Ich bin ein taxman

December 8, 2015 7:32 AM

You are not my tax person. My tax person is not German. How can I find someone qualified to answer a question about whether I, a US citizen resident in the US, need to pay taxes in Germany on a small amount of income from a contracted work?

The snowflakey things are (a) I don't speak or read German, and (2) I reeeeeeally don't want to talk on the telephone. I'm happy to pay a professional a small fee to answer the question, but I don't know how to find them.

The situation is thus: I live in the US, am a US citizen, and my sideline in ebook covers is based in the US. An author who lives in Germany commissioned me to provide an ebook cover for their book. I had no idea they were German until after they paid me (yay for living in a futuristic society, I guess). My tax preparer is of course not an expert in German taxes, but if I have to pay taxes in Germany on this, I may qualify for a foreign tax credit. I'm in communication with the author who commissioned me about this, but I'd really rather obtain an official answer myself as to whether or not I need to pay taxes on that income, or whether the person who commissioned me should have deducted taxes from it, to be extra-sure.

There is also no need to tell me to work this sort of thing out ahead of time next time: that lesson is already learned.

posted by telophase to Work & Money (15 answers total)

Why would you be paying the tax? You are the seller of the item, aren't you? Is this sale between two business entities?
posted by gorcha at 7:52 AM on December 8, 2015

you might get better answers if you say how much money you're talking about, because there are different tax liabilities for various bands... For example, we can hire a house cleaner on a 400 euro contract and there are no taxes. Otherwise you'll end up needing to have a conversation with a tax professional knowledgable about such things... But perhaps the U.S. Embassy in Germany will link to various tax professionals...
posted by flink at 7:55 AM on December 8, 2015

Yes, definitely Google English speaking or American accountants in (choose German city) and that should put you on the trail of someone with the knowledge to answer your question. I can message you some links I saw if you need help.
posted by flink at 7:59 AM on December 8, 2015

Response by poster: gorcha: I did not sell an item. I performed a service, according to my tax preparer. (unless I mistook your question)

I'll stop thread-sitting unless anything else needs confirmation.
posted by telophase at 8:03 AM on December 8, 2015

So, you are a US-based freelancer, working and living in the US, right? Then the only entity entitled to your taxes is the IRS, certaintly not the German equivalent.

With a freelance business, it doesn't really matter where your clients are, you pay your income taxes where you live, no matter where your commissioned work originates from! I'm not an accountant but I am a freelancer and have colleagues all over the world, as far as I know it works that way for everyone. (Incidentally, I am in the opposite situation and the same principle applies - I do live in Germany and have a freelance business in Germany and I do work for US clients and I pay my taxes on that in Germany, of course.)

If you're talking applying VAT to the invoice to a non-US client, that's another matter - as far as I know you don't - but it's a question any US accountant will answer because it's about US laws.

You just need to comply with US laws about income tax.
posted by bitteschoen at 8:25 AM on December 8, 2015

I live and am based in the US.
A couple years ago I built a website for an Irish guy.
I just counted it as income and went on my merry way.

YMMV
posted by bricksNmortar at 8:39 AM on December 8, 2015

What bitteschoen says. If the buyer were in, say, Colorado, would you be looking into whether you owed the state of Colorado tax? No, you would not, because that would be ridiculous. Same idea applies here. Also, on a practical level, the German government presumably has no idea who you are and no way to collect from you so even if they did think this kind of situation was taxable to the person in your position (I originally wrote "even if they thought you owed them money", but I had to edit that because, again, they don't know who "you" is), they could go suck it.
posted by phoenixy at 8:43 AM on December 8, 2015

Taxes are based on residency for (practically) every country in the world except the USA. And that only affects US expats, who are required to declare income to the IRS in spite of not living in the US.

You have not resided in Germany to do this work, so you are not required to pay income tax there.
posted by fraula at 9:05 AM on December 8, 2015

Response by poster: Thank you for your answers so far. While I suspect that it's probably the case that I do not need to do anything about it, the actual question I asked is: How can I find someone qualified to answer this? Please understand that I don't find "someone on the internet told me" good enough for financial and legal answers.

(now wishing I hadn't obfuscated the question with the details about it.)
posted by telophase at 9:18 AM on December 8, 2015 [1 favorite]

Honestly, if you don't want to talk on the phone, the easiest thing would just be to have someone call up the IRS for you and get confirmation of all the answers here. The IRS person will say the same things people are telling you here, speaking as a US citizen who is entirely tax-compliant and has both done freelance work for overseas clients while residing in the U.S. and while residing in the EU.
posted by tiger tiger at 9:37 AM on December 8, 2015

Somehow in between reading your question and posting my reply I forgot that your question was specifically about German taxes, which obviously the IRS can't answer. D'oh! Sorry about that.
posted by tiger tiger at 9:39 AM on December 8, 2015

If your tax person is a CPA, they should be able to get that information even if they aren't an expert on German taxes. The research will, of course, cost you a bit, but shouldn't be prohibitive to have definitive citations. If your tax person looked at this issue and just told you that you needed to "ask someone else" without finding someone else to ask, you should find a new CPA. This isn't something that should really take some kind of fancy expert on international tax.

Now, if you owed German tax, finding out how to file and how much you owed and so on, that could require someone else. But you're not going to need to get that far. You just need a preparer competent enough to know why German income taxes and VAT almost certainly don't apply to you and how to explain that in language you'll understand.
posted by Sequence at 11:44 AM on December 8, 2015

The tax treaty with Germany is on the IRS website. Skimming, I found this:

ARTICLE 14
Independent Personal Services
1. Income derived by an individual who is a resident of a Contracting State from the performance of
personal services in an independent capacity shall be taxable only in that State, unless such services are
performed in the other Contracting State and the income is attributable to a fixed base regularly
available to the individual in that other State for the purpose of performing his activities.
2. The term "personal services in an independent capacity" includes but is not limited to independent
scientific, literary, artistic, educational, or teaching, activities as well as the independent activities of
physicians, lawyers, engineers, economists, architects, dentists, and accountants.
posted by kjs4 at 2:46 PM on December 8, 2015

While I suspect that it's probably the case that I do not need to do anything about it, the actual question I asked is: How can I find someone qualified to answer this?

Seriously, your tax person in the US must be able to give you an answer (and that answer will be "no, you do not need to pay taxes in Germany as a US freelancer on a service provided to a German client" as has already been said by more than one person here but hey at least you'll be happy to hear it from a professional!)

The very fact your tax accountant is telling you they cannot answer it means only one thing: do yourself a favour and find a new tax accountant, because if they cannot answer something so basic and simple, something that is known to any freelancer who's already filed taxes, well, they're shockingly incompetent as a tax professional. Like Sequence says above... it really isn't a highly specialized area of expertise!

(Just one thing though - you wrote "I had no idea they were German until after they paid me", now aside from that being irrelevant to where you pay taxes, I imagine that means that you did not have their address, and therefore did not even send an invoice to them for payment, but agreed on payment informally. In that case, then that would probably be a problem, the lack of an invoice - but it depends how your side business is registered in the US, how you've been invoicing or not invoicing your clients so far - and that again is all stuff your tax person must be able to answer for you. )
posted by bitteschoen at 7:47 AM on December 13, 2015

PS - if you still want someone qualified on taxes in Germany, you just need to google searching for exactly those keywords you put in this question... you'll find several English-language tax consultants based in Germany.
Thing is, they provide services for English-speaking people dealing with the German tax system because they do reside in Germany, so they may not be as qualified to answer your question as a US-based tax accountant.
posted by bitteschoen at 7:57 AM on December 13, 2015