Contracting in Germany: The latest updates

Contracting in Germany updates

8th February 2021

For contractors working abroad, Germany remains a hot spot of opportunities, despite the current pandemic.  However, remaining compliant with the local regulations in terms of work and resident permits, taxes and social security payments can be tricky for international contractors, including EU national professionals. As we’ve mentioned in a previous article, operating as a contractor in Germany is a real challenge that’s wrought with complex legislation.

And the coronavirus pandemic is driving further changes which contractors should be aware of. Here are the latest updates you should be aware of.

German tax authority to review tax return deadline

Operating compliantly as a contractor is highly complex and we advise individuals to seek expert guidance based on their own unique circumstances in order to avoid any potential fines or criminal charges. As an overview, however, there are two contracting models available in Germany which aren’t too dissimilar to those you’d expect to see across the rest of Europe:

  • Local self-employed “contract model” which is spilt into two distinct areas: sole trader Freiberufler or a limited company GmbH.
  • Local in country payroll – in Germany this is the AUG model.

While in the likes of the UK the sole trader option tends to be avoided, in Europe it’s a much more common route. You may come across a limited company in Germany, but it’s much less common than the sole trader option. Looking at the AUG model, this is essentially pseudo employment with labour leasing which most recruiters will already be familiar with. As an overview, an entity employs a worker and then leases them on to a third party.

The choice you make when working in Germany will affect your tax return. Indeed, as per the German tax system, a waged employed contractor typically doesn’t need to file a tax return. Self-employed professionals, however, will still need to submit tax returns. Due to the pandemic disruptions, German tax authorities have been considering an extension to the tax return deadline, from February 28 to August 31 for taxpayers who are submitting via tax advisor services. The suggestion received the unanimous approval of the Bundestag, so it seems likely that the draft bill will become official.

Lockdown extension to be reviewed

Contractors should also note that Germany is under national lockdown until February 14. However, Chancellor Angela Merkel is due to meet the head of the Bundesländern (federal states) on February 7 to review the current measures and establish the next pandemic response.

For those contractors working in Germany or looking to in the near future, the news of either a relaxed or prolonged lockdown will certainly have some impact. Bear in mind, though, that overseas contractors and EU nationals face the same restrictions in a national lockdown scenario. However, for non-EU nationals arriving in Germany during the national lockdown, local authorities may choose to restrict your operational range and travel as a contractor. This will be based on your local address in Germany, as defined by your application for a residence permit. If you are to start work in Germany soon, it’s best to keep an eye on the lockdown situation and the latest restrictions.

Digital demand is booming

For those already on long-term assignment in Germany, you may have already noticed changes in preferred payment methods. As a case in point, with online shopping booming during the pandemic, extra security measures have come into effect from February.

A new two-factor authentication to make it harder for criminals and hackers to access private financial information will now be the norm, as a recent article by I Am Expat explained:

“It will no longer suffice to simply enter your credit card number, expiry date and CVV (the three-digit number on the back of the card) to make a purchase online. You will also have to enter a password or a transaction number (TAN). This has been the case for payments above 250 euros since January 15; from February 15 it will apply to purchases above 150 euros, and from March 15, 2021, all online purchases will be subject to this extra layer of security.

Travel around Germany during lockdown

While the national lockdown currently prohibits non-essential travels across Germany, contractors working in Germany are able to commute for jobs and projects that wouldn’t proceed without a physical presence. However, if your work falls into this category, there are some considerations that you need to be aware of.

Medical masks are, of course mandatory on public transport, although in Bavaria commuters are required to wear FFP2 masks. It’s worth mentioning that the Deutsche Bahn has recently announced a cost reduction on annual BahnCards starting from February 1. The BahnCard 25 for a 25% discount on regional and long-distance commutes will cost €55.70. The BahnCard 50 is priced at €229.

Health insurance doesn’t change

German hospitals are introducing new nursing staff limits to cap the number of patients for each nurse. The process is designed to increase nurse numbers working on wards. For contractors working in Germany with private health insurance, nursing availability remains unaffected by your Krankenkasse system. Staff limits are not influenced by Gesetzliche Krankenversicherung (public health insurance), or Private Krankenversicherung (private health insurance). However, it is important to add that the need for appropriate health insurance is now more important than ever – so ensure yours is fit for purpose in a Covid-hit environment.

Contracting in Germany: Further updates expected to occur

The above is a brief summary of the latest changes that could affect contractors working in Germany. However, further changes are likely to occur as Germany tackles the constantly changing pandemic challenges and regulations. We strongly recommend getting in touch with experts to seek contracting guidance. Our team is available for support online or by phone – contact them today!


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