Fail in foreign trade - Ten ways to waste money abroad: The tenth case: We don’t have any premises and we don’t need a subsidiary

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Fail in foreign trade - Ten ways to waste money abroad: The tenth case: We don’t have any premises and we don’t need a subsidiary

An article of InterGest, partner of ti communication

Ms. Diener runs a industrial-cleaning company at the German- Dutch border, and she has about 200 employees. In Germany, her important customers include Deutsche Bahn and large hotels. Her employees come from all over, mainly from Eastern Europe, but they always have valid German employment contracts and are naturally properly registered.
During a trade association event, Ms. Diener comes in contact with a Dutch businessman who owns a hotel in the Netherlands with more than 200 beds, and who is looking for a company to do the necessary cleaning work. Previously, the hotel had its own cleaners and maids, but the personnel and social security costs have become so large that it seems very reasonable to outsource these activities.
After some negotiation, they come to an agreement, and Ms. Diener is asked to provide the cleaning crews for the hotel immediately. Ms. Diener assigns about 15 people to the Dutch hotel, and every day they drive about 30 km from Germany to their workplace in the neighbouring country.
Some time passes, and both business partners are quite satisfied with the deal they have made. Ms. Diener is earning good money in the Netherlands, and the hotel owner is very pleased. Everything is going perfectly. Everything? Well, yes, as long as you ignore the fact that Ms. Diener is providing services in a foreign country and acting as if there were no tax implications. In fact, it never even occurred to Ms. Diener that she could establish premises in the Netherlandsfor her work; so she conscientiously adds German value-added tax to the invoices for her company’s services and pays taxes on her earnings in Germany.

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