Must use payroll company in the country I am working?

**cojak** · 23 May 2016, 07:06

It depends on the country you're working in.

Yes, if it's Switzerland.

**m0n1k3r** · 24 May 2016, 10:05

Originally posted by Sapjem View Post

Hi, I have a uk ltd company and have contracted over the past 15 years in most European countries and with the exception of longer term contracts in BE and NL this has been sufficient.

With my most recent job however, which has me assigned to different projects in different countries with a consultancy in a third country, the agency is taking a position which I don't like..I must use a payroll solution from day one or have a company setup in one of the actual three eu countries. So Isle of Man is out of the question.

Not liking this due to the extra layer of admin and the costs involved.

The agency tells me it's about compliance.

Has anyone else experienced similar?

I am seriously doubting the worth in contracting now.

It depends on which countries there are.

If you are a person who have the right to enter into binding agreements on behalf of the company (and as a director you most certainly are) then your company would be viewed to have a permanent establishment in the country you're working for as long as you work there.

It usually means that you would have to register a foreign branch of the company with the company register in that country, register with the local tax authorities for company taxes and as an employer, comply with the local laws and regulations and in many cases also maintain a separate bookkeeping and file separate accounts for that foreign branch (not all countries require this). It is often easier to set up a separate company for each country to keep it all nice and tidy and separated. For some countries it is more feasible to set up a new UK LtdCo for that specific country alone and register it as a foreign branch there and only use it in that country due to costs (such as minimum share capital requirements, time, authorisations and minimum number of directors). They can all be owned by your UK limited company so that the dividends end up there eventually and gets paid out to you from the UK company after you have stopped being in those countries.

Then again, it depends on the length of stay and on which country you are in. In many cases you could avoid having to pay local personal income taxes by not being there for more than 182 days in any 365 day period while in others the obligation begins on day one (the Netherlands is one such example). Certain countries (such as the Netherlands and Norway) also have chained obligations so that if your company would not fulfil its obligations, they would automatically go up the chain so that the agency or the end client could become liable to pay for your failings - thus the insistence on compliance.

In many cases, however, agencies use 'compliance' as an important sounding word to cover their own *se.

Post April 2016, looking at the actual difference in take-home between a UK limited company, paying taxes in the UK only, and going payroll agency (e.g. 'umbrella') is typically around 8.5%, taking corporation taxes and the cost of running a limited company into account. The higher the earnings the smaller it tend to get.

Although it certainly is doable to go the own limited company route, it can involve a lot of administration and costs, and the real question is whether it is really worth it. If you are looking at retaining a large portion of the money in the company for other purposes, growing the business etc, later on then it might be. If all you are looking at is to withdraw it and use it as personal income then it probably is not.