I am moving to Germany (Munich) towards the end of August to live permanently.
I am UK born and have been resident all my life (I am 25).
I am currently working as a contractor being paid a daily rate and my employer will maintain this for me even though I am going abroad.
So, I will be being paid by a UK source, but living in Germany.
I have been reading up on the inland revenue site and have seen quite a lot of stuff about double taxtion treaties. However, these treaties seem to relate mainly to income from interest, royalties, dividends etc...
I am more interested in knowing what the situation is with my normal income.
Will I have to pay full tax in the UK and Germany or do I get some sort of break?
Some hints on what my situation is/what I should do would be greatly appreciated.
ITYF the rules are you pay tax where you are oridnarily resident. If you have income from somewhere else and *they* try tax you on it it's up to you to apply to them for double taxation relief. I can't see it being a problem within the EU.
Once you have been outside of the UK for a complete tax year (so that to April 2006) you will obtain an NT (no Tax) coding. Before this point you will be theoretically liable to pay UK tax but as the German Finanzeamt will have first call, you won't actually have to pay any (you didn't think that your German bill would be smaller did you?). Once you have the NT coding it will be backdated to the date of first departure and you will get the UK tax back. (actually, I think that they let you work in arrears so they don't have the aggro of the refund). You need to talk to the people at Bootle for exact details.
That's the easy bit.
Once you have established permanent residence in Germany, which is after 6 months continual residence OR when you sign a let for a property you are liable to what the Germans call unlimited tax liability. That is, you are liable to German tax on the *whole* of your world wide income, for the *whole* of the year in which you are resident, including the bit before you arrived and after you leave, though you do get double taxation refief on these bits as they are liable to UK tax as well. The Top German tax rate is 53% which is achievable on a good professional salary. (Note that three months residence in one year followed by three months in the next establishes residence for both years).
As you are being posted from the UK you can chose to pay your UK NI instead of the German one for a period of 5 years. You will want to do this, the German NI totals 43%.
On the plus side you can claim second house deductions if you have a house that you leave behind in the UK, provided that you do actually go back to live in it regularly so you can't claim this allowance if you rent it out (or if you don't have a house in the first place).
How are you going to be paid, do you have a specalist Management company working for you, they can do things to lessen your German tax bill (though not by a great deal)
If you can take this work on a self employed basis you really want to do this, it is much better for you.
In fact I think you become non-resident from the day after you leave the UK, as long as it is your intention to remain outside the UK for at least a whole tax year, and don't intend to return for more than an average of 91 days in any tax year.
That was certainly my experience a few years ago. I'd worked abroad before (for three years) and I'd been back here for three years. I wrote to the IR saying I was going to work abroad again and they treated me as non-resident as soon as I left the country.
That's exactly what happened to me when I left the UK. That was 15 years ago now, so things may have changed, but I've just had a look at the Inland Revenue web site and it appears to still be the case.
BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here.
All logos and trade names are the property of their respective owners.