How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask bigduckontax Your Own Question
bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4423
Experience:  FCCA FCMA CGMA ACIS
75394688
Type Your Tax Question Here...
bigduckontax is online now

I am a British national, retired and have just moved from South

Customer Question

I am a British national, retired and have just moved from South Africa, where I have permanent residency, to Germany. I draw a British State Pension.
I am thinking about starting in self-employment as an online consultant offering web-based marketing services. My clients will be almost exclusively based in America.
Where would be the best place to base my business for tax purposes?
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I am Keith, one of the expert on Just Answer, and pleased to be able to help you with your question. Let us first dispose of your State Pension which is taxable in the UK and paid gross. As an EEA citizen you have the standard personal allowance of 10.6K so there will be no UK tax due. The BBC advise that the take home percentage of income after tax in Germany and South Africa is virtually identical at:Germany - 60.61%South Africa - 61.78%So it behoves you to operate in whichever is the more convenient. In The UK, by the by, it is 57.28%. If you were to choose Germany, which from the tenor of your question seems logical, there will be German VAT to consider as well as Income Tax on your world wide income. This is at 19%, but you do not pay VAT on exports. There are turnover limits, there didn't used to be, back in the 80s just one mark or income required registration. These limits are [source; Wikipedia]: 'Entrepreneurs whose turnover (plus the value-added tax on it) has not exceeded EUR 17,500 in the preceding calendar year and is not expected to exceed EUR 50,000 in the current year (small enterprises), do not need to pay value-added tax. However, these small enterprises are not allowed to deduct the input tax they have been billed.' So there you are, a quick canter through the possibilities. It would appear that Germany is the obvious choice. Just think or the palaver of trying to live in Germany and running a SA based business, the mind boggles.
Customer: replied 2 years ago.
Mmm. Thank you Keith, but I am a little perplexed at the reply which I was hoping to be a rather more comprehensive as I selected the 'High' level of detail.How can there be German VAT 'to consider' if all my clients are overseas?
Why, as a tax expert, have you quoted Wikipedia?
Why is the Wikipedia quote on the subject of VAT, which you tell me is not applicable for 'exports'.
And what 'palaver' might there be in having my business registered in South Africa if I am operating from Germany with my laptop and an internet connection?The only information of relevance is the taxation levels in the three countries. However, there is no advice on operating as a sole trader or limited company or any other entity, to support a recommendation from you as to how to limit my exposure. I thought that's what tax advisers were for....Sorry if this sounds a little critical, but I am paying for this advice.Brian
Expert:  bigduckontax replied 2 years ago.
VAT is a turnover tax. Exports, if the turnover threshold is exceeded must, be charged. On exports the rate is 0%, but input taxes suffered can be reclaimed. As an accountant I was always taught that it was not necessary to know everything, but know where to look it up. As it happens Wikipedia gave a world wide summary of take home percentages thus making a recommendation easier. To operate as you suggest would immediately run foul of the German Tax authorities as you are resident in Germany. Furthermore Germany does not have a Double Taxation Treaty with South Africa so were you to base your business there you could end up paying tax in both countries. With respect, you made no mention of operating as a limited company, but intended to work as self employed. Corporation Tax in Germany is at a tad under 30%. If you draw dividends these are taxed at 25%. There is also the trade tax of some 14% payable to the municipality in which the trade is carried out.
Customer: replied 2 years ago.
Ah, now we are getting down to the nitty-gritty that I had hoped for. I put 'self-employment' to differentiate myself from being an employee, while hopefully leaving the taxation opportunities of working for myself, wide open. Sorry for any confusion.Thank you for the extra clarification on Vat, that is now understood. As is the info on the lack of Double Taxation Treaty with S.A. and the news about the limited company aspect.The only thing I am now needing is whether the quoted take home percentage of income after tax in Germany includes the Solidarity Tax, which could negatively affect the figures?Thanks,Brian
Expert:  bigduckontax replied 2 years ago.
Solidarity tax is [same source]: 'On top of income tax, the so-called solidarity surcharge (Solidaritätszuschlag) is levied at a rate of 5.5% of the income tax for higher incomes. Up to €972 (€1,944 for married couples) annual income tax, no solidarity surcharge is levied. Above this threshold, the solidarity surcharge rate increases continuously[clarification needed] until it reaches 5.5% when the annual income tax is €1,340.69 (€2,681.38 for married couples).For example, if €10000 income tax result from a certain annual taxable income, a solidarity surcharge of €550 will be levied on top. As a result, the tax payer owes the taxation office €10550.Solidarity surcharge is also imposed on withholding taxes on income e.g. wages tax and capital yields tax' This was taken into account in the percentages for take home pay I gave you in my initial reply. Please be so kind as to rate me before you leave the Just Answer site, Brian.
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 2 years ago.
Thank you for your support.