Reply to: Advice on which solution to go with whilst abroad - Sanzar/Garraway Consultants

[Michael J Perry FCA]

HMRC looking at Sanzar, Cherrylon and others

Spammed advertising.

Banned for 1 day.

[simondolan]

I am sorry to hear that. That is a world away from how I would expect my staff to act towards you. Can you please let me know who you dealt with?

[skywalker76]

Actually dismiss my previous response as it seems that they have seen the light and sent me a proper more dignified response. I'll keep you all posted.

[skywalker76]

Thanks to everyone for the responses. I've decided to go with a legitimate UK solution but after exchanging several emails, SJD have decided to send me cryptic and down right rude replies. It seems that if you ask too many questions you're deemed an angry client and they'd prefer not to do business with you. Their motto as far as I am concerned is 'just sign on the dotted line and don't ask too many questions.'
I really did expect more from a 'professional company.

Therefore, could someone please recommend an alternative?

[BlasterBates]

This may well be OK. You can do this I think. I did this though I paid UK NI, when I was in Luxembourg. For a period of time as a foreigner you can pay your social insurance else where. I suspect as in most countries, except the UK, social insurance is probably not a tax anyway, it´s for your benefit, though of course if they can they´ll twist your arm very hard for you to pay it. French social insurance is very high indeed, so it sounds like a good idea. As the others say though wouldn´t you be better off paying UK NI?. If you´re not Bulgarian I would have thought this would raise eyebrows in the French pension dept if they were to do some check in a few years time.

[mooshld]

Thanks for all the advice. I'll def be looking at another solution now.

Could somebody advise me on the following proposal:

The Solution

1) ************ has setup in France, a company in partnership with a Bulgarian entity. This allows us to technically employ consultants from the Bulgarian entity who are then posted to the new French entity. This allows us to arrange for social costs (via A1 certificate of coverage) to be paid in Bulgaria rather than in the far more expensive France.

2) Tax is not withheld in France for employees as it is the individuals responsibility to declare income and pay tax in the year following that in which it was earned. Thus the French tax estimate shown in the attached simulation is paid over to you each month, but indicates what will be due to be paid upon completion of the annual tax return.

3) Impatriation allowance - under article 155B of the 'Code General des Impots' an expatirate contractor in France, an 'impatriate' may have part of his taxable income exempt from taxation. Under this regime a contractor may opt for a 30% exemption of his taxable income. This allowance is considered as an additional remuneration received for the work performed abroad to cover additional expenses for the accommodation or the additional tax pressure resulting from living in France. To qualify for this allowance you must not have lived in or worked in France during the past 5 years.


Solution Summary

You will be employed by our new French company which is a joint venture with a Bulgarian partner. Via an A1 certificate of coverage we can arrange for you to pay social costs in the jurisdiction of your employer, in Bulgaria, at far lower rates than you would face in France
If eligible, 30% of taxable salary will be exempt from tax (expat tax regime)
Estimated French tax liability is shown in the attached simulation - but is not witheld, this liability is due once an end of year tax return is produced and tax demand made by the French authorities
We will attend to social insurance deductions
Estimated retentions will be in the region of 73% (without 30% allowance) over a 12 month period, retentions will be higher for contract periods below 12 months in the current tax year. If the 30% allowance is available to you, estimated 12 month retentions will be in the region of 75%.
The fees for our services under this solution which include general advice, timesheet control, invoicing, collecting your funds and paying you are 7% of contract value per month with a minimum fee of €550.00. There are no hidden charges or start up fees.

Professional Indemnity Insurance (PII) – our contracts require our contractors to have PII. If you do not already hold this insurance, AFSS can offer you a fully comprehensive PII at €50 for up to 3 months, €100.00 for 3-6 months or €150 for 7-12 months with a worldwide cover (exc USA) of €5 million.

My understanding is this is the same as what SJD are offering you with one exception. You are not currently a Bulgarian resident. So why make social contributions to a country where you will never have a chance of getting the benefit. I was under the impression to use a solution like this you would be required to maintain a residence in the country where you were paying social contributions. Whether this is checked I have no idea. Ask yourself is it really worth it for a few extra %.

[LisaContractorUmbrella]

Thanks for all the advice. I'll def be looking at another solution now.

Could somebody advise me on the following proposal:

The Solution

1) ************ has setup in France, a company in partnership with a Bulgarian entity. This allows us to technically employ consultants from the Bulgarian entity who are then posted to the new French entity. This allows us to arrange for social costs (via A1 certificate of coverage) to be paid in Bulgaria rather than in the far more expensive France.

2) Tax is not withheld in France for employees as it is the individuals responsibility to declare income and pay tax in the year following that in which it was earned. Thus the French tax estimate shown in the attached simulation is paid over to you each month, but indicates what will be due to be paid upon completion of the annual tax return.

3) Impatriation allowance - under article 155B of the 'Code General des Impots' an expatirate contractor in France, an 'impatriate' may have part of his taxable income exempt from taxation. Under this regime a contractor may opt for a 30% exemption of his taxable income. This allowance is considered as an additional remuneration received for the work performed abroad to cover additional expenses for the accommodation or the additional tax pressure resulting from living in France. To qualify for this allowance you must not have lived in or worked in France during the past 5 years.


Solution Summary

You will be employed by our new French company which is a joint venture with a Bulgarian partner. Via an A1 certificate of coverage we can arrange for you to pay social costs in the jurisdiction of your employer, in Bulgaria, at far lower rates than you would face in France
If eligible, 30% of taxable salary will be exempt from tax (expat tax regime)
Estimated French tax liability is shown in the attached simulation - but is not witheld, this liability is due once an end of year tax return is produced and tax demand made by the French authorities
We will attend to social insurance deductions
Estimated retentions will be in the region of 73% (without 30% allowance) over a 12 month period, retentions will be higher for contract periods below 12 months in the current tax year. If the 30% allowance is available to you, estimated 12 month retentions will be in the region of 75%.
The fees for our services under this solution which include general advice, timesheet control, invoicing, collecting your funds and paying you are 7% of contract value per month with a minimum fee of €550.00. There are no hidden charges or start up fees.

Professional Indemnity Insurance (PII) – our contracts require our contractors to have PII. If you do not already hold this insurance, AFSS can offer you a fully comprehensive PII at €50 for up to 3 months, €100.00 for 3-6 months or €150 for 7-12 months with a worldwide cover (exc USA) of €5 million.

So you are employed in Bulgaria and France?? Interesting I am not an expert in Bulgarian or French employment and tax law but I think the old chestnut "If it seems to good to be true it very probably is" applies here

[skywalker76]

Thanks for all the advice. I'll def be looking at another solution now.

Could somebody advise me on the following proposal:

The Solution

1) ************ has setup in France, a company in partnership with a Bulgarian entity. This allows us to technically employ consultants from the Bulgarian entity who are then posted to the new French entity. This allows us to arrange for social costs (via A1 certificate of coverage) to be paid in Bulgaria rather than in the far more expensive France.

2) Tax is not withheld in France for employees as it is the individuals responsibility to declare income and pay tax in the year following that in which it was earned. Thus the French tax estimate shown in the attached simulation is paid over to you each month, but indicates what will be due to be paid upon completion of the annual tax return.

3) Impatriation allowance - under article 155B of the 'Code General des Impots' an expatirate contractor in France, an 'impatriate' may have part of his taxable income exempt from taxation. Under this regime a contractor may opt for a 30% exemption of his taxable income. This allowance is considered as an additional remuneration received for the work performed abroad to cover additional expenses for the accommodation or the additional tax pressure resulting from living in France. To qualify for this allowance you must not have lived in or worked in France during the past 5 years.


Solution Summary

You will be employed by our new French company which is a joint venture with a Bulgarian partner. Via an A1 certificate of coverage we can arrange for you to pay social costs in the jurisdiction of your employer, in Bulgaria, at far lower rates than you would face in France
If eligible, 30% of taxable salary will be exempt from tax (expat tax regime)
Estimated French tax liability is shown in the attached simulation - but is not witheld, this liability is due once an end of year tax return is produced and tax demand made by the French authorities
We will attend to social insurance deductions
Estimated retentions will be in the region of 73% (without 30% allowance) over a 12 month period, retentions will be higher for contract periods below 12 months in the current tax year. If the 30% allowance is available to you, estimated 12 month retentions will be in the region of 75%.
The fees for our services under this solution which include general advice, timesheet control, invoicing, collecting your funds and paying you are 7% of contract value per month with a minimum fee of €550.00. There are no hidden charges or start up fees.

Professional Indemnity Insurance (PII) – our contracts require our contractors to have PII. If you do not already hold this insurance, AFSS can offer you a fully comprehensive PII at €50 for up to 3 months, €100.00 for 3-6 months or €150 for 7-12 months with a worldwide cover (exc USA) of €5 million.

[BlasterBates]

If the company has 3 directors, two of whom are permanently resident in the UK, board meetings and other management decisions take place in the UK how can the company be French resident?

It doesn't matter where the directors are, it's where the employees are the count. If you have one employee working somewhere for several months the tax authorities will argue that your company should be registered in France as well as the UK, and tax should be paid in France as laid out in the Double Taxation treaty for companies that operate in two countries. The rules for "dual residency" are outlined in the DTA.

[BlasterBates]

Generally you should be taxing yourself from day 1, not day 183. Be aware of that. The 183 day rule applies to your personal tax status, not the business. You can't open a factory for 3 months and shut it again all tax free.

When you work in any country on a contract, it would be exceptional that the tax authorites wouldn't tax you regardless of how many directors you have back home. Of course let us say you did a 1 or 2 month contract, it probably be wouldn't worth their while.

If the French authorities find out, they'll be down on you like a ton of bricks, particularly the VAT people.

Contractors that just continue as if they're in the UK often get into serious trouble with the relevant authorities. The one saving grace in France is that there isn't a flourishing contractor market, so unlike Germany or Belgium where there is, the tax authorities probably won't be actively looking for you, as they would in those countries.

In your position I would go and see a local French tax advisor and get your affairs straightened out.
Follow his advice and don't take advice from so called "International Tax" experts. There is no such thing. These experts sit in tax havens and are not accountable, so they'll sell you all sorts BS schemes.

You can sit quiet and hope they don't find out, but it will be deemed to be tax evasion, and they could find out any time in the next few years. Some contractors have got nasty letters a couple of years after they left the country.

[SueEllen]

Your company would also become French resident as you would be moving the management and control of the company (you) to France, so your company would be liable for French corporation tax. It may not be worth the cost and red tape.

If the company has 3 directors, two of whom are permanently resident in the UK, board meetings and other management decisions take place in the UK how can the company be French resident?

[LisaContractorUmbrella]

Hello Lisa,

Are you saying that I should get out of this scheme now due to this ruling?

Hi Skywalker

I cannot advise you to use a scheme or not but you should be aware of the risk and make provision for any tax that may become due at a later date (see BN66 thread)

[skywalker76]

Hello Lisa,

Are you saying that I should get out of this scheme now due to this ruling?

[PhilBreeze]

OP - the French system is not known for being excessively relaxed, that is for sure. If you are there for more than 183 days you should register in France. There are ways and means of them catching up with you. Also I guess if you're going to be there for a year you might want to set up with a French doctor, get a mobile phone contract and various other things that could flag you to the authorities as being there.

Once you are resident in France any payments from a trust may be treated very differently than in the UK. France uses civil law which doesn't recognise the concept of a trust (see Trust law in Civil law jurisdictions - Wikipedia, the free encyclopedia). It's therefore possible that payments from a trust would be treated as income payments. The only way to be certain of where you would stand is to ask a French international tax expert which may be cost prohibitive.

One thing worth considering is the Form A1/E101 which could allow you to continue to pay National Insurance in the UK rather than pay French social security. This would increase your overall % but also would continue your contributions towards the state pension and other state benefits here.

It is legal to use a UK limited company in France but you may need a labour leasing licence to send employees of the company (ie you) to work at another company. Your company would also become French resident as you would be moving the management and control of the company (you) to France, so your company would be liable for French corporation tax. It may not be worth the cost and red tape.

If you've been offered 75% using a solution that is compliant and puts you on French income tax, that's a very decent return for France IMO.

[mooshld]

I am in a similar situation coming to the end of a gig and looking at others that would take me over 183 days in France. The option I am leaning towards is to make my ltd dormant and go through a payroll with my accountant. Its that or setup through an umbrella in France, anything else to me is to good to be true.

We all have to evaluate our own level of risk, but I draw the line at anything that could have me fined and paying back taxes well in excess of what I would have had to pay, had I just been by the book to start with.

Finally if the rate doesn't cover it negotiate one that does, or don't take the gig.