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Working from European country on UK contract

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    #11
    Originally posted by eek View Post

    Because it is - and even if it isn't agencies are risk adverse - any issue and they will move on to the next possible option.
    This is unfortunately correct (I've been offered a contract operated by one of the UK biggest payroll agencies, the headhunter said he didn't see any reason why I couldn't bill via European LTD. So I opened one only to learn that the agency's HR doesn't agree to that. Fullstop. Myself, my headhunter, my future manager tried to negociate with them. We were all told that this is not possible (without any justification).

    I can't see any option for you if the work is detemined inside IR35

    If this is outside IR35 and there are no other limitations (like the data can't leave the UK) you could theoretically work from the Chech Republic using a UK LTD, but you'd either:
    1) need to be extra careful with your company's tax residency (which has nothing to do with your personal tax residency), which would mean you'd need to collect evidence that its the seat of control is in the UK (so some travelling would be required). I'd start checking CZ-UK double taxation tax treaty - it should be laid out what factors must be triggered for an overseas company to have a permanent establishment. If you see a realistic scenario to avoid having a PE in CZ, it could be fine.
    2) need a CZ company to bill your UK company but it will be terribly complex and expensive finding accountants in both countries to manage it . You can forget about accountants like Gorilla or Paystream, they won't touch it (been there, tried that)

    To give you some comfort , the things are slowly changing (there's more and more contracts that consider overseas contractors operating via their local LTDs). At least in my sector (finance/insurance).

    Comment


      #12
      Originally posted by ContractorPL View Post

      This is unfortunately correct (I've been offered a contract operated by one of the UK biggest payroll agencies, the headhunter said he didn't see any reason why I couldn't bill via European LTD. So I opened one only to learn that the agency's HR doesn't agree to that. Fullstop. Myself, my headhunter, my future manager tried to negociate with them. We were all told that this is not possible (without any justification).

      I can't see any option for you if the work is detemined inside IR35

      If this is outside IR35 and there are no other limitations (like the data can't leave the UK) you could theoretically work from the Chech Republic using a UK LTD, but you'd either:
      1) need to be extra careful with your company's tax residency (which has nothing to do with your personal tax residency), which would mean you'd need to collect evidence that its the seat of control is in the UK (so some travelling would be required). I'd start checking CZ-UK double taxation tax treaty - it should be laid out what factors must be triggered for an overseas company to have a permanent establishment. If you see a realistic scenario to avoid having a PE in CZ, it could be fine.
      2) need a CZ company to bill your UK company but it will be terribly complex and expensive finding accountants in both countries to manage it . You can forget about accountants like Gorilla or Paystream, they won't touch it (been there, tried that)

      To give you some comfort , the things are slowly changing (there's more and more contracts that consider overseas contractors operating via their local LTDs). At least in my sector (finance/insurance).
      Do I need apply for VAT with this LTD after reaching 85 000 pounds threshold?

      Comment


        #13
        Probably. There shouldn't be problems with VAT, there's a special route in HMRC - VAT for non-established persons
        Last edited by ContractorPL; 5 June 2022, 11:43.

        Comment


          #14
          Originally posted by lackorol View Post
          1. according clarity umbrella co if my daily rate will be 700pd inside IR35 total *21 days on average makes 14,700 monthly.
          Monthly Income £14,700.00
          Employer National Insurance £1,803.03
          Employment Tax £63.69
          Employee National Insurance £723.85
          Employee Tax £4,047.78
          Total All Tax £6,638.35
          Margin £95.00
          Total Net Income £7,966.65
          This is huge tax deduction approx 45% tax comparing against my own set up LLC
          even if my contract would be only 500pd IR35 outside
          Monthly Income means 10,500*0.80 (Corporate Income Tax 20%) equals 8400

          Anyway I have conducted that this scheme inside iR35 + umbrella is really not so much efficient .

          I don't know all the details where these Total All Tax will end I guess that inside IR35 I am paying taxes to UK through umbrella even I
          am tax resident of Czech Republic. And probably I have obligation to fulfill tax declaration again in my country with some checkboxes which prevents
          double taxation.

          2. So I have choosen Outside 35 and own LLC but still confused about transfering money between my two companies, need to more familiarise myself with Controlled Foreign Companies and Transfer Pricing. Hopefully there is no additional tax here I need hoarding cash in my Czech company and be invoiced in (UK company + revolut).

          5. good to know about limitation of be present in UK, but there must be way in 21 century to contract UK from Europe as we have international trade.
          Is UK company must have or there is slight possibility to deal it with one foreign Czech Company?. I am besides not UK based so when they allow me trade, maybe set up own LLC is irrelevant too and agency allows me contracting with my domestic company.
          You have to be careful if you pay tax in the UK even though you are working in the Czech Republic. Normally they will take into account tax paid in the UK, but they may decide to enquire into your UK earnings, simply because they may well be miffed that you would not be paying tax in the Czech Republic. In this case they may ask for proof for travel and working in the UK. If you can't prove this they may well decide you shouldn't have been paying tax in the UK and charge tax in the Czech Republic. In other words you could end up being taxed twice because the Czech Republic deem your UK tax as unlawful.
          I'm alright Jack

          Comment


            #15
            Originally posted by BlasterBates View Post

            You have to be careful if you pay tax in the UK even though you are working in the Czech Republic. Normally they will take into account tax paid in the UK, but they may decide to enquire into your UK earnings, simply because they may well be miffed that you would not be paying tax in the Czech Republic. In this case they may ask for proof for travel and working in the UK. If you can't prove this they may well decide you shouldn't have been paying tax in the UK and charge tax in the Czech Republic. In other words you could end up being taxed twice because the Czech Republic deem your UK tax as unlawful.
            A double tax agreement effectively overrides the domestic law in both countries. For example, if you are non-resident in the UK and you have UK bank interest, this income would be taxable in the UK as UK-sourced income under domestic law. However, if you are resident in France, the UK-France double tax agreement states that the interest should only be taxable in France. This means that the UK must give up its right to tax that income. In this situation, you would make a claim to HMRC (in practice, this would usually be made on a Self Assessment tax return) to exempt the income from UK tax
            As stated it seems that I am eligible to be taxed only in my home country even though I am operating UK company because Double taxation law is subordinate over domestic law. Quite opposite what we were discussing. I should only fill Self Assessment tax return for UK company to exempt the income from UK tax?? hm

            Comment


              #16
              Originally posted by lackorol View Post



              As stated it seems that I am eligible to be taxed only in my home country even though I am operating UK company because Double taxation law is subordinate over domestic law. Quite opposite what we were discussing. I should only fill Self Assessment tax return for UK company to exempt the income from UK tax?? hm
              If you work in the UK and pay tax there, then the double taxation treaty applies and you won't pay tax in the Czech Republic, however if you are working in the Czech Republic and you pay tax in the UK then the Czech tax authorities may argue you should have paid tax in the Czech Republic, charge you tax and expect you to get a refund from the UK authorities.

              https://assets.publishing.service.go...-MLI-final.pdf

              From the double taxation treaty:

              The profits of an enterprise of a Contracting State shall be taxable only in that State
              unless the enterprise carries on businessin the other Contracting State through a
              permanent establishment situated therein. If the enterprise carries on business as
              aforesaid, the profits of the enterprise may be taxed in the other State but only so much of
              them is attributableto that permanent establishment.
              In other words a UK company is only taxable in the UK unless there is a permanent establishment in the Czech republic in which case profits attributable to the PE will be taxed in the Czech Republic. As you are working remotely in the Czech Republic they can argue you have a PE there.

              Good, the situation is more complicated if you are employed by an umbrella company, but you can see the implications.

              If you will be working in the Czech republic and you aren't going tax yourself there, don't rely on your own understanding of the law as it is complicated and if you get it wrong in the worst case you could end up on the wrong end of a tax evasion investigation. Take advice from an accountant.
              Last edited by BlasterBates; 5 June 2022, 13:07.
              I'm alright Jack

              Comment


                #17
                Sue B always gives good advice on this, you could try contacting her.

                https://forums.contractoruk.com/member/36719-sue-b
                I'm alright Jack

                Comment


                  #18
                  Originally posted by BlasterBates View Post

                  In other words a UK company is only taxable in the UK unless there is a permanent establishment in the Czech republic in which case profits attributable to the PE will be taxed in the Czech Republic. As you are working remotely in the Czech Republic they can argue you have a PE there.
                  PE is defined in the DTA treaty:

                  (2) The term “permanent establishment” includes especially: (a) a place of management; (b) a branch; (c) an office; (d) a factory; (e) a workshop; (f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources.


                  If a director ensures that place of management is in the UK and collects evidence of it, it will be more difficult for the Czech tax authorities to prove otherwise. It will be even harder with the certificate of fiscal residence issued by the HMRC (which is harder and harder to get in the discussed circumstances, yet possible).

                  On the other hand, these DTAs have clearly been written when the remote working was scarce.


                  Comment


                    #19
                    Originally posted by ContractorPL View Post

                    PE is defined in the DTA treaty:

                    (2) The term “permanent establishment” includes especially: (a) a place of management; (b) a branch; (c) an office; (d) a factory; (e) a workshop; (f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources.


                    If a director ensures that place of management is in the UK and collects evidence of it, it will be more difficult for the Czech tax authorities to prove otherwise. It will be even harder with the certificate of fiscal residence issued by the HMRC (which is harder and harder to get in the discussed circumstances, yet possible).

                    On the other hand, these DTAs have clearly been written when the remote working was scarce.

                    As stated in the post:

                    (a) a place of management; (b) a branch; (c) an office; (d) a factory; (e) a workshop; (f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources.

                    Not only must you demonstrate (a) the place of management is not in the Czech Republic but also (c) an office.

                    If you are working in a home office then the company has a PE in that country. If this is a one man company then the place of management will also be deemed to be in the Czech Republic if he's working in his home office. A few visits to the UK won't change that.
                    I'm alright Jack

                    Comment


                      #20
                      Originally posted by ContractorPL View Post

                      PE is defined in the DTA treaty:

                      (2) The term “permanent establishment” includes especially: (a) a place of management; (b) a branch; (c) an office; (d) a factory; (e) a workshop; (f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources.


                      If a director ensures that place of management is in the UK and collects evidence of it, it will be more difficult for the Czech tax authorities to prove otherwise.
                      You seem to have diligently ignored (c). It will be exceptionally difficult to not establish a PE in an overseas jurisdiction when you have a fixed place of business in that jurisdiction. Moreover, as a PSC, it will be very hard to demonstrate that you don't have a place of management there too. In short, I don't think you know what you're talking about. This question arises periodically and you fit the same pattern of a majority of other posters who ask this question, attempting to convince yourself that it's workable. It isn't. The only sane way to work overseas for foreign clients is to establish a business overseas (not in the jurisdiction of the foreign client) and to work directly for those clients, not via foreign agents.

                      Comment

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