Reply to: Isle of Man

[expat]

If you come to the UK, your time here is now measured by number of midnights. not the older formula of number of days not including arrival and departure days.

Becoming resident in another jurisdiction does not automatically stop you being resident in the UK, for which the usual tests apply, including but not limited to number of days in the UK.

Double Tax Avoidance treaties exist to try to ensure that you do not have to pay two full sets of taxes on any one period of earning, but:
1. You do not get to choose whose tax you pay, the tax people decide that. They may disagree amongst themselves, and you will not find that convenient.
2. You are quite likely to have to pay one set of tax, then have to pay the difference to a higher-tax country, i.e. one country credits you with what you actually paid to another, as against letting you off completely because you have paid another country for that income; though it can happen that way.
3. The DTA formulae genarally try to tax you at a level consistent with your aggregate income, to stop you from earning a lot but over many different places. If you're rich, everybody wants to tax you as rich.
4. Generally speakn=ing, as has been mentioned, regardless of residence, if you earn money in a country you should expect to pay some tax to that country. As indeed you should: if you don't want to pay a country's tax, stay out of its economy.

[BlasterBates]

There are different types of income. Basically:

Employment income: this is taxed once and only once. If you have a permie job in Paris and keep it for one month and return you'll pay French tax (might not be much and could potentially be 0), and you won't be taxed again in the UK, regardless of how little tax you paid. You will be classified as French tax resident for the month you have your permie job.

Dividends and Investments: These are usually taxed twice, according to credits, as described by ASB. You'll end up paying the highest tax rate if you're resident in two countries.

Corporate Income. Companies operating in two countries will only be taxed once on any income.

Ok a bit of a simplification but a good rule of thumb.

[ASB]

He is not strictly wrong. He was responding to my over simplification as this is a complex subject.

Ok, I perhaps wasn't entirely clear. As you say it is a complex subject.

It is perfectly possible to be resident in any number of places for tax purposes. Those jurisdictions will levy taxes according to their fiscal rules. Thus double taxation ALWAYS occurs (regard taxation as subject to tax, not that tax is necessarily actually paid).

The overall effect of the DTA's in force in Europe is that one will generally pay tax in the country where the work is performed (assuming tax residency) and nothing in the UK. However if you are UK resident you will also be taxed in the UK on it, it just happens that the provisions of the DTA usually reduce this to nil.

Where a company is involved it can get more complex. There are DTAs for companies but they are generally more complex. Again the company can easily gain tax residency in more than one jurisdiction - usually based on its "seat of control". Also the terms of the corporate DTAs can become complex. For example Portugal will levy a 15% withholding tax (withheld by clients) on ALL invoices raised from a UK company for services physically provided in portugal. Whether this is levied is not dependant upon whether the individual was resident in Portugal.

Offsetting this is difficult (but possible). Provided you can obtain confirmation from HMRC that the company is taxed on it's worldwide income then the Portuguese authorities will issue a certificate. This certificate can then be used to claim relief against UK CT (although this can on occasion be difficult because Portugal regard it is as income tax). However if the individual is resident in Portugal they can claim the withheld tax against their personal portuguese tax (and the authorities will not then issue a certificate of course).

There are also property based taxes potentially levied on non resident companies or individuals which are not reclaimable through the DTA.

Overall the situation is always dependant upon the exact circumstances of the individual and corporates involved, however, yes - in europe the overall effect is usually to be taxed in one place only.

[The Lone Gunman]

Sorry, but you are plain wrong!

DTA's exist so a person doesn't pay tax twice. You dont pay tax in both countries then claim credits where DTA's exist. You only pay tax once.

He is not strictly wrong. He was responding to my over simplification as this is a complex subject.

You are normally required to pay tax locally. You can get away with not doing so by virtue of a short stay, but you should have registered for local tax and they can insist on you paying them.
If you are tax resident in the UK and the host Country has a DTA with the UK then the tax you paid in the host country is offset against your bill in ther UK and (I understand) can even lead to a rebate though I have no experience of that.
If you are not tax resident in the UK the taxman can still ask for proof of tax residency abroad and for proof of paying tax.

This is one of the issues with using your own Ltd when working abroad. AFAIK the DTAs only exist for personal tax. There are no DTAs for businesses. If the host decides your company is resident there then you are going to get a bill for corp tax locally. As you are a UK Ltd you will also get a bill from the UKfor copr tax too.

It is complex and I am not an expert. Please dont ask me for details as it would take ages to find the relevant supporting evidence.
This all comes from 10 years in Europe. 8 in Germany and 2 in Belgium.

[BolshieBastard]

Sorry but that is just plain wrong. You would have been resident in both Germany and the UK. You would have been taxed in both.

However both Germany and the UK have dta's. The provisions of which I am unawre of. It is possible that those treatys will allow only one to levy taxes. But the general principle is that you pay both and then get credit against that for what you have paid elsewhere (i.e. you end up paying the higher).

Sorry, but you are plain wrong!

DTA's exist so a person doesn't pay tax twice. You dont pay tax in both countries then claim credits where DTA's exist. You only pay tax once.

[BarbarianAtTheDoor]

Sorry but that is just plain wrong. You would have been resident in both Germany and the UK. You would have been taxed in both.

However both Germany and the UK have dta's. The provisions of which I am unawre of. It is possible that those treatys will allow only one to levy taxes. But the general principle is that you pay both and then get credit against that for what you have paid elsewhere (i.e. you end up paying the higher).

AFAIK, a single rule applies within the EU (DE, UK) and that says that if you paid income taxes for a certain period of the year, you're not liable for same period in the other country. When I asked the lawyer whether this means that I can just travel around the EU, work everywhere a month and not exceed minimum wages (and ridiculously low taxes) and he said yes.

I asked professional advice when I moved to the UK 3 years ago from within the EU.

[prosperoiom]

Isle of Man - residence & life

I'm musing over moving to IoM and taking my Ltd Co with me.

UK tax considerations (residence and domicile) always apply. Moving to IOM particularly is not going to help you in that regard. In other words, you still have to 'lose' UK residence & domicile. 'Gaining' IOM residence is not a major contributing factor to that. Basically you have to sever all physical ties with the UK (property, bank accounts, club memberships etc). You want to end up in situation where you submit IOM tax return (on global income) and no UK tax returns.

The IOM still has open property market. There is no 'residence permit' here. Single integrated property market, unlike parts of CI where there is two-tier market (one for incomers, one for locals).

IT work in IOM is fairly limited. Not many big companies. Job market is fairly static (people tend to stick in their jobs for years).

Quality of life is not bad, but made up of various factors. See my web site http://frankvipond.com/isleofman.html for an overview.

Frank

[ASB]

Should i have returned to the UK within 12 months I would be regarded as never having left but would not be taxed in the UK as I had paid in Germany.

Sorry but that is just plain wrong. You would have been resident in both Germany and the UK. You would have been taxed in both.

However both Germany and the UK have dta's. The provisions of which I am unawre of. It is possible that those treatys will allow only one to levy taxes. But the general principle is that you pay both and then get credit against that for what you have paid elsewhere (i.e. you end up paying the higher).

[The Lone Gunman]

I accept that you have to be outside the country for (at least) a year to qualify not to be tax resident, but the point that I was answering is that the NT status then starts from the date that you originally left, not from that date that you qualify, which is what the poster I was answering thought happened.

And from an adminstrative pov, the IR will give you the NT status almost immediately, and then take it away again if you are later found to have not qualified, rather than, expecting you to pay the tax until you do qualify and refunding it later.

tim

Fair enough. I was just chucking in my experience. Which was gained in 98 when I went to Germany. I only went into tax residency stuff as I was originaly going for 6 months.
All my info said I would be tax resident in Germany after 6 months and would pay all my tax there. (Non aligned tax years are a problem but a different issue).
Should i have returned to the UK within 12 months I would be regarded as never having left but would not be taxed in the UK as I had paid in Germany.

[tim123]

That is not true. You remain tax resident in the UK untill you have become tax resident elsewhere. As someone said above, you effectively have to be outside the UK for a whole tax year before being considered non resident.

I accept that you have to be outside the country for (at least) a year to qualify not to be tax resident, but the point that I was answering is that the NT status then starts from the date that you originally left, not from that date that you qualify, which is what the poster I was answering thought happened.

And from an adminstrative pov, the IR will give you the NT status almost immediately, and then take it away again if you are later found to have not qualified, rather than, expecting you to pay the tax until you do qualify and refunding it later.

tim

[The Lone Gunman]

Yes and no, respectively. Yes you have to be tax-resident somewhere else (in practice). No, it doesn't take a year.

I contacted the tax office shortly after leaving and they confirmed to me that they considered me not normally resident in the UK from the date I left.

OK, I must be out of date. When I went abroad in 98 all the advice I received was what I stated above.
Certainly in the case in question, you cant just move abroad and then claim a 90 day rule. First you have to get the tax resident abroad and then you can come back on the 90 day rule.

[expat]

That is not true. You remain tax resident in the UK untill you have become tax resident elsewhere. As someone said above, you effectively have to be outside the UK for a whole tax year before being considered non resident.

Yes and no, respectively. Yes you have to be tax-resident somewhere else (in practice). No, it doesn't take a year.

I contacted the tax office shortly after leaving and they confirmed to me that they considered me not normally resident in the UK from the date I left.

[The Lone Gunman]

You are non resident immediately (the day after) you leave the UK.

That is not true. You remain tax resident in the UK untill you have become tax resident elsewhere. As someone said above, you effectively have to be outside the UK for a whole tax year before being considered non resident.

[Mailman]

Yeah but Gordon will then look on you as being a tax evader!

Mailman

[tim123]

So, assuming I have understood DaveB's last post and the doc he linked to, because the 90-day rule is an average over 4 tax years you couldn't be free of UK tax immediately on taking up residence in IoM, because of your previous residency in the UK for the tax years preceding it. A bit of a cheek really!

You miss-understand.

You are non resident immediately (the day after) you leave the UK.

But they can't actually determine that you will gain and keep this status until you have been away a full tax year (or more) so that they can work out the average days in the UK.

Your tax status will remain in limbo until they know, though usually the IR will issue you with an NT status as soon as you convince them that you won't be coming back. But you don't lose any of the benefits just because they don't know.

tim