No tax on foreign dividends:Too nice to be true?

[budrul]

I am currently working in Ireland as a contractor using an Umbrella company X. The other day I spoke with one of the X consultants about
creating my own LTD and be more tax efficient in my next Irish contract. They told me that they have an international solution for me:
They have an UK LTD and it will invoice my Irish client, then I will earn a salary (36000 euro/year) which will be taxed just below my
second tax point cut(41%) and then the rest in dividends. They told me that there are no taxes on foreign dividends in Ireland:

Estimated Tax/PRSI Calculations 2013 - Single Person

€
Total Income 8,000.00 20 days * 400 per day
Gross Salary in Ireland 3,000.00 36000/12

Costs
Irish Tax & Employee PRSI 534.23
Employer's PRSI 322.50
Fees (5%, capped at €300pm) 300.00

Total Costs (Tax, PRSI, Fees) 1,156.73

Nett Payments
Nett Salary in Ireland 2,465.77
Expenses 800.00
Foreign Income* 3,577.50

Total Net Payment 6,843.27 86%


*Not taxable in Ireland if not paid into Ireland, may be taxable in Spain if tax resident

They show me the above simulation. They also told me that I will need to wait some time for getting the dividends. I told them that
perhaps I could be working in the UK in 2 or 3 years, and they told me that they have the same solution but at the opossite, I mean they also
have an Irish company that could invoice any UK client, and then same procedure.

Before accepting anything I will speak with a "real" accountant, but for now I would like to have your opinion on this.

1. Do you think this net incoming of 86% is possible? working in Irland and invoicing from an UK LTD? and what about working in the UK and invoicing from Ireland?
2. What do you think they mean by "need to wait some time for getting the dividends"? is this an usual practice? are they going to "play"(deposits,bonds..)
with my dividends?
3. What kind of paper,form can I have to demonstrate that they owe me those dividends?
4. I would like to know how dividends of an UK LTD are taxed if I am not UK resident.
5. what do they mean by "*Not taxable in Ireland if not paid into Ireland, may be taxable in Spain if tax resident"? I am Spanish, but I am no longer resident.


Finally I have to say that I am not still Irish resident(<182 days) and that in this case I will be one of the directors of the UK LTD, but I wont have control
over the management.

[northernladuk]

Try
ireland uk ltd site:forums.contractoruk.com - Google Search

The first result discusses this and looking down the list many other questions seem to ask the same....

[BlasterBates]

Tax avoidance schemes always carry a risk, this sounds very similar to working through an offshore scheme in the UK.

Just be aware of that.

If an Irish auditor were to look at your tax arrangement in depth they may question it. At least if it is declared it won´t be tax evasion.

I personally wouldn´t do anything like that because tax disputes are very unpleasant and expensive. Ireland does have a General Anti Avoidance Rule, which means they can attack artificial arrangements.

If you are there for less than 183 days you´re probably more likely to get away with it. I haven´t heard of any contractors getting into trouble in Ireland.

[Jessica@WhiteFieldTax]

I think the missing point may be

(a)that although there is no tax on foreign dividends in Ireland, there may well be UK Corporation Tax in there somewhere - based on there being a UK company - (I think thats whats proposed; or indeed Irish Corp Tax on the UK company as its control is in Ireland?

(b) Personal tax in your country of residence - and remember its not just about days, its more complex than that, increasingly so with the new UK rules coming in from April 13 (http://www.hmrc.gov.uk/budget-update...-test-note.pdf)

There are more questions than answers really, but you are ding the right thing by suggesting running it past an intendant accountant.

The deferred dividend bit looks a bit iffy as well.

[budrul]

Well, let me explain my whole story: I am spanish and I left my country in 01/04/2012 and I tried to get a contract in London
without success, then in 14/8/2012 I got a contract in Ireland and I went there... since that I am living in Ireland, so I really wasnt
UK resident (less than 6 months), but next month I will be Irish resident I think because from 14/8/2012 to today is like 6 months.
What happens now is that I am getting offers from Dublin and from London, so in the next future I will be working in Ireland or in England
(as they say here, lol).

I dont pretend to do the following because is foolish but... what is your residence country if you are always working/living in different European
countries, each 6 months? I guess that from the international point of view if you are Spanish in this case you will have to pay taxes in Spain...
am I right? Of course you will always have to pay taxes on your salary wherever you work, but what about the WorldWide income in this situation?
what happens if you are every 6 monthgs changing your work place?

But ok,thats not the real point... the point is: if it is true that in Ireland there are no foreign taxes on dividends, will I have to pay
taxes in the UK even if I am not UK resident?

In the other hand that possibility doesnt really scare/screw me because, you have nice divedend taxation in UK, if I am not wrong in UK you pay interest taxes ONLY over 35000 pounds of income,
so thats nice, here in Ireland is 41% no matter what your income is, thats crazy, but of course Google only pays 2.5% taxes WTF?.

Perhaps I should look into the forum for someone in my situation: working in Ireland an using the Offshore thing... but listen my problem is the
following: I want to be honest and pay the taxes I have to pay, but where is the limit? I mean I also have to thing about my incoming...
if my contract is 400 euros/day how much money as salary and how much as dividend should I take? where is the limit in which the taxman will
say "you are bad dude, pay the fine!"?

[BlasterBates]

If it is too good to be true it generally is. If it were possible simply to do business in Ireland by setting up an offshore company and issuing non taxable dividends then everyone would do it.

In the UK many contractors have worked through offshore companies exploiting so called "loopholes" where the contracting income comes in the form of an offshore loan or some other type of income. However many have had to face legal action by the UK tax authorities.

An Irish tax man might argue that your foreign dividends are not from a foreign company but were from an Irish business.

My advice would be simply set yourself up as an Irish contractor and pay the taxes in Ireland, even if you are there less than 183 days. Talk to an Irish accountant. Usually the tax rates are dependent on how much you earn, so you probably won´t be paying the highest rate. If your tax residency is elsewhere then you won´t be taxed again, worst case just a top-up tax.