Reply to: Moved out from the UK and closed my company but not sure where my dividend tax will b

[jamesbrown]

Thank you James brown. This is my understanding as well

Blaster area above indicated that this might not be the case for one man band companies who had worked and retained profits. Do you know if that is in any way true

Neither I nor BB is a tax adviser, so you can take our opinions on that basis, but the question only arises because of the anti-avoidance provisions introduced in 2013 and, in that context, only for a closely controlled company. Thus, the point about receiving dividends from a publicly traded company seems completely irrelevant to me. The whole point of extending the rules from capital gains to dividends, alongside the new statutory residence test, was to prevent someone extracting profits from a company they controlled during a one-year period of non-residence.

[NowPermOutsideUK]

Thank you James brown. This is my understanding as well

Blaster area above indicated that this might not be the case for one man band companies who had worked and retained profits. Do you know if that is in any way true

[jamesbrown]

edit: oh, wait, holy thread resurrection, batman.

I think your accountant is wrong.

Providing that you were non-resident at the time the dividends were declared and that you don't become UK resident again within a 5yr period (i.e., providing you weren't "temporarily non-resident"), then there shouldn't be any UK tax on those dividends, regardless of whether they originate from profits earned while UK resident. But if you do return within 5yrs then, certainly, you will suffer UK tax on those dividends as though they were paid in the year of return from your temporary non-residency.

[Fred Bloggs]

It's fairly simple, download the double tax treaty and do what it says. the DTA over rides national law.

Malta: tax treaties - GOV.UK

The section you want is called Article 10.

[je vais a la plage]

I am currently in the same predicament. Not sure if you managed to find out more since?

[m0n1k3r]

Hi everyone

I'm non-UK national who used to contract for the past 5 years in the UK via a limited company. During this time I accumulated money in my company's. I moved out of the UK in May to Malta.

I went in through SRT test with a tax residency professional who confirmed that I'm non-resident in the UK for the current year. He also said that if I close the company my income tax will be due in Malta because I was a resident of Malta at the time of distribution. With one exception that, if I move back to the UK within 5 years I might still have pay tax in the UK. Following that advice I closed company and distributed the money as dividends as Entrepreneurs' Relief would apply only if I were resident in the UK anyway.

On the other hand, my accountant who usually assists me stated recently that the tax on that dividends will still be due in the UK because the reserves in my company were coming from the work carried in the UK territory. So in his opinion, the fact that I paid it out while being non-resident in the UK doesn't matter.

I know that tax residency is a complex subject so that's why decided to take professional advice on that subject... Unfortunately, I received 2 contradicting answers from 2 professionals so I hoped maybe I will find someone opinion here

Many thanks for any opinion

Malta. But I also believe it is the case for non-domiciled residents in Malta that the money is only taxed in Malta if you bring it into Malta. If the dividend is instead paid to an account outside Malta, and you keep it there (e.g. no cash withdrawals or card purchases in Malta from that account), there will be no tax to pay in Malta. Effectively the same rules that the UK used to have until a few years ago.

[oilboil]

Also worth considering that tax domicile is much more complicated than just days on the ground. The UK can claim you are UK resident for tax based on a large number of things; the place your feet are actually standing is just one of them

1) Wife/Husband/Kids under 18 in the UK still
2) Family home not rented out in the UK
3) Significant business interests

It's easy to get this stuff wrong...

[BlasterBates]

Just one point is that dividends as a result of you working for that company may be treated differently than simply investing in a UK company. That is why I think your accountant maybe right.

[BlasterBates]

This is a complicated one. Non UK residents are liable for tax on income arising in the UK, i.e. if the earnings of the company arose as a result of work in the UK then there is an argument it should be taxed in the UK.

Tax on foreign income: UK residence and tax - GOV.UK

Non-residents only pay tax on their UK income - they don’t pay UK tax on their foreign income.

The way I would see it as follows. You pay the dividends, clarify with HMRC what tax is liable, after all these are dividends paid in the UK. Whatever tax you pay in the UK will then be taken into account by the Malta tax authorities.

I would declare the dividends in the UK to avoid any potential problems with HMRC. If being non-resident means you don't pay tax they won't charge any.

It is normal for dividends from foreign companies to be taxed in the country where the company is resident. In the end the double taxation treaty will ensure you pay no more in tax than the maximum tax rate of either of the countries.

I have an international portfolio of shares and dividends I earn are taxed all over the world. I only pay the difference between the tax withheld and the local tax authority.

[craigy1874]

Pretty sure that is what I said...

[Chart Accountancy]

Your accountant is wrong then. As long as the dividends are paid out in a year when you are non-resident (not a split year) then the UK tax on the dividends will be restricted to Nil.

As above, and per the HMRC guidance, extract below:

“With the exception of income from property in the UK and investment income connected to a trade in the UK through a permanent establishment, the tax charge for non-residents on investment income arising in the UK is restricted to the amount of tax, if any, deducted at source. If the tax charge is limited in this way, personal allowances will not be given against other income. This restriction does not apply in the overseas part of a split year.”

I would add that you should ensure that you satisfy all tests to confirm you are non-resident for the tax year in question.

[craigy1874]

I'm sorry craigy1874 I'm still confused when you said "they are both correct".
I will try to put it in other words. Let's say I have 30 000 GBP redistributable:

Tax advisor said: I need to pay 4500 GBP to Malta (30 000 * 15% tax in Malta) because I'm Malta tax resident at the time of distribution.

My accountant said: I need to pay 2250 GBP to the UK (30 000 * 7.5% tax in the UK) regardles my current residency, because the reserves in my company were coming from the work carried in the UK territory

As there is double-taxation agreement between the UK and Malta, one of those answer has to be wrong. From your latest answer I'm implying that there's no tax to pay in the UK. Means my accountant is wrong and I have to pay tax solely in Malta.

Regards

Your accountant is wrong then. As long as the dividends are paid out in a year when you are non-resident (not a split year) then the UK tax on the dividends will be restricted to Nil.

[Presto]

The rules were written when there was tax credits on dividends. But the principle is the same, i.e. no UK tax due on the dividend.

I'm sorry craigy1874 I'm still confused when you said "they are both correct".
I will try to put it in other words. Let's say I have 30 000 GBP redistributable:

Tax advisor said: I need to pay 4500 GBP to Malta (30 000 * 15% tax in Malta) because I'm Malta tax resident at the time of distribution.

My accountant said: I need to pay 2250 GBP to the UK (30 000 * 7.5% tax in the UK) regardles my current residency, because the reserves in my company were coming from the work carried in the UK territory

As there is double-taxation agreement between the UK and Malta, one of those answer has to be wrong. From your latest answer I'm implying that there's no tax to pay in the UK. Means my accountant is wrong and I have to pay tax solely in Malta.

Regards

[craigy1874]

Thank you craigy1874. I'm not sure what you mean that the tax already deducted?
The only tax that I paid was Corporate Tax thus far and if you refer to 10% dividend tax credit, that was abolished in April 2016.
Or maybe I'm missing your point, could you elaborate, please?

Thanks

The rules were written when there was tax credits on dividends. But the principle is the same, i.e. no UK tax due on the dividend.

[Presto]

They are both correct - it is just that the UK tax on the dividends will be restricted to the tax already deducted from them, i.e. Nil.

Thank you craigy1874. I'm not sure what you mean that the tax already deducted?
The only tax that I paid was Corporate Tax thus far and if you refer to 10% dividend tax credit, that was abolished in April 2016.
Or maybe I'm missing your point, could you elaborate, please?

Thanks