Residency law challenges when providing services from a Home Office abroad

Telemedial work from home or from a home office is playing an increasingly important role in the German labor market: Employers recognize the advantages of a decentralized organization and employees appreciate the good compatibility of private and work life in their home office. From a legal perspective, however, cross-border activities in particular lead to numerous challenges.

Residence law challenges for third-country nationals in the case of cross-border telemedia services

Surprisingly, German residence law does not provide a blanket solution for cross-border work from a home office. The legislator simply did not envisage the possibility of a residence in Germany while simultaneously working for a company based abroad. In accordance with this legal concept, most residence permits are fundamentally tied to working for an employer based in Germany. However, this is not mandatory. In the following, we present possibilities for reconciling a home office activity with a national residence title.

Settlement permit and permanent residence EU

The simplest option is to apply for a settlement permit or a permanent residence EU. Although both titles are linked to gainful employment or securing a livelihood, this does not necessarily have to be with a German employer. The prerequisite for the granting of a settlement permit is, in principle, a period of employment of at least five years or the completion of 60 months of compulsory contributions to the statutory pension insurance. The other prerequisites, such as the completion of an integration and language course, can be established comparatively easily.

Involvement of a payroll service provider

Another possibility to work in a home office for an employer abroad with a residence permit is to engage a so-called payroll service provider. This service provider carries out the payroll in Germany so that taxes and social contributions are also paid in Germany. Contrary to the opinion of some foreigners authorities, a corresponding employment relationship entitles the employee to an employment migration title. In this respect, the internal administrative regulations clearly state that “the location of the employer is irrelevant as long as an employment relationship exists or is sought in Germany and there is no case of posting”. The legal possibilities hidden behind this provision are not clear to most case workers. In case of doubt, this construction must therefore be explained to the foreigners authority by a lawyer for migration law.

Self-employed activity

Then it is also possible to work as a self-employed subcontractor. Irrespective of the fact that this construction can lead to numerous legal uncertainties from the perspective of labor law and social security law, it does, however, in principle entitle the person to provide cross-border services from the home office. To obtain a residence permit for self-employment, very high hurdles must be overcome in principle, since the residence law stipulates, for example, that there must be “an economic interest or a regional need” (§ 21 AufenthG). However, this can also be circumvented by applying for a different residency permit, for example, which only provides for the permitted self-employment as a secondary condition. The card or the electronic residence title (eAT) will then contain the note “self-employment permitted”. Which title would be the right one for this is always a question of the individual case, so that in the best case a lawyer for immigration law is involved beforehand.

Other legal options for home office work abroad

If none of the above-mentioned options is possible, other options to provide work at the home office from abroad are conceivable: For example, the employer could establish a dependent branch (permanent establishment) in Germany, which, however, could have unintended tax consequences, hire a service provider in the field of employee leasing or hire the employee abroad and then post him or her to Germany. However, these paths are regularly associated with a not inconsiderable cost and administrative effort, which is not always worthwhile for an individual employee.

As a result, the question of the correct residency title for a cross-border service for an employer based abroad always depends on the individual case. If a settlement permit is already within reach, this could solve the problem in an uncomplicated manner. However, if the employee has only been in Germany for a comparatively short time, careful consideration must be given to the other options, as there are specific advantages and disadvantages in each case.