Working for a German company, getting a German salary while living in a warmer and more affordable place. So will a remote work for German company abroad sounds a great deal to you? Well, it is.
However, there are various rules and regulations considering remote work. Ultimately, Germany is still a very traditional country regarding employment and how things are done at work.
You can work remotely and reside overseas if your German employer allows it. Becoming a contractor instead of an employee may be part of the employment agreement. Remote workers must follow host nation residency and work visa laws.
Indeed, working for a German company and living abroad is possible and practiced by many freelancers.
In this article, you will learn about all the legal sides of remote work for a German company regarding taxation, social insurance, and employment agreements.
How to work remotely for a German company and live somewhere else?
Though you can work for a German company and live in another country, it’s not as simple as it sounds. There are a few things to consider when working remotely from abroad, such as:
- Your residence
- Tax obligations
- Employment agreement
- Social security
In general, the employer determines the place of work and not the employee. In Germany, most people work in an office. Remote work and working from home are still not very common.
Your contract with the firm will outline all terms and limitations.
Some firms allow employees to work from home one or two days a week. However, spending these working days in a coffee shop (let alone abroad) violates the employment contract.
Germany doesn’t have clear laws for foreign workers. If an employer gives you that chance, he should specify the work abroad.
They may also offer you a limited time and ask you to live in Germany.
Employees residing overseas temporarily have less regulations. If you’re staying outside Germany for fewer than 183 days, don’t worry.
You might also want to read about working remotely while living in Germany.
1. Determine your place of residence
In the entire process, one of the most important steps is to figure out in which country a remote worker is a legal resident.
Thus, you need to have a country of residence. If you move to Portugal, let’s say, live and work remotely from there, then Portugal will be your country of residence.
Therefore, when living there for 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?
Also, you need to understand from the beginning if it will be a temporary stay abroad, after which you will move to Germany, or if you are planning to reside in another country long-term.
In this case of permanent work from abroad, German labor laws will no longer apply.
Many German companies will prefer to change employment terms to the independent contractor agreement. The worker will become a freelancer and is no longer an employee.
EU and non-EU countries
Another consideration is in which country you are planning to live while working remotely in Germany. As an EU citizen, you have all rights to live and work in EU and EEA states plus Switzerland.
In other countries, EU citizens must obtain a residence permit to work in that country legally.
Similar rules apply to non-EU citizens. However, they aren’t even permitted to live and work without a permit in any EU/EEA state. Furthermore, this rule applies to UK citizens since January 1, 2021.
Even if you work remotely for a German company in another country, you also work there. This might not seem as obvious as working as an employee in the office somewhere, but your online activity is still considered work.
The factor of you working abroad can influence your residence permit situation there. In the worst case, remote employees are working illegally abroad.
In many cases, residence and work permits can only be obtained if a German company has a local subsidiary in that country. Alternatively, remote workers can apply for digital nomad or freelance visas.
Read this article about countries that are offering such visas.
Your residence permit in Germany
If you have a German residence permit for work purposes and are considering moving somewhere else while keeping your job in Germany – you might have some problems.
A German residence permit, be it EU Blue Card or a regular work permit, doesn’t allow you to stay in other countries for an extended time.
While EU Blue Card allows employees to go on business trips abroad, it doesn’t mean you can move out of Germany with that. Yet, you can stay abroad and work remotely for some time, usually before you become a resident in another country – or 183 days.
After that, you need to apply for a permit in that country.
Nonetheless, the German EU Blue Card holders can stay outside of Germany for up to twelve months without losing entitlement to it.
2. Taxation while working remotely from abroad
How and where will you pay taxes while working remotely for a German company?
Taxation rights and social security status can vary if an employee works remotely abroad.
Most significantly, before relocating abroad with a remote work, evaluate all double taxation and social security treaties.
Well, 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 taxes in Germany
A basic rule of German income tax law is that you must always pay taxes where your residence is.
According to tax law, this is the place where you live most of the time in a year or have an apartment, property, etc.
Hence, one must pay taxes in that country on foreign and local income.
Where are you tax-liable?
If you live abroad for less than six months
When spending under 183 days in another country within a year, you will still be taxable in Germany or the country where you are a tax resident. In Germany, it’s called unlimited tax liability.
If you live abroad for more than six months
You will become tax-liable in that country with all your world’s income when staying longer than 183 days (within a year). However, this doesn’t apply to US citizens.
On the other hand, people who aren’t residing in Germany but get an income from there are subject to limited tax liability. Hence, your earned salary will be taxed according to German law.
However, double taxation treaties between Germany and your nation will apply. Double taxation assists remote workers in avoiding taxes.
All EU countries have similar arrangements. Work for a German company overseas and receive a gross wage. Pay taxes in your home country.
Thus, Germany will not demand tax filing. However, some employers have automated deductions, so address it beforehand. Because otherwise, you must file in Germany for a tax return.
US citizens are taxably liable for their worldwide income in the US, even if they live abroad. Therefore, you must file a US federal tax return annually and report your global income.
3. Employment agreement
When considering working remotely from abroad for a German company, an employer and employee might want to change the current employment agreement.
Become a self-employed or a contractor
To avoid any legal and tax problems, you might want to become self-employed or a contractor. Working as a contractor or freelancer from abroad is always easier than an employee.
In that case, many German labor laws won’t apply to you, so it’s also easier for the employer to handle such a work agreement.
To work as a contractor for the company in Germany, you must register as self-employed in the country where you live or in Germany.
After that, you can simply bill the German employer instead of working for a wage.
Registering as a freelancer in Germany
One of the options is to register for self-employment in Germany. All EU&EEA nationals can do it without obtaining a visa or residence permit.
Yet, you must have a German address.
To become self-employed in Germany, one must register as a freelancer with the local tax office or online by using this tool.
By doing so, you will obtain several tax identification numbers, such as:
- Tax ID (Steuer-ID)
- The tax number (Steuernummer)
- VAT number (Umsatzsteuer-ID)
You can register as a self-employed or freelancer in Germany by using this tool.
Getting a Tax ID in Germany
Both self-employed and employees must get a tax identification number or Steuer ID in Germany. So you and your company can file income taxes.
To get a tax ID, you must register your address in Germany.
Around two weeks later, you will get a tax ID by mail. Yet, you could go to the Finanzamt (tax office) and apply there to speed up the process. No appointment is needed.
Get a Tax Number – Steuernummer
The Steuernummer is required for German freelancers and businesses. A foreigner will get a tax number when registering for self-employment with the Finanzamt.
Again, you will receive it by mail 2 to 4 weeks after the registration.
By having this number, you can invoice your employer in Germany. Furthermore, one must take care of income tax and tax claims as a self-employed. This should be done in the country where the business is located and in the country of residency.
Getting a VAT in Germany
When you first set up your business as a freelancer in Germany, you must apply for a VAT number in the Finanzamt.
When working as a contractor for the company, your employer might pay VAT in Germany on your bill, instead of you charging it on top of your invoice and paying it in the country of living.
Not everyone must charge VAT in Germany. Here are some exceptions:
- Small businesses – revenue of less than 22,000 EUR in the first year and less than 50,000 EUR in the following years.
- Certain professions, such as for example, doctors, dentists, and other members of the healing professions (Freiberufe).
The VAT tax in Germany is 19% of the generated revenue from sales.
We recommend avoiding paying VAT since it will save you a solid amount of work to your self-employed activity.
Therefore, self-employment is the ideal option for working remotely from abroad. From employee to service provider for a German corporation. The employment agreement must also change.
Read about the difference between freelancers and self-employed in Germany.
Get your taxes sorted in Germany!
Want to be a freelancer or self-employed in Germany and avoid the bureaucratic nightmare? Get Sorted!
It’s an online tool for managing your registration, all tax obligations, reports, payments, and communication with the Finanzamt (tax office) in Germany.
The tool will do all the bookkeeping, tax, and VAT declarations.
Not only freelancers can use Sorted, but also small business owners and people with a side income. Whether you are a full-time freelancer, business owner, or considering working on a side, this tool will be helpful.
All necessary features are available at zero monthly costs. Thousands of freelancers already happily use Sorted; read reviews here.
Kontist is another tax management option for freelancers and self-employed in Germany. It’s comparable with Sorted but with an even wider range of services.
Kontist is virtually your private accountant in Germany but at a fraction of the cost (free or 9 EUR/month). It’s ranked 4,7 stars on Trusted.de and 4,5 on Trustpilot.
With the Kontist app, you can effectively:
- handle your taxes and communication with the German tax office
- consult experts
Kontist also offers a special bank account for freelancers and self-employed in Germany. Hence, it’s a perfect solution for banking and bookkeeping.
Some additional features:
- service & customer support is 100% in English
- SEPA transfers
- overdraft – between 500 EUR and 5,000 EUR
You can start with the free plan, sign up here.
Open a German bank account from abroad or online
Read this article to learn more about how to open an account in Germany in this article.
4. Social contributions
Another aspect of working remotely from abroad is where you receive and pay for social security. It will depend on some factors. If these conditions are met, you will remain under German social security:
- The employee works regularly remotely in Germany AND abroad
- The employee’s place of residence is in Germany
- A substantial part of the employee’s work is in Germany, or the employer is registered in Germany
You must consider all social contributions when operating remotely abroad. Otherwise, you may lose pension rights, etc.
As with income tax, a worker must pay social security in the country where they work.
Self-employed people must pay social security in their home country. As an employee, it depends on your country.
Germany has social security agreements with EU/EEA countries. Your firm may set up a benefit for you in that country.
You must handle payroll and social security taxes alone.
Remote workers must inform German companies so they don’t withhold commitments. Because you may pay social security in two nations.
Americans working abroad and self-employed must pay Social Security taxes. Citizens can sometimes opt out of the US system. They can be self-employed or create a corporation in Germany. Refer to the setup instructions above.
5. Health insurance
You need to consider optimal health insurance coverage for living abroad and working for a German company.
Cigna Global is the perfect global health insurance solution. Because Cigna insurance is international, you can use your policy in Germany and almost anywhere in the world.
With 74,000 employees, 200 years of experience, and more than 100 million customers globally, Cigna is one of the largest international insurance providers.
With Cigna, you can enjoy instant and easy access to healthcare facilities and professionals around the globe.
They are the preferred choices for expats in Germany. Feather provides public and private health insurance. Ottonova is customized for foreign employees, expats, freelancers, and self-employed.
For example, this insurance from Feather is perfect for a visa application, a new arrival to Germany, unemployed as well as self-employed individuals. You can sign up completely online and get full English support anytime.
You must have a secure internet connection
When working remotely for a German company, you MUST ensure your internet connection is secure and stable. That’s why many employers only allow employees to work from home instead of coffee shops or coworking spaces.
Remote workers should use a VPN to secure internet access, especially if they are abroad or working from public areas, like coffee shops. The top 3 best VPN providers in the world are:
What else do you need to consider?
One needs to watch out for many details when working remotely from another country.
We can’t cover all of them, but the following points are worth considering:
- Immigration law: Do you have a right to work in that country? Do you need a visa? Ask the advice of the lawyer here.
- Employment law: How do you and your employer comply with all rules for remote work? Do they know foreign labor laws? In case of doubt, request an online consultation with an employment lawyer.
- Data protection: How do you handle employer’s or client’s data when working remotely? Is it protected enough? Use VPN for security.
- Employer liability: Do you have any liability insurance for your work?
- Health and safety: Employers have certain legal responsibilities regarding the health and safety of the employee, which must be reviewed when working remotely.
- Medical insurance: You must have health insurance that provides coverage abroad.
- Travel and home insurance: Any policies you need while staying abroad?