Employee Living in Germany

MetzgerMeister

Hi all,

This isn't directly tax related but I was hoping someone could give me some guidance.

We are an Irish company with an Irish employee living in Germany and working for us remotely.

In Germany, companies are obliged to pay for their employees' health insurance but given that we are an Irish company, we aren't obliged.

We are having an issue whereby the German authorities are hounding this employee to get her situation sorted or face fines and/or deportation. I'm not sure the deportation thing is substantiated but that's what the employee was told while speaking to "Die Techniker".

Any advice is welcome and if this would be better suited to another forum I will gladly remove it from here.

Cheers.

Tow

http://www.welfare.ie/en/Pages/Social-Insurance-PRSI-for-Persons-while-Working-Abroad.aspx

Q3 WHERE DO I PAY MY PRSI?
A Under EU Regulations 1408/71 Article 13.1 and 883/04(since 1 st May 2010) Article 11.1, a person shall be insured for Social Insurance Contributions (PRSI) in a single Member State only. Generally, employment is insurable in the State where it takes place. However, if you are an employed/self-employed person who is posted from Ireland to work in another EEA State, you may be entitled to apply for an E101 Certificate (Regulation 1408/71) or an A1 Portal Document (Regulation 883/04). This Certificate will exempt you and your employer from paying Social Insurance in the country where you are posted to and authorises it payable to the country where you were posted from.

MetzgerMeister

Thanks Tow.

The employee is being paid from Ireland to an Irish bank account therefore is paying PRSI here.

Basically the employee started working with us here in Ireland and then moved to Germany but continued the same job with us.

d15ude

Generally speaking, you have to pay taxes (and social benefits etc.) in the country of residence:

https://www.citizensinformation.ie/en/moving_country/moving_abroad/working_abroad/working_in_the_eu.html

Taxes
By working in another member state and by transferring your residence there, you are likely to become "resident for tax purposes" there. The definition of fiscal residence varies from one member state to another. You must comply with the laws of the country where you have established your residence. The laws on personal taxation vary considerably from one member state to another and you may be liable for taxation in more than one country. In general, you are subject to income tax in the country where you are living but this may not be the case if you are a “posted worker” – see below. In general, property is taxed in the country in which it is situated but, again, there are variations.

Anbocmorrua

How is the employee currently covered for health insurance? Die Techniker is a German health insurance fund.

MetzgerMeister

Anbocmorrua wrote: »

How is the employee currently covered for health insurance? Die Techniker is a German health insurance fund.

She had her own health insurance plan with a Germany company.

Tow

My gut feeling is that the employee should be paying the German version of PRSI. The A1 is only for a temporary posting abroad and it's use as described on DEASP's site differs from Revenue's, where it can be used to NOT pay PRSI in Ireland!

Anbocmorrua

Health insurance is mandatory in Germany. Mandatory as in if you don't have it you can't get a residence permit etc. You and your employee need to take professional advice on this.

Here's something you might find useful but it's not legal advice and IANAL.

https://www.toytowngermany.com/wiki/Health_insurance

rivegauche

Your employee needs advice separate from the employer
Long term, the state pension issue is even bigger than the health insurance issue for the employee or they'll be left destitute in their old age but the German Social Welfare Services are more concerned about the employees health cover immediately.

GarIT

MetzgerMeister wrote: »

Thanks Tow.

The employee is being paid from Ireland to an Irish bank account therefore is paying PRSI here.

Basically the employee started working with us here in Ireland and then moved to Germany but continued the same job with us.

Then you are breaking the law. The employee must be paid through the German tax system.

rivegauche

Not up to a year for a temporary transfer I think.
The rules are very complex.

GarIT

rivegauche wrote: »

Not up to a year for a temporary transfer I think.
The rules are very complex.

If you spend more than 183 days in Germany you are considered to have lived there for that tax year. And all income you earned in that year is taxable in Germany from the day you arrived, including backdating anything previous if you hadn't already paid the tax on it.

rivegauche

GarIT wrote: »

If you spend more than 183 days in Germany you are considered to have lived there for that tax year. And all income you earned in that year is taxable in Germany from the day you arrived, including backdating anything previous if you hadn't already paid the tax on it.

I don't agree there. There are exceptions which is why professional advice is required.

https://www.zoll.de/EN/Businesses/Work/Foreign-domiciled-employers-posting/Social-insurance-while-posted-abroad/Arrangements-within-the-EU/arrangements-within-the-EU_node.html;jsessionid=D4F737A3A3A7F77E7982A5F0827033A0.live4671

coppergrass

Does this person need to be an employee - could they contract? I'm in a similar situation - I'm an Irish citizen living in Sweden and working for a UK company. Working as an employee was both the company's and my initial preference, but as we went through the different sets of rules it became obvious it's an utter clustershambles. I set up a company in Sweden and have private health insurance from Ireland. After those two things were sorted it's been relatively hassle free.

MetzgerMeister

One option is for this employee to freelance, yes and then look after themselves with regard to health insurance etc. in Germany.

She is seeking legal advice from someone in Germany.

coppergrass

MetzgerMeister wrote: »

One option is for this employee to freelance, yes and then look after themselves with regard to health insurance etc. in Germany.

She is seeking legal advice from someone in Germany.

I'm not at all up to speed with the German system, but I had to show the Swedish tax authorities proof of income (invoices and bank statements), an Irish tax return, and the full details of my insurance policy. The fact that I had savings also helped. As far as I could tell it was not a black-and-white procedure and pretty much a judgement call on their part. They were very helpful in the tax office and gave good advice around the residency application and supporting documents so I didn't feel the need to go to a lawyer. Once residency was approved I got a 'personnumer' and could set up a company. Invoices get paid into that company's account, I pay myself from it and pay taxes in Sweden.

I'm not sure what your employee has in place in terms of residency and tax, but if I was getting threatening letters from the tax or migration office then I'd likely get legal advice too!