Reply to: Working overseas - invoicing own limited company

[BlasterBates]

If everything is 10%, you might be better off doing everything totally in the other country.

Then there would be no NI, UK tax issues. If you run through the Ltd without registering a separate branch elsewhere, then you'll probably be taxed as a UK co.

If you invoice yourself in the UK and you retain UK residency, then I presume you'll be liable for UK tax on those earnings. from your UK co., because there's no foreign branch they aint going to recognise this as foreign earnings.

The foreign country may not allow you to credit any UK tax for your earnings they deem to be from activities in their country. So you may end up with a double whammy.

You need to read the Double Taxation Treaty very carefully.

[soleil]

I just cannot see there being a problem so long as there is a commercial relationship between you and your UK ltd company. We do not have any clients in this specific situation so cannot give you a certain answer. If you are looking to pay for some advice I can suggest Contract lawyer (UK) Roger Sinclair Egos Ltd - there are probably others that operate in the area too and I don't want to create an environment of favouritism, but this guy is good, and seeing as how you seem to have a good head on you, and are in a good tax saving position, it might just be worth it for the peace of mind.

Not sure about good, but it does look like a head at times
Host country rules do remain to be more thoroughly checked, though as it's east (and thank god not the sinking US of A ) things work... well, shall we say a bit different. Personal and co. tax are the same at 10% anyway, so I really can't see them complaining about a different account tax will be paid into - UK co is more to keep the EU client from getting lost in translation.

[BlasterBates]

BlasterBates - you and soleil are very likely not talking about the same country.

As soleil refuses to say the country he's talking about then there is little point continuing this conversation as we can't check the country specific tax laws.

You're right but I have worked in several countries, and it is very similar everywhere. I gave the example of the US because we respect the US, we wouldn't mess with them, but for some reason, when it's Europe contractors seem to think they have an invisible cloak that makes them immune from the tax man. Some of tax inspectors in these countries throw a massive tantrum when they find out you have signed a contract to do several weeks work in their country without registering, especially the VAT people.

[SueEllen]

BlasterBates - you and soleil are very likely not talking about the same country.

As soleil refuses to say the country he's talking about then there is little point continuing this conversation as we can't check the country specific tax laws.

[Greg@CapitalCity]

No

Are you sure invoice payments by the co. to me would not attract NICs, seeing how for NI purposes I would remain in the UK system?

Cheers,
soleil

I just cannot see there being a problem so long as there is a commercial relationship between you and your UK ltd company. We do not have any clients in this specific situation so cannot give you a certain answer. If you are looking to pay for some advice I can suggest Contract lawyer (UK) Roger Sinclair Egos Ltd - there are probably others that operate in the area too and I don't want to create an environment of favouritism, but this guy is good, and seeing as how you seem to have a good head on you, and are in a good tax saving position, it might just be worth it for the peace of mind.

[BlasterBates]

You are presuming that soleil is the only director in the company.

The company may have 1 or more other directors who may or may not be shareholders/employees who are based in the UK.

There are some countries that as long as the company has other directors and control i.e. company decisions are theirs, allow a foreign company to operate in that tax jurisdiction for a period of time.


He's not in the US though he's in some undisclosed country outside the EU but in Europe.

Well on the whole there is no "period of time" specified, there's a woolly paragraph about permanent presence, which can be as little as a few weeks, judging from the wails from burned fingered contractors. Just because there are directors elsewhere doesn't make you immune. The tax authorities will demand you should have setup a branch for the work you were doing.

So basically you run the risk from day on, which is why you need local advice.

I had contract that ran 8 weeks and I was registered, and the authorities didn't refuse the tax because I wasn't there long enough. Logically I assume I hadn't they could have demanded that tax, had they found out. On the other hand the country I was resident in wouldn't have been able to "surprise" me with an additional tax.

[SueEllen]

Actually this is a problem from day 1. Usually after 6 months you become fully personally tax resident, but when you run a business there is a tax issue from the first day you operate your business.

You are presuming that soleil is the only director in the company.

The company may have 1 or more other directors who may or may not be shareholders/employees who are based in the UK.

There are some countries that as long as the company has other directors and control i.e. company decisions are theirs, allow a foreign company to operate in that tax jurisdiction for a period of time.

Imagine going to the US, renting a warehouse for 3 months, hiring some machine tools, then manufacturing and delivering widgets for a local manufacturer. If the local IRS official were to hear about it would he

a) Ignore it
b) Come round with the flying squad and demand immediate payment of VAT and registration.

Making Software is no different in the eyes of a tax office.

He's not in the US though he's in some undisclosed country outside the EU but in Europe.

[BlasterBates]

There is no problem invoicing your UK company. The fact that you are outside the EU has no bearing on this - just have a contract in place between you and your company that explains the commercial relationship. No NI issues then. Then however you deal with the income that is paid to you from your company must just comply with tax regulations in the country you live, and also the UK.

The two areas to watch are;
(1) Personal tax - make sure you understand the tax residency rules of the UK, and the country you will be living - is quite probably at sometime you will be resident in more than one country for tax purposes. Also, if you receive a salary from your UK limited company when tax resident of a different country, you will most likely need to declare that salary in your resident country also.
(2) Company tax - most double taxation agreements are the same these days - if a UK company is managed/controlled by a director/shareholder who is not UK resident, the company become liable for tax on earnings from operations in the country where you are resident - meaning you would also need to register your company for tax in the country you reside.

If you are going to be working and living overseas for say 6 months or more, these areas will become a problem for you. If this is the case you might just be better off just taking the UK ltd company out the equation.

Actually this is a problem from day 1. Usually after 6 months you become fully personally tax resident, but when you run a business there is a tax issue from the first day you operate your business.

Imagine going to the US, renting a warehouse for 3 months, hiring some machine tools, then manufacturing and delivering widgets for a local manufacturer. If the local IRS official were to hear about it would he

a) Ignore it
b) Come round with the flying squad and demand immediate payment of VAT and registration.

Making Software is no different in the eyes of a tax office.

[soleil]

There is no problem invoicing your UK company. The fact that you are outside the EU has no bearing on this - just have a contract in place between you and your company that explains the commercial relationship. No NI issues then. Then however you deal with the income that is paid to you from your company must just comply with tax regulations in the country you live, and also the UK.

The two areas to watch are;
(1) Personal tax - make sure you understand the tax residency rules of the UK, and the country you will be living - is quite probably at sometime you will be resident in more than one country for tax purposes. Also, if you receive a salary from your UK limited company when tax resident of a different country, you will most likely need to declare that salary in your resident country also.
(2) Company tax - most double taxation agreements are the same these days - if a UK company is managed/controlled by a director/shareholder who is not UK resident, the company become liable for tax on earnings from operations in the country where you are resident - meaning you would also need to register your company for tax in the country you reside.

If you are going to be working and living overseas for say 6 months or more, these areas will become a problem for you. If this is the case you might just be better off just taking the UK ltd company out the equation.

Many thanks for that GregCapitalCity - it was more or less the info I was looking for.
I've been away from the UK for a whole financial year now, am waiting for an NT tax code to be sent, and will likely be away for another 2-3, so don't expect issues there. Personal income will be declared locally since they have only 10% tax on that.
Re: the company being taxed where I'm going, details still to be confirmed, but they are not in OECD so the whole permanent establishment/seat of management thing shouldn't apply.
Are you sure invoice payments by the co. to me would not attract NICs, seeing how for NI purposes I would remain in the UK system?

Cheers,
soleil

[Greg@CapitalCity]

Be careful

Thanks for the answer - though it didn't really touch on anything I've asked - working via a UK Ltd co. is perfectly legal where I'm going.
The original question still stands though - are there any limitations on UK side on invoicing own Ltd. co - without this being subject to NI/seen as employment income?

Thanks

There is no problem invoicing your UK company. The fact that you are outside the EU has no bearing on this - just have a contract in place between you and your company that explains the commercial relationship. No NI issues then. Then however you deal with the income that is paid to you from your company must just comply with tax regulations in the country you live, and also the UK.

The two areas to watch are;
(1) Personal tax - make sure you understand the tax residency rules of the UK, and the country you will be living - is quite probably at sometime you will be resident in more than one country for tax purposes. Also, if you receive a salary from your UK limited company when tax resident of a different country, you will most likely need to declare that salary in your resident country also.
(2) Company tax - most double taxation agreements are the same these days - if a UK company is managed/controlled by a director/shareholder who is not UK resident, the company become liable for tax on earnings from operations in the country where you are resident - meaning you would also need to register your company for tax in the country you reside.

If you are going to be working and living overseas for say 6 months or more, these areas will become a problem for you. If this is the case you might just be better off just taking the UK ltd company out the equation.

[soleil]

Who told you that?

If it was your agent or other contractors, then it maybe baloney.

Even if this is a tax haven like Dubai you still need to make sure you know how it is legally, not what everyone is getting away with.

Working in a foreign country is full of pitfalls, and many a contractor has had the nasty surprise of a "flying squad" of VAT inspectors or whoever. Hundreds of contractors in Germany have been facing very hefty penalties, sometimes years after they left.

So you really want to double check.

As mentioned, that's beyond the scope of this discussion - am trying to find out about UK rules.

[BlasterBates]

working via a UK Ltd co. is perfectly legal where I'm going.

Who told you that?

If it was your agent or other contractors, then it maybe baloney.

Even if this is a tax haven like Dubai you still need to make sure you know how it is legally, not what everyone is getting away with.

Working in a foreign country is full of pitfalls, and many a contractor has had the nasty surprise of a "flying squad" of VAT inspectors or whoever. Hundreds of contractors in Germany have been facing very hefty penalties, sometimes years after they left.

So you really want to double check.

A good start is the Double taxation treaty. If there is one and it covers businesses in both jurisdictions then you know you have to tax yourself there as a business. Difficult to imagine a country where you're personally taxable but not as a business.

[SueEllen]

Thanks for the answer - though it didn't really touch on anything I've asked - working via a UK Ltd co. is perfectly legal where I'm going.
The original question still stands though - are there any limitations on UK side on invoicing own Ltd. co - without this being subject to NI/seen as employment income?

Thanks

You need to find out the rules in the tax jurisdiction you are in on how much tax you need to pay on income you personally take out of the business.

Then work out if there is a dual tax agreement with UK and work out from there if you need to pay income tax and NI on the amount.

[soleil]

Europe has lots of different tax jurisdictions the onus is on you to find out for each individual country whether:
1. You are allowed to use your UK based limited company and what structures you have to put in place in the few countries you are allowed to.

2. Ensure you are paying the correct tax on your personal affairs.

Thanks for the answer - though it didn't really touch on anything I've asked - working via a UK Ltd co. is perfectly legal where I'm going.
The original question still stands though - are there any limitations on UK side on invoicing own Ltd. co - without this being subject to NI/seen as employment income?

Thanks

[SueEllen]

Europe has lots of different tax jurisdictions the onus is on you to find out for each individual country whether:
1. You are allowed to use your UK based limited company and what structures you have to put in place in the few countries you are allowed to.

2. Ensure you are paying the correct tax on your personal affairs.