Reply to: Tax Bill from Norwegian Tax Authority

[Gry]

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.

Yes, they do know the value of the work undertaken in Norway, because all foreign companies are obliged to file a due diligence contract filing called RF-1199, stating the full value of the contract. If some of the work is undertaken outside the country, then this should be explained on the due diligence filing. They may also request to see the contract. This does not mean that it will automatically liable for taxation. It will, amongst other things, depend on if you charge hourly / daily rates as opposed to a fixed sum, and whether the client can complain / refuse to pay.

[Gry]

All income has to be declared in Norway, whether you work as a contractor, for an agency or a UK company.

Some may not have to pay taxes, but this is assessed individually by the tax authorities and would also require the contractor to have an A1 form from the home country.

You should get some help from a local tax advisor, that may help you cut your tax bill. This does not go away btw. The Norwegian tax office cooperates with the UK HMRC and money will be collected in the UK if you don't act. This comes as an unpleasant surpise to many companies and contractors that have not been compliant in the past.

A guide to compliance in Norway can be found here : w ww.promptus.no/company ]Promptus - The ultimate guide to payroll in Norway

Good luck :-)

[m0n1k3r]

Out of interest: if a UK LTD has 1 director (also employee) and one other employee, can the director work in another EU state and take advantage on the 183 day rule?
If not, why not?

The company would effectively be managed and controlled from that other country (and would have an obligation to register there as a foreign branch before begin trading there). Being an employer of such a local establishment means that the director employee would be a local employee.

If the company had 3 directors then it could be argued that management and control still resides in the UK, but those other two directors must not be sham directors.

[m0n1k3r]

So you understand the economic employer vs the employer of record interpretations of the OECD Article you keep quoting?

Yes. The document you linked to only scratches the surface. It depends on more, such as on the relationship. If there is a proper statement of work with defined deliverables and expected outcomes, it is a B2B relationship and not an employment relationship. If it, on the other hand, is like what most contractor gigs are like, then it is employment and they look through intermediaries unless it can be shown that the intermediary has operated taxes in the same way as a local Norwegian employer would have had. But it doesn't have to be all of the money - it can be less, as long as the salary paid is at the same level as a local employee would in the same position would have earned.

The trouble, for most UK contracts, is that of substance. When the one-man contractor works in another country, there is no longer much of substance left in the UK. The tax authorities may therefore also come after the UK LtdCo with penalties for not having registered as a foreign branch, not operated accounting and taxes locally (e.g. financial crime) and for not having reported and paid the right amount of taxes.

Since Norway is an EEA country, I think they participate in the MARD scheme, where they can ask HMRC for assistance in collecting (and HMRC has an obligation to fulfil, no questions asked).

[kolata]

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.

Out of interest: if a UK LTD has 1 director (also employee) and one other employee, can the director work in another EU state and take advantage on the 183 day rule?
If not, why not?

[SueEllen]

They do, but it is up to you to provide evidence for it. In lack of that in the form of payslips, personal income tax returns, B2B contracts etc, they make an assumption and assess based on that.

Having worked and lived in, and still having companies in a few other countries, I believe I clearly understand how tax works in foreign countries.

So you understand the economic employer vs the employer of record interpretations of the OECD Article you keep quoting?

[m0n1k3r]

They don't which is why we have this thread.

You clearly don't understand how tax works in foreign countries you seem to presume because there is some convention all countries follow it.

They do, but it is up to you to provide evidence for it. In lack of that in the form of payslips, personal income tax returns, B2B contracts etc, they make an assumption and assess based on that.

Having worked and lived in, and still having companies in a few other countries, I believe I clearly understand how tax works in foreign countries.

[SueEllen]

They don't tax your invoicing. They tax your remuneration from your company.

They don't which is why we have this thread.

You clearly don't understand how tax works in foreign countries you seem to presume because there is some convention all countries follow it.


Edited: Due to someone else asking the question I found this old article which will help anyone doing a search - linky

[m0n1k3r]

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.

They don't tax your invoicing. They tax your remuneration from your company.

[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.

[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.

[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.

[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...

[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.

[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.