company taxes for 100k revenue in Germany. Not 100% sure, but that is my understanding of the situation.

Also note: You need to be quite careful, tax law is complicated in Germany. E.g. if you work for the company but you are not paying yourself a salary, but just profits, this can in itself be considered tax evasion! (since in Germany the corporate tax can be lower than your personal income tax)

But again, ask a tax lawyer or call your tax authority if you want dependable information on this.

P.S.: I don't believe bureaucracy is an issue here, you quite likely increase it by setting up a multinational.

Re: Incorporating a limited company in Germany

#100

Post by crypt1d »

therealmarv wrote: post #46
crypt1d wrote: post #25

Not sure if there is a specific benefit in incorporating in Germany vs some other EU country. If there isn't, I'd suggest looking into Estonia and their e-residency program. They have a fixed 20% corporate tax which you only pay when you take the money out of the company (as opposed to paying on income). I've recently applied and the bureaucracy has been a breeze so far. You can find some more info at https://bkpk.me…

In my opinion this is only great if you live outside the EU and want to have a financial place in the EU. One example: Imagine you live in Germany. When you create this company in Estonia good luck in describing to German tax authorities why you have founded it there and not in Germany! You probably also have to pay more taxes in total (to Estonia and Germany) if you are transferring money to yourself.

If you live in Germany and pay yourself a salary from an Estonian company, then you will only pay taxes in Germany and no taxes in Estonia.

The 20% Estonian corporate tax does not apply to salaries for non-residents, but for things like dividends.

P.S. Leapin is a company that specializes in accounting for online businesses looking to establish a presence in Estonia. You can find some more info on this stuff on their website:

https://www.leapin.eu/faq/receiving-funds#what-taxes-do-i-ne...

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