Working remotely and digital nomads

This page explains the pitfalls of working remotely for an overseas employer (or being a “digital nomad”) while living in Germany.

Introduction

On the surface, it seems simple - your job can be done from anywhere with an electrical socket and an internet connection. Perhaps you’d like to see the world a bit, or perhaps your spouse is moving to Germany, and you’d like follow them while not giving up on your job. Therefore, you think that you can just work remotely from Germany - however, in reality things are much more complex.

Note that international labour and tax law is an exceedingly complex subject. If you’re thinking of working remotely from Germany, use the information below as a starting point, but make sure to consult professionals (e.g. a lawyer and an accountant) to make sure that what you’re planning is legal.

Working remotely as an employee

Say you’re employed by a company in your home country, but you can do the work from anywhere. Can you come to Germany and work from here? Yes - but only if you meet certain requirements:

You must be legally permitted to work in Germany either via a residence permit allowing you to work or EU citizenship. People on other residence permits (e.g. a language learner’s permit) are not allowed to work while they’re in Germany, no matter where their employer is located. Note that having a job offer from a non-German employer doesn’t qualify you for a residence permit per se - but if you qualify for a residence permit another way (e.g. through family reunification), then this becomes a possibility. Note that there may be an exception to this last rule for citizens of certain countries (including Australia, Canada, the UK, and the US - see §26(1) BeschV for a full list), as the German immigration authorities may grant these people a residence permit even if their employer is abroad.
You must pay German taxes and social insurance premiums on all your worldwide income.
Your employer must pay their share of your social insurance premiums, and must cooperate with the German tax authorities (e.g. report your income to them). It’s possible for the employer to pass these responsibilities on to their employees - for example, by paying them the employer’s share of their social insurance premiums, and letting the employee handle all the paperwork to make sure the money is sent to the correct authorities in Germany. For the social insurance part, see here. Obviously, this is a lot of extra work for the employee.
Your work contract must be amended to be in line with German labour law. For example, you cannot be fired except for cause, you must get at least 20 days paid holiday, unlimited paid sick days, fourteen months paid parental leave, work no more than eight hours a day, etc. See here for a more complete legal explanation.
Your employer must agree to you working from another country. Depending on the laws in your country, “remote working” generally only allows remote work from within the same country by default.

It’s not necessary for your employer to have a presence in Germany (e.g. a satellite office) for this to work, although that certainly helps. In particular, there are many law firms and accountants in Germany who specialise in doing all the paperwork for overseas companies employing someone in Germany.

Here is an explanation from someone who went through the process, and here is another one.

EU employers

If both you and your employer are based in another EU country, and they are posting you to Germany temporarily (they have to ask you to go to Germany; you can’t claim to be a “posted worker” if you decide to work remotely from Germany without being asked to), then you have a bit more leeway. Specifically, you can continue paying into your home (EU) country’s social insurance system (at least for a time), and can probably keep your current work contract. You don’t have to pay German taxes until you spend more than 50% of a calendar year (>180 days) living in Germany.

For more details, see the EU directive on posted workers.

Working remotely as a freelancer

Many overseas employers see the list above, and reply with “ no!". Once they've calmed down, someone usually suggests that you go freelance, and just bill your employer for your hours - that way, your employer can wash their hands of all of the extra work and costs associated with employing someone in Germany.

Is this a possible avenue? Perhaps - but, again, only under specific circumstances:

As above, you must be an EU citizen, or have a residence permit which allows you to freelance. Again, as above, only having overseas clients doesn’t qualify you for a residence permit per se, so you’d have to meet the requirements for the residence permit a different way.
You must register your business in Germany, and abide by German law while running your business (this impacts e.g. the bookkeeping methods you use, which taxes you charge, etc). Obviously you also have to pay German taxes and social insurance premiums. Make sure to crunch the numbers to determine your net pay, as you may have to ask for a substantial pay rise to end up with the same net income you had before.
One important aspect of German law which causes problems is Scheinselbständigkeit (“fake freelancing”) - for more details see below. The rules in Germany are tighter than in many other countries, so “independent contractor” relationships in other countries are often illegal in Germany. Specifically, as an employee, simply redefining your work as “freelance”, without changing the way you work, is clearly illegal.

Scheinselbständigkeit

Under German law, employers cannot reclassify their employees as “freelancers” in order to get out of all the pesky obligations they would otherwise have towards them (e.g. protection from being fired, paying social security contributions, etc). Only people who are “true” freelancers can register and work as freelancers in Germany - and being a “true” freelancer means “not working in an employee-like manner”.

There is no black and white definition for “not working in an employee-like manner”, but here are the main criteria. If you meet all of them then you’re fine; if you violate one or two, then you may still be fine, but the more you violate, the higher the risk that the Finanzamt looks at your business, decides that you are an employee and imposes the appropriate sanctions if no social security contributions for employees were paid. This means have to pay all the mandatory contributions which you’ve been missing (plus late fees and interest), plus a fine.

You are a true freelancer if

You work for more than one client, and no one client can make up more than about 85% of your income. Temporarily only having one client is probably ok, but your business has to be set up in such a way that you can potentially work with several clients at once (something which would be impossible for an employee).
You set your own working hours, and are paid by deliverable, as opposed to time (ie you don’t get a fixed monthly salary).
You are free to decide where to work.
You are free to accept or turn down work.
You do not wear the uniform of your client.
You do not identify yourself as being a part of your client’s organisation. For example, you don’t have an e-mail address in your client’s domain, your business card doesn’t have your client’s name on it, and your e-mail signature doesn’t mention your client.
Your client does not have employees who do the same or very similar work to the work that you do.
You do not appear on your client’s internal organisational charts.
You only have limited access to your client’s internal IT network (only as much as you need to do the work you’re specifically hired to do).
You are not a member of your client’s “all employees” e-mail list.

You can apply for a formal determination of your work in order to find out if it falls under employement ore self-employment under German law. If you are classified as an employee then you have to pay pay social security contributions (both those that the employee usually pays plus the one that the employer usually pays).

Payroll companies

An alternative to becoming freelancer for the sole purpose of working for a single employer abroad, is to ask the employer abroad to use a payroll company (also called “employer of record”) to handle your employment and taxes. A payroll company works as an intermediary between your employer abroad and you, handling HR, legal and financial aspects of hiring employees abroad.

This way your employer won’t need to create a legal entity in Germany, and as well, you will enjoy the advantages of employed people without the worry of bogus self-employment while working remotely. They will, however, have to pay a small fee to the payroll company in return for their services.

Digital nomads

Being a “digital nomad” in Germany is, depending on how you set up your business, somewhere between very difficult and flat-out illegal.

In particular, coming to Germany on a Schengen tourist/business visa (the one which lasts 90 days) in order to work remotely for clients or employers in other countries is clearly illegal. The Schengen visa terms clearly specify that you may work for an overseas employer during your stay, but only if that work is clearly tied to your location - for example, meeting with business partners in Germany, visiting a supplier’s German factory, or scouting out new opportunities for your business in Germany. Simply doing the same work you could do from your home country in Germany is against the terms of the Schengen visa.

Now, to be fair, the chances of you being caught are not high - but that doesn’t change the fact that you’d be breaking the law, and should you be caught (e.g. if someone discovers that you lied to the immigration officer at the border when you told them that you were in Germany “for tourism”), then you would face a fine, deportation, and probably a very long ban on ever entering the Schengen zone again.

Nevertheless, it’s possible to be a digital nomad in Germany - as long as you follow one of the two paths set out above. However, that’s usually not what digital nomads have in mind.

Working remotely from another country

Let’s assume you have a contract with a German employer and German residency (whether it be through a residence permit to work, permanent residency, or EU/German citizenship). Your job is “fully remote”. It’s October, the days are getting colder and shorter, and you wonder - why not just spend the winter on Sardinia? All your job needs is a laptop with an internet connection, right?

Unfortunately, it’s not that simple. In practice, working remotely from another EU country might be possible for a short period (a few weeks), but only as long as your employer is ok with it. Working abroad for a longer period, or from outside of the EU, is very difficult to impossible.

Also, your employer must agree, and doesn’t have to give a reason to deny your request. Your employer has the unilateral right to determine your place of work.

See this thread for details.