Moving To Live In Czech Republic, Contracting To A UK Based Company

[Raodoar]

Hi all,

I'm moving to the Czech Republic in the next month or so (before Brexit hits!) for a couple of years. I'm a UK resident and currently working as an IT manager for a UK company. The company has offered to keep me on, if I re join as a contractor. I've not contracted before, and have been struggling to find any clear answers on what I'll need to do in this situation...

As I understand it I will be a resident in the Czech Republic, and therefore pay taxes & social security there, not in the UK. From my research it looks like paying an umbrella company may be my only option, but I wondered if anyone else has similar experience and may be able to offer any ideas?

Any advice is much appreciated

Thanks in advance!

[Old Greg]

In terms of whether you have non-brolly options, I don't know. In terms of brollies, Sue @ IPAYE always offers good advice so contact her.

[wattaj]

...The company has offered to keep me on, if I re join as a contractor...

QQ for the regulars: is Monday-to-Friday still a thing to worry about?

No, I CBA to check for myself; that's why I asked.

[eek]

QQ for the regulars: is Monday-to-Friday still a thing to worry about?

No, I CBA to check for myself; that's why I asked.

Yes

[johanek]

I've been investigating this for some time - I already spend part of the year living in CZ, but in the future this may flip around so I spend more time there than in the UK due to my partners work there.

If you want to work in CZ as an employee of your current company, they will need to setup a company there to employ you. Unlikely any company will do that for a single employee.

You could register as a self employed person (OSVČ - Osoba samostatně výdělečně činná) and invoice your company as a contractor that way. The tax treatment is very favourable - you can claim expenses of 40% of your income without evidence, so you only pay 15% income tax on 60% of your income! There is also health insurance and social security that needs to be paid as well.

This is what I will do if I become tax resident in CZ.

To be considered self-employed, you genuinely need to be self-employed. If you've been an employee of a company and intend to continue working the same way then you may not pass the independence or other tests of true self-employment.

"Independence is an element that distinguishes self-employment from employment most of all. It means that the self-employed person decides on his/her activities and their organisation independently. An activity carried out in a dependent/subordinate position, particularly an activity carried out for a single person who determines and controls the essential components of its performance, cannot be regarded as self-employment."

In that case, an Umbrella who will pay you as an employee may be your only option. I haven't found an unbrella service that operates in CZ but I've only looked at UK based firms and haven't looked very hard.

Whatever path you take, seek out advice of an accountant and/or tax specialist. Sue @ i-paye is often quoted here as an expert on this stuff, particularly for umbrella services.

I'm interested in what you end up doing, keep us updated here

[Raodoar]

I've been investigating this for some time - I already spend part of the year living in CZ, but in the future this may flip around so I spend more time there than in the UK due to my partners work there.

If you want to work in CZ as an employee of your current company, they will need to setup a company there to employ you. Unlikely any company will do that for a single employee.

You could register as a self employed person (OSVČ - Osoba samostatně výdělečně činná) and invoice your company as a contractor that way. The tax treatment is very favourable - you can claim expenses of 40% of your income without evidence, so you only pay 15% income tax on 60% of your income! There is also health insurance and social security that needs to be paid as well.

This is what I will do if I become tax resident in CZ.

To be considered self-employed, you genuinely need to be self-employed. If you've been an employee of a company and intend to continue working the same way then you may not pass the independence or other tests of true self-employment.



In that case, an Umbrella who will pay you as an employee may be your only option. I haven't found an unbrella service that operates in CZ but I've only looked at UK based firms and haven't looked very hard.

Whatever path you take, seek out advice of an accountant and/or tax specialist. Sue @ i-paye is often quoted here as an expert on this stuff, particularly for umbrella services.

I'm interested in what you end up doing, keep us updated here

Thanks dude.

I've been looking into it further and asked on a couple of Czech Republic Expat forums & Expat move abroad services! Seems the recommended way to do it is to acquire a 'Zivno' trade license, then once you have that all you need is a Czech bank account (doesn't need to be a business acc apparently) and then best off getting a Czech based accountant to help with annual returns. I've found two companies that offer to help you get hold of the trade license, and set you up to pay taxes & social security contributions etc too, quoted around 200 euros so sounds like a good bet. Hopefully that all does the trick, but i'll update here if I hit any major problems with this method!

The OSVČ sounds like a great method though, probably not for me & my situation but hope you manage to get it sorted and enjoy Czech Republic + less taxes all at the same time.

[zerosum]

Sue @ i-paye is often quoted here as an expert on this stuff, particularly for umbrella services.

I understand that i-Paye's solutions are based on being a posted worker.

But that's not applicable if you genuinely want to become legally resident in an EU member state before the end of the year and benefit from the Withdrawal Agreement, which preserves your right to live and work in the chosen state, providing you fulfil certain obligations on an ongoing basis.

Otherwise, for all EU member states inside Schengen, you're looking at applying for a working permit from the relevant embassy in the UK, and it's difficult to see how that would work unless your company does indeed open a branch or how they would prove that it's essential to hire you rather than an EU citizen.

The glories of Brexit.

[NotAllThere]

As I understand it I will be a resident in the Czech Republic, and therefore pay taxes & social security there, not in the UK. From my research it looks like paying an umbrella company may be my only option, but I wondered if anyone else has similar experience and may be able to offer any ideas?

I have contracted to a UK company from Switzerland. I have a limited company here, so simply invoiced them for work done, via their friendly agency. Another option here that may be available in Czech, is to continue as an employee of the UK company, be paid gross plus the employers NI that your employer will no longer be paying, and account for the tax and social contributions yourself.

If you were leaving the UK with the intention of not coming back for years, then the Mon-Fri rules and IR35 would be irrelevant in both situations, since IR35 is UK tax, and you wouldn't be paying any. I'm not sure IR35 is relevant anyway, since it's really to do with NI payments, which you won't be liable for at all. However, be aware that since you intend to be out only two years, you will be tax resident, at least for this tax year in both countries. You're only not tax-resident in the UK for complete tax years you are out of the country.

November 2020 - 5th April 2021: UK tax resident - dual taxation applies; you pay the higher tax of both countries.
6th April 2021 - 5th April 2022: Not UK tax resident
6th April 2022 - November 2022 (when you return): UK tax resident - dual taxation applies; you pay the higher tax of both countries.

It's a little more complex than that, but you get the idea.

[johanek]

Thanks dude.

I've been looking into it further and asked on a couple of Czech Republic Expat forums & Expat move abroad services! Seems the recommended way to do it is to acquire a 'Zivno' trade license, then once you have that all you need is a Czech bank account (doesn't need to be a business acc apparently) and then best off getting a Czech based accountant to help with annual returns. I've found two companies that offer to help you get hold of the trade license, and set you up to pay taxes & social security contributions etc too, quoted around 200 euros so sounds like a good bet. Hopefully that all does the trick, but i'll update here if I hit any major problems with this method!

The OSVČ sounds like a great method though, probably not for me & my situation but hope you manage to get it sorted and enjoy Czech Republic + less taxes all at the same time.

Getting a trade license, and then registering with the tax authoratives for income tax, social security and health insurance is exactly the process of becoming self employed.

Maybe it's beneficial to do that for a visa, but I don't believe you will fit the rules for being self-employed from what you've said - one of them says that if you only work for one client, then you're not truly self-employed, you're an employee.

You should look into the idea suggested by NotAllThere of remaining an employee, but having your employer pay you gross and arranging to make the correct tax payments in CZ yourself.

Also note the tax year in CZ is the calendar year, compared to the UK tax year starting on the 5th April, which complicates the dual taxation rules.

Please, get your own advice from an accountant.

[BlasterBates]

I have contracted to a UK company from Switzerland. I have a limited company here, so simply invoiced them for work done, via their friendly agency. Another option here that may be available in Czech, is to continue as an employee of the UK company, be paid gross plus the employers NI that your employer will no longer be paying, and account for the tax and social contributions yourself.

If you were leaving the UK with the intention of not coming back for years, then the Mon-Fri rules and IR35 would be irrelevant in both situations, since IR35 is UK tax, and you wouldn't be paying any. I'm not sure IR35 is relevant anyway, since it's really to do with NI payments, which you won't be liable for at all. However, be aware that since you intend to be out only two years, you will be tax resident, at least for this tax year in both countries. You're only not tax-resident in the UK for complete tax years you are out of the country.

November 2020 - 5th April 2021: UK tax resident - dual taxation applies; you pay the higher tax of both countries.
6th April 2021 - 5th April 2022: Not UK tax resident
6th April 2022 - November 2022 (when you return): UK tax resident - dual taxation applies; you pay the higher tax of both countries.

It's a little more complex than that, but you get the idea.

If he satisfies the residency rules of the Czech republic in any tax year even if part of a year, then income for that part of the year in the Czech republic will not be subject to UK tax. The double taxation treaty for the Czech Republic, as with most European countries excludes being resident in both countries at the same time and therefore the year will be split. Of course you're still taxed on UK income even if you're non-resident.

If your family remains in the UK then you will probably be resident in the UK even if you work in the Czech republic for a couple of years. If you move with your family to the Czech Republic or you have no family and don't return regularly to the UK will probably be deemed a resident of the Czech Republic.