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Comment by Loic | Hacker News Reader

I am French, living in Germany with a company in UK. I can tell you, business is easy in Europe. It is extremely easy to take the good of each country and leave the bad. You can setup a company in any EU country and run it from any other country. This means an insane level of flexibility at the regulations level (if you are looking at regulations loop holes) or ease of management (if like me you go for where you have the minimum of paper work and do not care about tax level).

EU is working very well for businesses, have you created a company in EU? I recommend you start to look at where you can influence to solve your real problems this will avoid you losing your time on big lobbying plans for little results.

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This can't be said for all of the EU.

In the UK if you direct a foreign company but are UK based then HMRC will consider it a UK company for tax purposes.

I looked at incorporating in Ireland because A. We wanted good Euro banking which the UK doesn't have and B. The corporate tax rate is a mere 12.5%.

Regarding taxes the rule would probably be the same everywhere in Europe. However nothing would (legally) stop you to base your company in Ireland or Estonia etc...

The EU flexibility rather concerns other aspects. For example in Germany if you wanted to have a limited liability company (GmbH), you needed to have 20,000€ capital. The british limited had a lower requirement so lots of small german businesses incorporated as a Ltd. Now there is a new limited liability company in Germany called the "UG" without the minimum capital, which otherwise would never have happend or at least not as fast.

As said before, in my case, I do not try to escape the taxes, I try to get the simplest setup to focus on my work and not on paper work. If your really want to limit your tax footprint, ask a good accountant, in UK with the City, you are packed with accountants specialized in tax optimization. But again, I am a small startup, so no ideas about all these options.

As a matter of fact, I'm considering setting up my limited liability company in the UK because in Italy that is very expensive for a bootstrapped startup - at least 4.000 euro just for setting it up, without actually doing any business, and most of it isn't even taxes but professional fees you are forced to pay.

But my case apart, I don't think that the current system is good eg for 20 something students who could create a startup while studying, if anything else because it's too complicated to find and exploit those loopholes. What I'd like is not having to look for loopholes, which are much easier to use for bigger companies (look at what Google pays in taxes).

> You can setup a company in any EU country and run it from any other country.

I keep seeing conflicting reports about whether this is actually possible in Italy in reality.

Where in Germany are you based? Berlin perhaps? To me Berlin looks like a great location to run an online business from.

I was in the former East Germany for a while, now in NRW. Anywhere outside Munich (way too expensive) is a good place to be to run a business in Germany.

    living in Germany, with a company in UK

Let me guess, you're not paying any taxes? :)

I pay full taxes. I am employed by my UK company, this means that I pay all the German taxes on my salary (health &employment insurances, pension, etc.) and of course pay the corporate taxes in UK. I did it for two reasons:

- simpler to manage a UK limited from anywhere (we tend as a family to move quite a lot, so the limited is a fixed point for my customers.

- the German limited is not "limited" if you run it alone. If something goes wrong, as you run it alone, you lose defacto the limited liability.

So, all in all, better to go this way even if sometimes it costs more (2 accountants one in UK and one in Germany). As said, for me the goal was and is not to pay less taxes. I am happily paying taxes. If I pay a lot it means I make a lot :)

I'm not a lawyer nor any kind of expert, but I don't think what you are doing is completely legal, and might get you into trouble with the German tax people if their eye falls on you.

I have looked into this myself some time ago, and the problem appears to be that some countries in Europe (including the UK) apply 'Incorporation Theory', while others (including Germany) apply 'Real Seat Theory'.

'Incorporation Theory' states that a company is governed by the law of the country where the company was incorporated. So far so good.

'Real Seat Theory', however, states that a company is governed by the law of the country where the actual decisions are made (location of company directors). In your case, this would be Germany. This means you may in fact be MORE personally liable now, since under German law your company is de facto German, but unlawfully so, and you have that way lost whatever protection you would have had under German law.

Again, caveats apply, I have a business but I am not an expert, though I feel you should consult one.

That's what I understood too (in Italy it is like in Germany). So I would need to have a front man in the UK to be absolutely sure, but I don't like that.

This is exactly the kind of worries that I would the EU to abolish. Not easy of course, and not something I would expect in a few months, but it there isn't anybody pushing in the right direction, we could wait forever...

Since 2002 this real seat theory has been ruled out by EU, yes EU do a lot of good things :)

http://www.germanlawjournal.com/print.php?id=214

Yes you are correct for company law, but not tax law, see the §§ 1, 2 of the german corporate income tax law. ("KStG" http://www.gesetze-im-internet.de/kstg_1977/BJNR025990976.ht...). Unfortunately there is no official english version, but the tax code is formulated in such a convoluted way that GoogleTranslate can't make it much worse ;)

German taxes, more than 1000 pages of new rules written each month, nobody can follow, not even the state employees taking care of checking the submissions. For the tax part, I have a very good German accountant with a very good knowledge of all the cross border rules. Everything is done through chartered accountants both in UK and Germany to avoid issues.

Wow, that is excellent news! Hopefully that is the end of it.

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