Reply to: Warning to any noobies working abroad anywhere (eg Zurich belgium amsterdam dubai )

[AlfredJPruffock]

The overseas article refer to Capital consulting as the author (recruiter), think they mean Capital tax consulting as per banner.

So took a look at the site and
http://www.capitaltaxconsulting.com/...dency-example/

An illustration of the complexities of tax residency rules:

John Smith, a British national, takes a consulting assignment in France for one year, starting 1st May 2006 . Because he will be there for more than six months he is immediately considered to be tax-resident in France and pays his tax in France in line with French legislation.

However, in order to become UK tax non-resident, John needs to be out of the UK for at least one full UK tax year. As the assignment started on 1st May 2006 , he therefore needs to remain out of the UK until after the beginning of the new tax year in April 2008.

Clearly, with a one-year contract, this will not be the case. John remains UK tax-resident therefore and will very likely have to file a UK tax return.

The result is that he will pay tax in France on his income and he will also be assessed in the UK on this income, but his UK tax will be reduced by the amount of French tax already paid. However, if the UK tax works out higher on this same income, he will have to pay the difference in the UK .


Hope this clears things up for future searches.

Mr Smith
You dont know whats going on
Do you Mr Smith ?

Then mild mannered Mr Smith - weary of grey slates golf courses and gourmet cooking replied with two fingers in the air ;

'Watch the Police and the Taxman miss me '

...and that was the end of Mr Smith.

PS Which serves him right for being so dim as to pay the Frogs his hard earned wonga.

[NotAllThere]

Hope this clears things up for future searches.

A vain hope. Best thing - leave the UK and never return.

[YHB]

The overseas article refer to Capital consulting as the author (recruiter), think they mean Capital tax consulting as per banner.

So took a look at the site and
http://www.capitaltaxconsulting.com/...dency-example/

An illustration of the complexities of tax residency rules:

John Smith, a British national, takes a consulting assignment in France for one year, starting 1st May 2006 . Because he will be there for more than six months he is immediately considered to be tax-resident in France and pays his tax in France in line with French legislation.

However, in order to become UK tax non-resident, John needs to be out of the UK for at least one full UK tax year. As the assignment started on 1st May 2006 , he therefore needs to remain out of the UK until after the beginning of the new tax year in April 2008.

Clearly, with a one-year contract, this will not be the case. John remains UK tax-resident therefore and will very likely have to file a UK tax return.

The result is that he will pay tax in France on his income and he will also be assessed in the UK on this income, but his UK tax will be reduced by the amount of French tax already paid. However, if the UK tax works out higher on this same income, he will have to pay the difference in the UK .


Hope this clears things up for future searches.

[BlasterBates]

I would agree with that.

But just to explain some experience of tax authorities. When I was working in Luxembourg I did some work in the UK, now because I was only there a few days I didn't earn much and was a few grand, because I'd spent less than 183 in the UK there was no compuction to fill in a tax return. In fact my tax was 0. However it was an employment contract, so tax was due in the UK.

Now this UK income was declared on my German and Luxembourg tax returns for the same year, and due to the double taxation agreement, which are reciprical I had no further tax to pay on this. Indeed there was correspondence directly between myself and the German authorities as to the source of this income. Once I had clarified it was due to employment there was no further tax to pay,nevertheless it was used to calculate the tax rate on interest from investments.

So I think since this agreement is reciprical it would also apply in the UK. I had to prove that it was taxed in the UK. So I sent the document from the HMRC, to both tax authorities, which stated quite clearly 0, as I was paid £4000.

[YHB]

Ive PM's Nixon and a couple of other accountants on here to ask if wouldnt mind commenting.

[YHB]

Anyway believe what you like.

Precisely what you are doing.

Dear BlasterBates

We would like you to know we are decent people and will not use every trick in the book to get you to pay tax. It does not matter to us at all that you are a UK resident and thus completely in our clutches, please know we want you to keep all income apart from dividends.

We have decided to overlook the part about the millions we could raise from the thousands working abroad, in addition we welcome Switzerland and other countries being able to compete with us on an unequal level and thus attracting our best people- Its such a shame Switzerland is not as big a financial centre as us, we hope by allowing them to attract our key people, for the same pay as UK but less tax, will help them overtake us in the near future.

Kind regards

Hector


Nothing personal- I hope you are right so I save thousands from my tax bill next year, but don't want any one reading this to go away listening to you unless you are correct- if not I would appreciate if you and I delete all our needless posts so this thread gives a accepted simple answer to anyone searching in the future.

Its lack of understanding like this that I created this thread to increase awareness- the agencies re not daft, in order to make an easy 20% or more they are not mentioning it.


Keywords not mentioned so far for future searches : Bern, Geneva, Zug, Munich, Brussels Holland Netherlands EnglishForum kanton swiss easyjet swissair luthansa

[YHB]

Have you not thought about a German employee working over the border in Denmark, Frenchman working in Luxembourg. That's why this EU rule was brought in. .

One last comment on paying taxes overseas: Under double taxation agreements that exist between the UK and just about every other country that you are likely to work in, you will not be required to pay tax twice on the same earnings. Where you are liable to pay tax in two countries on the same earnings, for example where you work in say Belgium for nine months - thus breaking the Belgium six month rule regarding residency for tax purposes but not achieving the UK tax year exemption - then the double taxation agreement between Belgium and the UK will prevail. Under this agreement, you will be liable for tax first in Belgium based on your Belgium income and their tax rules. You will also be liable to tax in the UK based on the same income, but less any tax already paid on it to the Belgium authorities. That is, you will end up paying tax on your Belgium income at the higher of the two countries tax rates, albeit possibly spread over two different countries.


Think Belgium is in Europe....
Think Shout99 are a reputable source...


http://www.shout99.com/contractors/s...id=11731&n=300

[BlasterBates]

DT18159 - DT: Switzerland: double taxation agreement, Article 10: Dividends
(1) Dividends derived from a company which is a resident of Switzerland by a resident of the United Kingdom may be taxed in the United Kingdom. Such dividends may also be taxed in Switzerland, and according to the laws of Switzerland, but provided that the beneficial owner of the dividends is a resident of the United Kingdom the tax so charged shall not exceed:

(a) 5 per cent of the gross amount of the dividends if the beneficial owner is a company which controls directly or indirectly at least 25 per cent of the voting power in the company paying the dividends;
(b) 15 per cent of the gross amount of the dividends in all other cases.

(2) Dividends derived from a company which is a resident of the United Kingdom by a resident of Switzerland may be taxed in Switzerland. Such dividends may also be taxed in the United Kingdom, and according to the laws of the United Kingdom, but provided that the beneficial owner of the dividends is a resident of Switzerland the tax so charged shall not exceed:

(a) 5 per cent of the gross amount of the dividends if the beneficial owner is a company which controls directly or indirectly at least 25 per cent of the voting power in the company paying the dividends;
(b) 15 per cent of the gross amount of the dividends in all other cases.Article 10(3) was substituted by SI82/714 as below;

(3) However, as long as an individual resident in the United Kingdom is entitled to a tax credit in respect of dividends paid by a company resident in the United Kingdom, the following provisions of this paragraph shall apply instead of the provisions of paragraph 2:

(a)

(i) Dividends derived from a company which is a resident of the United Kingdom by a resident of Switzerland may be taxed in Switzerland.
(ii) Where a resident of Switzerland is entitled to a tax credit in respect of such a dividend under sub-paragraph (b) of this paragraph tax may also be charged in the United Kingdom, and according to the laws of the United Kingdom, on the aggregate of the amount or value of that dividend and the amount of that tax credit at a rate not exceeding 15 per cent.
(iii) Where a resident of Switzerland is entitled to a tax credit in respect of such a dividend under sub-paragraph (c) of this paragraph tax may also be charged in the United Kingdom, and according to the laws of the United Kingdom, on the aggregate of the amount or value of that dividend and the amount of that tax credit at a rate not exceeding 5 per cent.
(iv) Except as provided in sub-paragraphs (a) (ii) and (a) (iii) of this paragraph, dividends derived from a company which is a resident of the United Kingdom by a resident of Switzerland who is the beneficial owner of those dividends shall be exempt from any tax which is chargeable in the United Kingdom on dividends.

(b) A resident of Switzerland who receives a dividend from a company which is a resident of the United Kingdom shall, subject to the provisions of sub-paragraphs (c) and (d) of this paragraph and provided he is the beneficial owner of the dividend, be entitled to the tax credit in respect thereof to which an individual resident in the United Kingdom would have been entitled had he received that dividend, and to the payment of any excess of that tax credit over his liability to United Kingdom tax.
(c) The provisions of sub-paragraph (b) of this paragraph shall not apply where the beneficial owner of the dividend is a company which either alone or together with one or more associated companies controls directly or indirectly at least 10 per cent of the voting power in the company paying the dividend. In these circumstances a company which is a resident of Switzerland and receives a dividend from a company which is a resident of the United Kingdom shall, provided it is the beneficial owner of the dividend and subject to the provisions of sub-paragraph (d) of this paragraph, be entitled to a tax credit equal to one half of the tax credit to which an individual resident in the United Kingdom would have been entitled had he received that dividend, and to the payment of any excess of that tax credit over its liability to United Kingdom tax. For the purpose of this sub-paragraph two companies shall be deemed to be associated if one is controlled directly or indirectly by the other, or both are controlled directly or indirectly by a third company, and a company shall be deemed to be controlled by another company if the latter controls more than 50 per cent of the voting power in the firstmentioned company.
(d)

(i) The provisions of neither sub-paragraph (b) nor sub-paragraph (c) of this paragraph shall apply unless the recipient of a dividend shows (if required to do so by the competent authority of the United Kingdom on receipt of a claim by the recipient to have the tax credit set against United Kingdom income tax chargeable on him or to have the excess of the credit over that income tax paid to him) that the shareholding in respect of which the dividend was paid was acquired by the recipient for bona fide commercial reasons or in the ordinary course of making or managing investments and it was not the main object nor one of the main objects of that acquisition to obtain entitlement to the tax credit referred to in sub-paragraph (b) or sub-paragraph (c), as the case may be.
(ii) Switzerland may, on or before 30 June in any calendar year, give the United Kingdom, through diplomatic channels, notice of termination of this sub- paragraph and, in such event, it shall cease to have effect in relation to dividends paid on or after 6 April in the calendar year next following that in which such notice is given.

(4) The term `dividends` as used in this Article means income from shares, jouissance shares or jouissance rights, founders' shares or other rights, not being debt-claims, participating in profits, as well as income from other corporate rights assimilated to income from shares by the taxation laws of the State of which the company making the distribution is a resident and, in the case of the United Kingdom, includes any item which under the laws of the United Kingdom is treated as a distribution of a company.

(5) The provisions of paragraphs (1), (2) and (3) shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In that case the provisions of Article 7 or Article 14, as the case may be, shall apply.

(6) Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company's undistributed profits to a tax on the company's undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.

Just to make my point as you can see it talks about credit. In other words you've read the general rule on "credit" but it doesn't apply in that other paragraph.

[BlasterBates]

Wikepedia

International Double Taxation Agreements


It is not unusual for a business or individual who is resident in one country to make a taxable gain (earnings, profits) in another. This person may find that he is obliged by domestic laws to pay tax on that gain locally and pay again in the country in which the gain was made. Since this is inequitable, many nations make bilateral Double taxation agreements with each other. In some cases, this requires that tax be paid in the country of residence and be exempt in the country in which it arises. In the remaining cases, the country where the gain arises deducts taxation at source ("withholding tax") and the taxpayer receives a compensating foreign tax credit in the country of residence to reflect the fact that tax has already been paid. To do this, the taxpayer must declare himself (in the foreign country) to be non-resident there. So the second aspect of the agreement is that the two taxation authorities exchange information about such declarations, and so may investigate any anomalies that might indicate tax evasion.[citation needed]

the latter red part says you either pay tax in the country you are resident in ALONE and are exempt where it arises ie PAY UK, Exempt Switzerland, or both and get a CREDIT in the first.

Which is exactly what the first part of your article says...


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


Just hope the HMRC beleive your ignorance if it is ever queried or fines and interest fun!

The credIt applies to investment income like dividends, and if you were to read the thing through you would find each type income of is dealt with individually. So if "credit" applied why didn't it say that in the paragraph. I suggest you read other paragraphs where credit does apply. Income that is not classified specifically such as dividends, remuneration etc. is dealt with like that. That is true. But the employment contracts are as outlined in the paragraph you continue to misinterpret.

[YHB]

This is not true and would in be direct violation of the EU directive on cross border working.

Yup, its not like the newly joined EU countries are limited to types of permits and can only do manual work, or rest of europe not allowing in Poland like we did.

Europe is a general framework, when it suits countries they withdraw and thats accepted.

Call the HMRC helpline if you're 100% convinced, may not be a good idea...

[YHB]

Wikepedia

International Double Taxation Agreements


It is not unusual for a business or individual who is resident in one country to make a taxable gain (earnings, profits) in another. This person may find that he is obliged by domestic laws to pay tax on that gain locally and pay again in the country in which the gain was made. Since this is inequitable, many nations make bilateral Double taxation agreements with each other. In some cases, this requires that tax be paid in the country of residence and be exempt in the country in which it arises. In the remaining cases, the country where the gain arises deducts taxation at source ("withholding tax") and the taxpayer receives a compensating foreign tax credit in the country of residence to reflect the fact that tax has already been paid. To do this, the taxpayer must declare himself (in the foreign country) to be non-resident there. So the second aspect of the agreement is that the two taxation authorities exchange information about such declarations, and so may investigate any anomalies that might indicate tax evasion.[citation needed]

the latter red part says you either pay tax in the country you are resident in ALONE and are exempt where it arises ie PAY UK, Exempt Switzerland, or both and get a CREDIT in the first.

Which is exactly what the first part of your article says...


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


Just hope the HMRC beleive your ignorance if it is ever queried or fines and interest fun!

[BlasterBates]

This is not true and would in be direct violation of the EU directive on cross border working.

Anyway believe what you like, I have been cross border working between Luxembourg and Germany, Germany and the UK, the UK and Luxembourg and Switzerland and Germany.

I declare all my income in all countries and my income attributable to emplyoment remuneration is taxed only once ie "taxable only in that State". This rule is common throught the EU and EEC states.

Have you not thought about a German employee working over the border in Denmark, Frenchman working in Luxembourg. That's why this EU rule was brought in.

As I say you can believe what you like but you're the one who's decided to forgo an excellent opportunity through incorrect advice.

[YHB]

in that case you have not paid the tax you should have paid and owe the UK government money...

The links you are looking at are part of a whole agreement broken into bits, the part you are looking at is exactly as I have covered, If you read the whole document one by one you would come across this one (which also part of Article 18) covering "credits" ie deductions for amounts already paid and which are eligible. http://www.hmrc.gov.uk/manuals/dtmanual/DT18102.htm "Admissible for credit under the agreement " should be self explanatory.

Why would this document about credits covering income tax exist and mention "Federal and cantonal taxes on income " and "Direct federal tax " if no tax was applicable??

The UK would not go and just 'give up' its tax for the fun of it, more UK people probably contract in the UK than the other way around and the amount in questions is hundreds of thousands if not millions.

Think about it, the UK charges MORE than switzerland so has more to lose and little to gain. Its called "double tax RELIEF" manual for a reason as opposed to exemption.

[BrilloPad]

I think I've made a new friend.

You dont have much luck with the trolls do you!

Maybe you should tell him how big your balance sheet is

[BlasterBates]

Please unrest your case http://www.hmrc.gov.uk/manuals/dtmanual/dt18164.htm

[This is saying you pay only in one state unless you are working in two where by the other party can also tax the part of the income made there- no mention of ONLY one country .

No what this means is if some of the work/employment is attributable to the other state then this is apportioned accordingly.

i.e. if your work is only in Switzerland you only pay in Switzerland.

I was subject to this very agreement (the exact same wording is used between all EU states), I worked in Luxembourg and the UK at the same time. Part of my income was in the UK, this was taxed at UK rates. The other part of my income (work) was in Luxembourg, taxed at Luxembourg rates. I did not pay any additional tax either in Luxembourg or in the UK on the income that I received in the "contracting state". But as I've explained it was apportioned as stated in the paragraph that you are interpreting incorrectly.

My employment relationship was in Luxembourg and the UK with a single employer but two different locations.