WORKING IN GERMANY
The most transparent, accurate and reliable contract management company in the market.
Access Financial has looked after close to 4,000 contractors in Germany in the last 20 years. With an AUG licence, we have the authorisation to carry out labour leasing activities in Germany and able to help recruitment agencies and their contractors to take full advantage of the potential and flexibility of the German market.
The solution assures the contractor of the highest retentions possible under the law, excellent service and fees that offer the best value for money.
Payroll and Tax in Germany
There are three main ways to operate as a contractor in Germany.
The first is to work as an independent freelance or Freiberufler provided that a contractor can demonstrate sufficient independence that he or she is not classed as an employee, being a Freiberufler is a very compelling and popular choice.
The main advantages of being Freiberufler are that you need not suffer German social security charges provided that you have approved German medical insurance or hold a Certificate of Coverage (*A1) from your home state.
You may claim business expenses to reduce your taxable income
In Germany, you must first register at the local Townhall where you stay. Then you must register with the tax office (Finanzamt) in the region.
After that,you must submit monthly VAT returns.
At the end of the year, you need to submit an income tax return to the Finanzamt.
Employment under AuG (Arbeitnehmerüberlassungsgesetz)
The second is to be employed by an employer that holds an AuG licence.
Our company employs the contractor and becomes its employee. AFI runs a German payroll and withholds taxes, social charges, necessary insurances and our management fee. The employee receives a monthly payslip, and the net salary is deposited into their bank account each month.
Recruitment business must understand that a condition of the AuG licence is that the licence holder and not the recruitment business must bill the client using the services of the employee. The recruitment business receives its remuneration by way of a margin agreement with the licence holder.
The third and last is to use a limited company or personal services which can be a UG or a GmbH or a foreign company to conduct assignments. In this case, the contractor is shareholder and director of their limited company that takes the contract with the recruitment business or end client. The rules in Germany concerning forming a permanent establishment and the authorities enforce them strictly, and the contractor should count on having to bear the full rate for Germany company income tax is 15%. (The rate is expected to rise to 21% in 2020.) There is also a solidarity surcharge of 5.5% levied on the corporate income tax. In addition, there is a municipal surcharge of between 14% and 17% depending on municipalities. The combined rate is between 30-33% approximately.
The rules are strict and include Equal Treatment
Allgemeine Gleichbehandlungsgesetz (AGG) after a prescribed period of working at a client.
After eighteen months of working under AuG the contract must be ended or the contractor becomes a permanent employee.
Outsourcing payroll and tax in Germany
Companies can outsource the employment and payroll of their staff in Germany to a PEO, like AFI Germany GmbH (AFI). AFI can do this both for foreign workers and German nationals. Unquestionably, PEO is the easiest, fastest and safest way to payroll staff in Germany.
AFI manages all aspects of payroll for workers in Germany, including taxes, withholding, social security payments and other statutory requirements. AFI is the Employer of Record and employs the staff on behalf of the client.
Staff are paid monthly with tax and social security deducted at source and paid to local authorities. AFI will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. AFI provides the employees with payslips.