Doing business in an international environment is no longer simply a strategic necessity for major companies; it has now also become an everyday occurrence for many small and medium-sized enterprises. Many of our clients are also successfully represented in other countries with sales offices and production sites.
We help German companies doing business abroad establish contact with qualified consultants and legal advisors. As active members of the worldwide consultancy network LEA Global, we are in contact with the partners whose expert knowledge you can rely on for your auditing and (transaction related) tax advisory needs. We advise foreign companies on setting up businesses and investing in Germany: choice of location and legal form, structuring, financing, transfer pricing - always taking into account the relevant double taxation agreements.
We consider your situation not only from the point of view of German law, but also according to the regulations of the respective country. In this way, tax risks are minimised and double taxation can be avoided.
International assignments and foreign secondments require special expertise and hold both, tax and legal, risks for companies and their employees as well as for individuals working abroad.
To ensure that you and/or your employees are well advised, we provide assistance in particular with regard to wage tax, income tax and social security law.
As a member of Leading Edge Alliance, the world's second largest international association with more than 226 companies specialized in accounting, auditing, tax and management consulting services, we offer an international network in more than 110 countries. Due to the knowledge and skills of LEA, your situation and questions can be analyzed and reviewed not only from a German perspective, but also from experts of the sending country. In this way, tax risks are minimized and a double taxation can be avoided.
In particular, we offer the following services:
Payroll and Social Security (in Germany)
If yes, the following information should be kept in mind:
In principle, every German company is subject by tax law to the obligation to keep and store its books and other necessary electronic records in Germany. The purpose of keeping the books in Germany is to give the tax authorities access to data that is essential for taxation purposes at all times.
As companies increasingly operating on a global scale, larger groups in particular are seeking to centralize their accounting and recording activities for organizational or financial reasons. Already in 2008, the legislator had created the legal framework for companies to be able to relocate and store their electronic accounting worldwide, including countries such as the USA or Switzerland, under certain conditions. Since then, more and more internationally active companies have made use of this option.
How to proceed?
Companies wishing to relocate their electronic accounting abroad must apply in writing to the local tax authority. The transfer of electronic books abroad requires the prior approval of the local tax authority.
What is the minimum content of the application?
The application has to contain the following information in particular:
The documents and data access options must be available immediately and in full upon request and the required information must be provided promptly. The GoBD (principles for the proper management and storage of books, records and documents in electronic form, as well as data access) must also be complied with after the relocation.
Furthermore, a procedural documentation has to be available. The concrete form of the doc-umentation depends on the business activity and the structure of the company.
Reasons the tax office may refuse to grant approval at its sole discretion:
What is the scope of relocation?
The relocation is limited to the electronic books and other electronic records.
The paper documents, such as in particular invoices in hardcopy within the meaning of sec-tion 14 of the VAT code, must in principle continue to be stored in Germany. Thus, only cop-ies may be taken abroad permanently.
What happens if a relocation was done without the tax office’s authorization?
The tax authority may revoke the authorization and demand the relocation to Germany if they become aware of circumstances that lead to an impairment of domestic taxation.
The tax office is allowed to assess a penalty payment ranging from € 2,500 to € 250,000 in case the taxpayer does not comply with the request to relocate the bookkeeping or with the obligations to cooperate by granting access to data, providing information or submitting requested documents as part of an external audit within a reasonable period of time or if they have relocated the electronic bookkeeping abroad without authorization.
This also applies if the requirements for the transfer of electronic accounting are no longer fulfilled. In this case, the electronic books and other necessary electronic records must be transferred back to the scope of application of the German Tax Code (AO), i. e., they must be kept on a server located in Germany. The taxpayer must provide evidence of the comple-tion of the relocation.
Please note: The tax authorities can, and normally do, verify the regularity of the accounting transfer in the course of a tax audit.
Thus, should the tax office find shortcomings in (foreign) accounting or determine that the accounting generally does not comply with the GoBD or is incorrectly kept, they can reject the accounting and make an estimate.
When using a cloud solution for parts of the accounting or for the accounting as a whole, it may involve moving the electronic accounting abroad. This is the case for systems in which data subject to recording and retention requirements within the meaning of the German Tax Code (AO) is stored, processed or archived and the servers for the cloud are operated exclusively abroad.
If the electronic accounting is carried out by using cloud computing, the taxpayer has to en-sure through appropriate contractual agreements with the cloud provider that the storage me-dia are located within Germany or that advance information is provided if cross-border stor-age takes place and that retransfer of the electronic accounting is guaranteed at all times.
For this reason, cloud solutions have to be examined in detail before concluding the contract.
According to our experience, it is highly recommended to reach out to the tax authorities at an early stage and align with them.
The responsibility for the correctness of the electronic books and other electronic records lies solely with the taxpayer. This is also applicable if the bookkeeping or storage is located out-side of Germany.
Should you have any questions or concerns regarding this issue or in case you need advice or assistance, for example in filing the application for the relocation of your electronic books, please do not hesitate to contact us.