Contracting in multiple countries + administration

[BlasterBates]

If you want to work in different countries you need to consult accountants in each country.

If these are going to be three to six month "bum on seat" contracts most tax authorities will expect you to tax it in their country.

That is not to say that you couldn't claim tax exemption, but by not registering and running through a foreign co. you run a risk of getting into serious trouble if the tax authority finds an invoice that isn't declared.

The basic rule is that if you are not tax resident you pay tax on income sourced in that country. In other words non-residents are still liable for tax, but you are not taxable on any other income so lets assume for example you did a three month contract in Germany. You would earn about 20000 EUR and you pay something like EUR 2000 in tax. You then declare that to the country where you are mainly resident, and they probably will then add a bit more tax.

In the end you won't be paying any more tax in the country you are mainly resident than you would if you were to declare everything there, but obviously it is bureacratic, and you have additional accountants costs.

If you take your chances and say do a 5 month contract in Germany but tax in the UK and the German authorities decide you should have paid tax in Germany then you'll be paying tax plus penalties plus a fine. You can reckon with a bill 3 times the size it would have been had you declared it, and it is possible that HMRC say that you were negligent and not refund the tax you pay in the UK, because the tax return is now closed.

Up to you, some contractors "take their chances" to save bureacracy but be warned that one or two to get on the wrong side of the tax man and end up with a very huge bill indeed.

Personally I think it is worth paying to register and keep everything above board.

It is also worth thinking about not working in so many different countries. If you can restrict it to business visits and work mainly in the UK (for example) via home office then there should be no problem, in that case you can tax it all in the UK and keep it simple.

What decides where your income is taxed in general is where you do the work.

[Clare@InTouch]

Well, I did my research, but with no success.
I don't think my question is stupid, because my accountant couldn't answer it. I guess it's not because that it doesn't make sense, but rather because it's complex.

It is complex, which is why you need professional advice from someone who knows the full story. Simply saying you'll be in certain countries and that you're an IT contractor isn't even vaguely enough information to advise properly on. Any adviser would also need to know where you live, where you intend to live, what your other income is, the tax rules in each country etc. You need professional advice from someone who knows about international taxes, and that's going to cost you. But then it will no doubt cost you a hell of a lot more in the long run if you take the cheap option of relying on free advice now and find out you've done it all wrong later.......

Try Haines Watts, we've had good advice from them in the past on more complex tax issues.

[Brussels Slumdog]

[QUOTE=BlasterBates;1922031a

If you take your chances and say do a 5 month contract in Germany but tax in the UK and the German authorities decide you should have paid tax in Germany then you'll be paying tax plus penalties plus a fine. You can reckon with a bill 3 times the size it would have been had you declared it, and it is possible that HMRC say that you were negligent and not refund the tax you pay in the UK, because the tax return is now closed.

Up to you, some contractors "take their chances" to save bureacracy but be warned that one or two to get on the wrong side of the tax man and end up with a very huge bill /QUOTE]

You would most likely pay less overall tax if paid tax +NI in Germany as NI is tax deductable in Germany and not in the UK. You also cannot deduct fines and penalties . The gain would be off set against the cost of a German Accountant. If the contract is less than 2 months then the amount of german tax payable would not warrant getting involved in the german tax system.
I always pay tax where I work but then Belgian double taxation rules are not the same as the UK.

[gabox01]

If you take your chances and say do a 5 month contract in Germany but tax in the UK and the German authorities decide you should have paid tax in Germany then you'll be paying tax plus penalties plus a fine

I think they souldn't just decide. There should be exact rules for that, like you have to pay tax locally if you are there for more than x days. I hope the rules are EU and not country specific though.

[gabox01]

It is complex, which is why you need professional advice from someone who knows the full story. Simply saying you'll be in certain countries and that you're an IT contractor isn't even vaguely enough information to advise properly on. Any adviser would also need to know where you live, where you intend to live, what your other income is, the tax rules in each country etc. You need professional advice from someone who knows about international taxes, and that's going to cost you. But then it will no doubt cost you a hell of a lot more in the long run if you take the cheap option of relying on free advice now and find out you've done it all wrong later.......

Try Haines Watts, we've had good advice from them in the past on more complex tax issues.

Yeah, but i don't want to lock myself to any accountant service now, because i have no contract yet and I have no idea which country I end up working in first. I just have a few questions. No sane accountant service would answer my tricky questions without getting paid. Most likely they wouldn't give me an honest answer to this specific question, instead they would convince me to become their customer.

[SueEllen]

I think they souldn't just decide. There should be exact rules for that, like you have to pay tax locally if you are there for more than x days. I hope the rules are EU and not country specific though.

The rules are country specific there are no general EU rules especially as Switzerland isn't in the EU.

This is why the advice you are getting from people is that you need to presume you are paying tax in the country you are working in but you need to investigate it yourself.

[Clare@InTouch]

Yeah, but i don't want to lock myself to any accountant service now, because i have no contract yet and I have no idea which country I end up working in first. I just have a few questions. No sane accountant service would answer my tricky questions without getting paid. Most likely they wouldn't give me an honest answer to this specific question, instead they would convince me to become their customer.

The reason they won't answer a tricky question without being paid is because it's going to be time consuming for them to research the answer, and to understand enough about your personal circumstances to give the right advice.

If you would rather rely on free advice given by people who do not know your circumstances then you are unlikely to end up with the best, or even right, advice. That could be way more costly in the long run than paying a couple hundred for advice now.

[ASB]

I think they souldn't just decide. There should be exact rules for that, like you have to pay tax locally if you are there for more than x days. I hope the rules are EU and not country specific though.

It's not a question of "just deciding". It is a question of seeing what actually happens and applying the law to the facts of any given case. Given the facts are always different there will be a tendency for the outcome to be different.

Every country of course has different laws.

However there are some linited EU rues on double taxation, cross border working etc. The links have been posted, but search will track 'em down.

If you do seek specialist advice it is likely to be f the form "if you were to do this then this is what will happen"; but it may not give you the certainty you desire.

Your question is intrinsically badly framed. It is of the form "I am going to do something, how will the variously tax codes apply to that". They question can only be answered in a fairly generic way.

Also, you have only been talking about tax. There are a whole set of different considerations related to socail security.