Reply to: Does non-resident tax status exist in UK?

[alreadypacked]

Thanks for the heads up

Liability in most EU countries arises on the basis of residency which is a matter of fact and is subject to both accumulation and 'years' involved. The problem is proving it because only non-EU passports are stamped at the port of entry/exit.

There have been recent rule changes for the UK to prevent the Tues>Friday worker claiming non-residence out of the arrivals/departure rules. Another gotcha.

Lucky for me I spent the last 5 years in Zurich, so I can prove I was outside the EU. Thanks for the heads-up on the Tues>Friday rule change I will look into that. In Ireland if you are here at 00:00 it counts as a day.

[bonpartit]

Doubt

Regarding the issues talked in this thread, let's imagine a fictional situation where an European has been contracting for a UK company and being paid in the UK for the last 8 months.
This European person has been using his European company to bill his client and has yet to pay taxes in UK or Europe.
What is the best way to "come clean"? Declare the last 8 months of earnings to the UK authorities and pay same level of tax as an employee (PAYE) which I understand will be 40% of gross earnings? Or should he create a UK company and declare past earnings through this UK company (definitely more tax efficient). Any other tax-efficient solution?

[dahowlett]

Confused?

Liability in most EU countries arises on the basis of residency which is a matter of fact and is subject to both accumulation and 'years' involved. The problem is proving it because only non-EU passports are stamped at the port of entry/exit.

For most short term contracts there should be no problem billing via your normal country of residence. Even if there is, then you should be able to use the double taxation agreements to ensure the right amount of tax is paid in the right place.

Remember that witholding tax in one state is not the same as liability. It's just that state's way of ensuring they are 'safe' on collection.

The other problem is that few local inspectors really understand how to handle the issues at stake so you always need good quality advice.

There have been recent rule changes for the UK to prevent the Tues>Friday worker claiming non-residence out of the arrivals/departure rules. Another gotcha.

[alreadypacked]

Non-Resident

I am current working in Dublin, but I will not be here long enough to be a resident so my invoice is paid to my country of residence and taxed there.

Are there any agents in London who will deal with me as a non-resident and pay invoices tax free to an overseas company? I may already have a contract through a friend.

[tim123]

No I'm not.

The only thing I am saying is that by careful consideration the OP might be able to avoid tax residency in the UK and it might be beneficial.

Sorry, we were taking about becoming liable to tax in the second country (the example for which was Portugal), where did I say anything about residency status in the home country?

tim

[expat]

hmm as I thought virtually every country in the EU has a 183 day rule, so basically Portugal is no different.

The reason ASB you haven't paid tax is because you were never there long enough from what I can see.

Yes, like everywhere else Portugal has a 183-day rule for residency: not for tax liability.

In the case of an individual who answers the test of a "permanent resident" of Portugal, tax will be calculated on his income earned in Portugal and overseas.
A foreign resident who is employed in Portugal pays tax only on his income in Portugal.

My italics - many people seem to think that if you're not tax-resident in a country, you don't pay tax in it. That is almost never true if you have income with its source in that country.

[ASB]

I agree with expat here.

You are missing the difference between tax resident and physically resident.

tim

No I'm not.

The only thing I am saying is that by careful consideration the OP might be able to avoid tax residency in the UK and it might be beneficial.

[The Lone Gunman]

Can you explain this "perpetual traveller" thing?

http://en.wikipedia.org/wiki/Perpetual_traveler

I am guessing at 12 months abroad to lose tax residency without staying in one place long enough to become tax resident there.

[threaded]

Can you explain this "perpetual traveller" thing?

[tim123]

hmm as I thought virtually every country in the EU has a 183 day rule, so basically Portugal is no different.

The reason ASB you haven't paid tax is because you were never there long enough from what I can see.

I agree with expat here.

You are missing the difference between tax resident and physically resident.

The 183 day rule is the period after which you become tax resident. You are, of course, physically resident after 1 day(hour, minute, second...).

Tax residency in a country is the status that entitles the country to tax you on your *worldwide* income for the year. It does not have any effect on the taxation status of your local sourced income.

Most countries tax local sourced income purely on the basis of physical residency. If you do one days work in a country, you are (theoretically) liable to pay the tax on that one day's income. Obviously, for normal paid workers they aren't interested in taxing you on one day's pay as the admin would be too much (though they can, and do, tax multi million dollar earners on one day's pay). But you don't normally avoid local liability to local income tax on local income by only being resident 182 days.

tim

[ASB]

hmm as I thought virtually every country in the EU has a 183 day rule, so basically Portugal is no different.

The reason ASB you haven't paid tax is because you were never there long enough from what I can see.

Yes. Which is where I started from of course. i.e. if you are able to arrange your affiairs such as you are not resident then there are potential advantages. The OP could conceivably avoid becoming UK resident. In this case he may be able to exploit the fact that he will only be taxed on a remittance basis.

Of course what he also needs to do is also keep the income out of the reaches of his home jurisdiction. Which is not easy.

for info the Portuguese thing is different from that you looked up. It is a 15% withholding tax levied on non resident bodies corporate.

[BlasterBates]

An individual in Portugal is liable for tax on his income as an employee and on income as a self-employed person. In the case of an individual who answers the test of a "permanent resident" of Portugal, tax will be calculated on his income earned in Portugal and overseas.
A foreign resident who is employed in Portugal pays tax only on his income in Portugal.
To be considered a Portuguese resident, the requirements must be met of residency in Portugal of at least 183 days in any calendar year, and occasionally also if residency is less than 183 days. If the individual has a home in Portugal that is his main residence, he will be considered a Portuguese resident.

hmm as I thought virtually every country in the EU has a 183 day rule, so basically Portugal is no different.

The reason ASB you haven't paid tax is because you were never there long enough from what I can see.

[expat]

A lot do. Some don't.

For example I never became resident in France despite working there via my UK co for 2 years. I never spent long enough consecutively in France to become resident. (I didn't cease to be UK resident either though).

I wasn't talking about where one is resident, but rather where one is due to pay income tax even if not resident. In the French case I suspect that possibly you should have done, though with a credit of that against UK tax of course:

Qui paie l'impôt ?

Les personnes non domiciliées en France

Les personnes non domiciliées en France doivent aussi souscrire une déclaration de revenus, si elles disposent de revenus de source française (elles sont alors imposées sur ces seuls revenus), ou si elles disposent en France d’une ou de plusieurs habitations.

[ASB]

Absolutely. And countries' tax offices generally declare quite clearly that if work is done in their country, then tax is due on that work, because it can not be claimed to be provision of services from the base country of the worker concerned. E.g. work in Holland, the Dutch will (quite correctly) regard that as provision of work in NL and not provision of services from UK.

A lot do. Some don't.

For example I never became resident in France despite working there via my UK co for 2 years. I never spent long enough consecutively in France to become resident. (I didn't cease to be UK resident either though).

Portugal has a system (which only changed recently as a result of foreigners owning property) where 15% of invoices are deducted as a withholding tax. However if you write to HMCR they will certify that you are a UK base company and taxed on worldwide earnings. Then the Portoguese don't deduct.

Monaco doesn't tax overseas earnings period.

Poland, Hungary, Romania and Russia have not sought to tax me (but I've never spent more than 30 days there).

Holland didn't seek to tax me (but in that case I was only there for a fortnight out of a 6 month job).

[expat]

No that's not what the EU treaty says. You can operate a German GmbH in the UK but you it doesn't however exempt you from paying tax.

Tax liability is dependent purely on the rules of that country. I operate cross-border but I've not yet come accross a way of being taxed in a low tax country and doing work in another country. Almost invariably (and I've worked in several European countries) you're supposed to pay tax if work is done in that country i.e. you're not merely exporting something, and expecially if you have an employee.

As a foreigner and you have earnings overseas, you aren't taxed on those earnings. The rules as far as I know don't entitle you to siphon funds from the UK off overseas, and then simply declare them as foreign earnings, because lets face it, they aren't.

Absolutely. And countries' tax offices generally declare quite clearly that if work is done in their country, then tax is due on that work, because it can not be claimed to be provision of services from the base country of the worker concerned. E.g. work in Holland, the Dutch will (quite correctly) regard that as provision of work in NL and not provision of services from UK.