Contracting in Austria through Ltd company

[borderreiver]

Just to clarify, my contract would be with a UK company (agnecy UK office), then Agency would have a contract with Austrian company. I would charge UK VAT on my invoices, but the contract would be paid in EUR. Does that mean my UK ltd source of income is UK or does it still mean my source of income is Austrian?

Possibly your LTD would be regarded as UK resident, but I would check with a reputable Austrian accountant, as BB says.

Just bear in mind that if you are deemed personally resident in Austria, any dividend payments you receive from your company while there will be subject to 25% Austrian CGT ...

[BlasterBates]

Thanks a lot for your advice! I really appreciate that!

My accountant says that I would definitely be a resident of the UK and also my company would be tax resident as well. It is more a matter of whether I need to pay Austrian tax or not.

Just to clarify, my contract would be with a UK company (agnecy UK office), then Agency would have a contract with Austrian company. I would charge UK VAT on my invoices, but the contract would be paid in EUR. Does that mean my UK ltd source of income is UK or does it still mean my source of income is Austrian?

I like the two contract solution. Does it mean one contract for working in Austria and one contract for working in UK? And do you know basics of how an umbrella can invoice my UK ltd to get this done?

As per the business trip rules I guess you can spend upto 90 days in any 180 day period. I thought that makes 45% working days a safe bet (33% of total days). Is there any rule of thumb, how many percentage days you can spend over time?

I would see an Austrian accountant about this. It isn't quite as simple as spending only 90 days in an 180 day period, that I would suspect is the rule governing personal tax residency. Some countries like Belgium have very specific rules about how many days you can visit on business trips before they classify it as taxable, anything beyond 5 days in any one month; so in that example you spend 6 days in Belgium in a specific month they want to tax it. In most countries though it is more subjective, i.e. you're in the hands of the tax authorities as to what they decide. My experience is that they'll decide in their favour if there is any doubt; why should they do otherwise?

In particular if this is a longterm contact I would advise getting this sorted with a reputable Austrian accountant or perhaps umbrella co. Better to register in Austria and have them tell you you're not liable for tax than the other way round. The trouble is if they did get wind of it and decided you'd been evading tax, they'll come up with a ridiculously high estimate and add penalties to boot, so this is definitely not to be taken lightly. Best going through the hassle of setting yourself up correctly and not have to worry about the very stern "brown" envelope or even a visit from the Austrian flying squad.

If you were to go round this forum you will find numerous stories of contractors who have got into trouble with foreign tax authorities, and it isn't nice when it happens.

Every country is different so there's no easy answer. Perhaps wait until you get to Austria and fix up a date with an accountant.

It is very easy sometimes just to ride with the agency and presume you'll be alright, but in the end they don't care whether it's legal, and it's you who carries the can.

In my view if you're working 45% in Austria and 55% in the UK the Austrian authorities would expect you to tax roughly 45% of your business income in Austria. This is actually stated in the double taxation treaties, for a company operating in two countries, that the proportion of income earned as a result of activities in that state should be taxed there. In other words you'd setup a subsiduary in Austria and then charge your UK Ltd. Strictly speaking this is what you should do, unless you can reduce your time in Austria to a level deemed by the Austrian authorities as business trips.

However all this is quite complicated and you can only clarify this with an Austrian tax expert.

[nsingla]

Thanks!

Thanks a lot for your advice! I really appreciate that!

My accountant says that I would definitely be a resident of the UK and also my company would be tax resident as well. It is more a matter of whether I need to pay Austrian tax or not.

Just to clarify, my contract would be with a UK company (agnecy UK office), then Agency would have a contract with Austrian company. I would charge UK VAT on my invoices, but the contract would be paid in EUR. Does that mean my UK ltd source of income is UK or does it still mean my source of income is Austrian?

I like the two contract solution. Does it mean one contract for working in Austria and one contract for working in UK? And do you know basics of how an umbrella can invoice my UK ltd to get this done?

As per the business trip rules I guess you can spend upto 90 days in any 180 day period. I thought that makes 45% working days a safe bet (33% of total days). Is there any rule of thumb, how many percentage days you can spend over time?

[ASB]

What does the agency and accountant say?

From your description it would appear you will be resident in the UK for tax purposes, and you may or may not be be resident in Austria. It is perfectly possible to be tax resident in multiple jurisdictions simultaneously. If you are tax resident in Austria under their rules then the Austrian authorities may seek to consider you UK ltd as Austrian resident due to the seat of control.

The provisions of double taxation agreements will differ between nations, but in general the worst that can happen is you end up paying the higher rate of the 2 countries. You need to be careful though to ensure you don't shoot yourself in the foot with dividends since some countries have radically different rules with these (from an Austrian POV if you are Austrian tax resident and your company is not then you will be receiving foreign dividends).

DT2750+ - Double Taxation Relief Manual: Guidance by country: Austria: Contents

In practice if you just invoice you probably won't get caught out if you are invoicing a UK entity, but the possibility does exist and it can bits you in the bum later on.

You haven't mentioned VAT at all either; though this should not be an issue clarify whether you are supposed to be charging VAT or not (the supplies made in Austria are probably outside the scope of VAT). However the Austrian client should probably be self declaring and paying the input tax. Austrian VAT rules may potentially also impact you, though this is very unlikely unless you are billing an Austrian entity.

I also assume you are on EU passport giving you all the necessary right to work/live anywhere in the EU.

[BlasterBates]

Well the safe way is have an Austrian company and the UK Ltd. The Austrian co. bills your UK for the work you do in Austria.

Normally you should split your income and tax the income for work in Austria in Austria, and tax the work you do in the UK in the UK.

Best to take advice from a tax specialist in Austria.

You can always take a risk and just tax everything through the Ltd, but there is a risk. From time to time contractors do come on here and complain that some foreign country is now claiming tax from them because they worked there, even though they were working through a UK Ltd.

I would follow the advice of a tax specialist, maybe for example get an Umbrella to invoice your UK Ltd for work you do in Austria. Particularly if this is a longterm contract this would be the way to go.

I once worked for an Umbrella company that setup two different contracts one for each country. I worked a few days in the UK and mostly in Luxembourg. In fact I did that so that I could justify paying UK NI rather than Lux. NI. But that would be an ideal simple solution for you. So splitting the contracts is an option.

I would add that 183 day rule doesn't apply, although some contractors think it does. This is a mistake. Because you'll be spending your weekends in the UK, it will be considered your main tax residence, however the Austrian authorities will still expect their cut.

There is however usually a "rule of thumb" where if you spend a few days a month in a country it could be considered a business trip, 45% sounds to me a bit too much, unless this is a short contract I doubt whether you could pass this off as business trips.

[nsingla]

Hi Friends,

I have been offered a contract to work in Austria (through agency in UK). The client has agreed to allow 50% of the work to be done from home (UK).Approximately I would spend 45% of working days in Austria and rest in UK (including weekends). I have a limited company set up in the UK. What are my options of working there in perspective of
1. Carry on operating through UK ltd company and treating Austria visit as busines trips.
2. Using umbrella company
3. Anything else?

Your help is appreciated!
Navdeep