Reply to: Not in any country for 183 days in a year - where can company be registered/tax paid?

[BlasterBates]

The EU actually has a whole page about this:

FAQs - Income taxes abroad - Your Europe



In a typical contractor situation, your employer is YourCo. You can probably argue the first two conditions are met easily enough, but the third one is harder and it's the local tax man you'd need to convince too.

Great link, I would also add this isn't just a theoretical point, we have had quite a few posts from contractors spending less than 183 days in Germany who have got on the wrong side of the German tax authorities and ended up being landed with a large bill.

[TheCyclingProgrammer]

Rubbish. You can't chose which State you prefer to pay your taxes in. Forget the EU here, it's like any other country in the World, work there, taxed there, full stop.

It's this sort of unresearched crap that clutters up these threads causing the same issue to be repeated ad nauseam, THERE IS NO HARMONISATION OF TAX LAW IN THE EU.

The EU actually has a whole page about this:

FAQs - Income taxes abroad - Your Europe

My current French employer is posting me to the Netherlands. Where will I be taxed?

You'll probably remain tax-resident and taxable on your worldwide income only in France as long as:

the posting is for no longer than 6 months
your salary is not paid by or on behalf of any employer resident in the Netherlands
your salary is not paid by an office or other permanent business owned by your employer in the Netherlands.

However, if all of these 3 conditions are not met, you may also be taxable in the Netherlands– at least for the income earned during your posting.

In a typical contractor situation, your employer is YourCo. You can probably argue the first two conditions are met easily enough, but the third one is harder and it's the local tax man you'd need to convince too.

[stek]

If an UK citizen goes to Italy for a month or two to work on a contract, he can choose where to pay taxes. After 183 days he must pay taxes in Italy. In both cases when declaring his income in the UK, he must declare amounts earned and taxes paid abroad.

Rubbish. You can't chose which State you prefer to pay your taxes in. Forget the EU here, it's like any other country in the World, work there, taxed there, full stop.

It's this sort of unresearched crap that clutters up these threads causing the same issue to be repeated ad nauseam, THERE IS NO HARMONISATION OF TAX LAW IN THE EU.

[BlasterBates]

If an UK citizen goes to Italy for a month or two to work on a contract, he can choose where to pay taxes. After 183 days he must pay taxes in Italy. In both cases when declaring his income in the UK, he must declare amounts earned and taxes paid abroad.

That is not true. You are assuming that you only pay taxes in Italy after 183 days.

You are liable for tax on income earned in the country even if you are non-resident.

[TheCyclingProgrammer]

If an UK citizen goes to Italy for a month or two to work on a contract, he can choose where to pay taxes. After 183 days he must pay taxes in Italy. In both cases when declaring his income in the UK, he must declare amounts earned and taxes paid abroad.

This simply isn't correct. You may remain tax resident in the UK (where you will pay income tax on all of your worldwide income) if you are in the other country for less than 6 months but depending on other factors, you may also be liable to income tax on earnings in the destination country from day one (which you would be able to offset against your UK tax bill depending on any double taxation treaties).

[mrv]

You pay tax wherever you work and however short your contract is as a non-resident with limited tax liability

If an UK citizen goes to Italy for a month or two to work on a contract, he can choose where to pay taxes. After 183 days he must pay taxes in Italy. In both cases when declaring his income in the UK, he must declare amounts earned and taxes paid abroad.

[BlasterBates]

This is very incorrect.

My advice is not incorrect it is based on personal experience, and when I read your account it doesn't really contradict what I'm saying.

You pay tax wherever you work and however short your contract is as a non-resident with limited tax liability, if you don't qualify for residency you don't need to declare any other income from any other countries. Normally you are resident in one country where you declare all income from all countries where they take into account tax paid. Quite often on employment income there is no additional tax to pay regardless of the tax rate.

[mrv]

You are liable for tax in any country you earn money.

If you live in Italy and work for two months, then go to Bulgaria and work for three months, then you will be liable for tax in Italy for the money you earned there and in Bulgaria for the money you earned there. You will need a separate company for each country you work in. You don't need to be in Italy or Bulgaria for 183 days to be liable for tax.

The tax residency 183 days simply means it becomes your main tax residency and that you declare not only your income from the country in question but also income from other countries as well.

Think of the 183 day rule as when your tax liability is unrestricted, rather than when you have a tax liability. In Germany for example there is a box and if you have you been there less than 183 days you tick restricted tax liability and if you've been there longer than 183 days you tick unrestricted tax liability. The same rule applies in every other country.

This is very incorrect. The correct answer - check the double taxation treaty between your country (presumably UK) and the other country, it will have all the answers. Most common case - one has to pay taxes in the new country on the income earned in the new country if he qualifies as a tax resident of the new country. The easiest way to become one is to spend 183 days in any 12 months period or 270 days in any 36 months period in the new country. Beware - new year does not reset the counter, it is any 12 or 36 months period. Usually taxes are only paid on the income generated while residing in the new country, from clients in the new country, although there you might find some differences. There are exceptions for sportsmen, sailors, artists etc, but that probably will not apply to you.

Don't confuse tax residency with living residency (I might be using the wrong term). Tax residency is where you have to pay taxes based on your commercial activities, and your living residency is where you normally live, the center of your life and interests, the location of your (main) home etc. A person can have only 1 living residency, but multiple tax residencies. Some super rich people are maintaining a lifestyle where they attempt to avoid becoming tax resident in any country at all, having houses in a few countries, counting days they spend etc, pretty exausting but lucrative from tax perspective.

[m0n1k3r]

And there lies another complication, not all jurisdictions entitle a temporary resident to claim any tax free allowance (no idea about Italy). And some jurisdictions even charge temporary residents a higher % of tax too. As usual, it is a case of DYOR.

Some give you a choice. For example, somebody working in Sweden for ≤ 183 days can either apply for special income tax, pay a flat 20% income tax, not claim any deductions, not file a tax return and be done with it. Or they can pay tax as an ordinary citizen, make use of the personal allowance and claim deductions (including 30% of mortgage interest) but will have to file a tax return.

[m0n1k3r]

Popular opinion is that using a UK MyCo Ltd elsewhere is a bad idea. I'm not sure how it would be if your uncle had a UK MyCo Ltd and seconded you to Italy as an employee? I really don't know TBH. My old BigCo PLC employer did that with me all the time right around the EU.

I have used UK Ltd's elsewhere without issues. It is just a matter of going through the appropriate registrations first, and get the required admin in order.

If your uncle have an UK Ltd, takes you on as an employee and seconds you to Italy for 183 days or less then no issues. Mind you, his Ltd doesn't have to pay you the full amount as a salary, only just a reasonable salary as per Italian standards. Your LtdCo can then invoice his Ltd for the balance (less his margin of course - I assume he won't take on the extra administration for free).

[Fred Bloggs]

That's a very interesting point! I'll definitely research that. Thank you

While you're at it, check on the tax treaties for the jurisdictions you are interested in, money tax free in one jurisdiction could very well still be taxable in another. For example in the UK, as a UK resident, you declare all your worldwide income, the tax paid on it and the tax treaty will decide if any tax is due or not.

[newcontractor08]

It is advantageous to tax yourself in Italy for 3 months, for example, because you have a tax free allowance, you're also exempt from IR35. If you move around several countries you may indeed legally pay very little tax at all because in each country you can take advantage of the tax free allowance or very low tax rates. In one tax year I worked in Luxembourg for 3 months, nd paid hardly any tax.

That's a very interesting point! I'll definitely research that. Thank you

[Fred Bloggs]

It is advantageous to tax yourself in Italy for 3 months, for example, because you have a tax free allowance, you're also exempt from IR35. If you move around several countries you may indeed legally pay very little tax at all because in each country you can take advantage of the tax free allowance or very low tax rates. In one tax year I worked in Luxembourg for 3 months, nd paid hardly any tax.

And there lies another complication, not all jurisdictions entitle a temporary resident to claim any tax free allowance (no idea about Italy). And some jurisdictions even charge temporary residents a higher % of tax too. As usual, it is a case of DYOR.

[BlasterBates]

Everyone here seems to be playing it safe and giving you the politically correct advice, which is contact your accountant.
If your visit to Italy is temporary and not related to business, then, in my opinion, you should carry on doing your business in the UK, via UK Ltd.
People who fly to Italy for a 2 week holiday, don't register for tax there, even if check their work email from time to time.

There's separate regulations about residency, in some countries, if you stay for longer than 3 or 6 months, you need to apply for residency, but that unrelated to tax and you can avoid it, by flying in and out every now and then.

It is advantageous to tax yourself in Italy for 3 months, for example, because you have a tax free allowance, you're also exempt from IR35. If you move around several countries you may indeed legally pay very little tax at all because in each country you can take advantage of the tax free allowance or very low tax rates. In one tax year I worked in Luxembourg for 3 months, nd paid hardly any tax.

[yasockie]

Everyone here seems to be playing it safe and giving you the politically correct advice, which is contact your accountant.
If your visit to Italy is temporary and not related to business, then, in my opinion, you should carry on doing your business in the UK, via UK Ltd.
People who fly to Italy for a 2 week holiday, don't register for tax there, even if check their work email from time to time.

There's separate regulations about residency, in some countries, if you stay for longer than 3 or 6 months, you need to apply for residency, but that unrelated to tax and you can avoid it, by flying in and out every now and then.