I am an application engineer (consultant) and I'm self employed. I am an
American and I contract to a company in Germany and work in Munich, Germany. I
have lived here in Germany since the middle of January of this year (2002),
working as a self employed contractor. I have no residence in the US. I am
working and saving money to start a film production company in the states at
the end of my time here. It can be assumed that the film production company
will not be a profitable venture for the foreseeable future, so no earnings
there need to be considered, only costs.
I want to avoid paying, what seems to be, the phenomenally high personal income
tax here in Germany. It is my understanding that if I work (physically exist
while working) inside Germany for over 183 days in the calendar year of 2002, I
will be taxed in Germany. This is defined in the US German tax treaty. (
http://www.irs.gov/pub/irs-trty/germany.pdf ) ( http://www.irs.gov/pub/irs-
trty/germtech.pdf )
I would like to continue working here for the remainder of the year (past July
15th) but have no interest in it if I will be paying 48.5% (roughly) personal
income tax on my earnings to the German government.
Some metrics are that I will earn roughly 120,000 euro by the end of the
calendar year 2002.
Possible solutions that I've thought of are :
1. Incorporate (create a one person corporation) in a US state (e.g. Delaware),
contract my newly created corporation with the German company (Tunisian company
based entirely in Germany), have the newly created corporation employ me and
pay me a very small amount, and at the end of the year turn the newly created
corporation into the production company and have it purchase the film equipment
needed. In this scenario I'd be taxed in Germany, but only on a small wage, I
would get the US foreign income exclusion (
http://www.irs.gov/taxtopics/display/0,,i1%3D56&genericId%3D16294,00.html )
however this wouldn't really matter since the tax treaty would prevent me from
paying in the states.
2. Leave July 15th, take my earnings (around 60,000 euro), return to the
states, and pay standard income tax only in the states. Start a production
company
3. Leave Germany July 15th, don’t return to the states, go somewhere else and
start the production company (Australia ?) and get the 80,000 dollar Foreign
Income Exclusion at the end of 2002 on my half year of earnings (60,000 euro)
So, my question is :
How can I avoid paying very high taxes on my earnings in Germany and if the
solution is one of my ideas above consisting of incorporation, how can I find
someone (name / phone number) who is knowledgeable in both corporation tax law,
and German out of country corporation tax structure etc.
The requirement is that I need to know before July 15th, exactly how this will
pan out in a financial sense (exactly what laws pertain to my situation and
with the above hypothetical amount of earnings, exactly how much I and the
corporation would pay in tax and to whom) in order to commit to staying in
Germany past the middle of the year. |
