Tax Bill from Norwegian Tax Authority

[SueEllen]

The 183 day rule applies to people posted abroad, e.g. ordinary employees sent to work abroad by their employer. A one-director limited company (virtually unknown outside of the British isles) takes their company with them wherever they go and they are locally employed by the UK company. The UK company should then be registered as a foreign branch in that country and maintain separate bookkeeping and submit separate financial statements and tax returns for revenue in that country.

The rules 183 day rules and the rules for posted workers etc are really for SMEs and up, where the directors stay in one place (mostly) and send their staff to work in different locations. They are not really applicable for UK-style, one-person limited companies.

That unfortunately isn't true.

The 183 day rule is a tax exemption which not all European countries allow. When they do allow it it is worked out differently country to country and can be for specific groups of workers. These workers are generally professionals where there are skill shortages e.g. technology workers or have unique skills e.g. sports people, musicians. These exemptions change all the time.

However the general rule is unless there is such an exemption in their tax laws for the period you are there, then from day one you pay income tax in the country you do the work in regardless of the size of company you work for.

If there is such an exemption and you are a contractor then you need to make sure you add additional directors to your company, preferably with different addresses to yours in the UK, before you sign the contract. (Some countries are fine with one additional director while others need three - it is up to you to find out.) That way when the tax authorities do catch up with you - and they will - they can clearly see your company had these directors before you entered the country so the company is UK based. You also need to keep these directors there for a year or so afterwards as you don't know how long the foreign taxman is interested in you.

In addition where they do discount days outside that country you need to keep records of you leaving and entering the country to prove your stay is not over 183 days if challenged.

While I've contracted abroad I've personally refused to work in some countries including Norway because the offered rate wasn't high enough to make up for the extra tax burden. In the case of Norway the agent lied blatantly about paying tax, so I suspect whoever took the contract got burnt.

[davetza]

How is income normally calculated in these circumstances? If for instance you paid yourself a salary of £10,000 p/a from your UK Ltd company and worked in another country for half the year would you pay tax on £5,000 of the salary in that country. How would dividends be treated? Also how does a company get taxed if it is a UK Ltd company but has a employee earning income in another country? I know it will be different for different countries but there must be some sort of rule of thumb on how tax works in this situation or maybe not?

[eek]

How is income normally calculated in these circumstances? If for instance you paid yourself a salary of £10,000 p/a from your UK Ltd company and worked in another country for half the year would you pay tax on £5,000 of the salary in that country. How would dividends be treated? Also how does a company get taxed if it is a UK Ltd company but has a employee earning income in another country? I know it will be different for different countries but there must be some sort of rule of thumb on how tax works in this situation or maybe not?

You remove the company from the question and need to pay tax in the exact same way that any freelance worker in that country would be paid.

That's why I don't do work abroad. It's just not worth the faff unless you are exceedingly well paid...

[Sue B]

I don't know if this is advertising, so am ready to be 'edited' if needed, but I just wanted to post our most recent article here which is very topical and maybe be useful.

https://www.linkedin.com/pulse/worki...le-title-share


HTH

[Fred Bloggs]

You remove the company from the question and need to pay tax in the exact same way that any freelance worker in that country would be paid.

That's why I don't do work abroad. It's just not worth the faff unless you are exceedingly well paid...

Exactly.

[Jolie]

Also if you only have one director and it is you, your company has permanently moved to whatever country the work is in regardless of whether the contract is 1 day or 100 days. This is easy for the Norwegian tax authorities to find out and verify as they just need to look at Companies House online.

Not quite, maybe if the only work being carried out was for the Norwegian company, but if the contractor was servicing many contracts, as many of us do, then regardless of whether it is a one man company they do not have an instant right to the earnings of everything you do at the same time. Therefore the company does not move simply on that basis alone and again I would question the legality of that.

This brings up another important point about proof. How do they know what work relates to you being there as a contractor, and what work you carry out in the UK? If I visit the Norwegian office for 30 days and that part of the contract is worth £15K, but I also invoice another £100K for work that was not done in Norway, does that mean they can also expect tax on the £100K?

They know you were in the country but they have no way of knowing the value of that work.

[eek]

Not quite, maybe if the only work being carried out was for the Norwegian company, but if the contractor was servicing many contracts, as many of us do, then regardless of whether it is a one man company they do not have an instant right to the earnings of everything you do at the same time. Therefore the company does not move simply on that basis alone and again I would question the legality of that.

This brings up another important point about proof. How do they know what work relates to you being there as a contractor, and what work you carry out in the UK? If I visit the Norwegian office for 30 days and that part of the contract is worth £15K, but I also invoice another £100K for work that was not done in Norway, does that mean they can also expect tax on the £100K?

They know you were in the country but they have no way of knowing the value of that work.

You are asking complex questions there which requires advice from suitably qualified and correspondingly expensive accountants...

The thing we do know is that Norway's tax people will know about the £15k of work you did for a Norwegian firm and they will want the tax for that...

[MrMarkyMark]

You remove the company from the question and need to pay tax in the exact same way that any freelance worker in that country would be paid.

That's why I don't do work abroad. It's just not worth the faff unless you are exceedingly well paid...

I'm the same, although I did a gig in Belfast, which is obviously no problem, with all expenses paid on top of the day rate.
It cost them a small fortune, but the consultancy was also making a packet.

In addition, I had a fantastic time

I'm regularly contacted about Switzerland, but my suggestion of 1K per day usually puts them off.
Norway I have always refused, for the reasons Sue Ellen cited.

[m0n1k3r]

That unfortunately isn't true.

The 183 day rule is a tax exemption which not all European countries allow.

It is an OECD convention and all countries do allow it. However a few have other rules in place that effectively override it unless you are sent out by your foreign-based and foreign-managed employer. If you work through a recruitment agency there, you are effectively not sent out.

Norway and the Netherlands have chained legislation, where the hirer of temporary workers eventually will have to take the tax hit if the temporary worker him/herself won't pay the appropriate taxes. That is why they insist on contractors going through payroll agencies.

The UK, for one, have its own secondary rule about an average of max 90 days over the previous four years.

When they do allow it it is worked out differently country to country and can be for specific groups of workers. These workers are generally professionals where there are skill shortages e.g. technology workers or have unique skills e.g. sports people, musicians. These exemptions change all the time.

Some countries apply the rule on tax years (usually calendar years) while others apply it on the previous 365 day period.

[m0n1k3r]

You remove the company from the question and need to pay tax in the exact same way that any freelance worker in that country would be paid.

That's why I don't do work abroad. It's just not worth the faff unless you are exceedingly well paid...

Yes, but only on the salary that the company actually pays you (taking dividends usually doesn't make sense in these cases as they tend to make the tax burden even higher). Pay yourself a half decent but not unreasonably low salary for the country in question and leave the rest in the country. Then when you're safely outside the tax net of that country draw dividends.