Reading this Today at 02:42 Add bookmark #1 I don't get it. Are the UK tax authorities this friendly? From what I've read, if it were the US or
Spain, wouldn't he be looking at a severe jail sentence? From this article, it appears that he didn't have a business entity but just channeled money from one privately owned
bank account to another without even reporting it. Also, why isn't Romania claiming that he's a tax resident there as well?
https://www.bbc.com/news/articles/cm2v1rnvrv0o Devon and Cornwall Police's lawyers told the court that Andrew Tate had publicly declared he had not paid tax in the UK, and that his approach had been to "ignore, ignore, ignore because in the end they go away". The force had argued that the brothers' traceable earnings of £21m between 2014 and 2022 seemingly came about despite the men having "no significant qualifications, business experience, established companies, shares, intellectual property or similar assets". Question - If a UK Citizen resides in a different country, surely just using their personal account in the UK for security, isn't doing business in the UK, if their company is in romania.
The situation described touches on several aspects of tax law and residency rules, which can vary significantly between countries. Here’s a breakdown of the issues at play:
1.
- In the UK, tax residency is determined by the Statutory Residence Test (SRT), which considers:
- The number of days an individual spends in the UK during a tax year.
- Ties to the UK, such as having a home, close family, or significant economic activity.
- If a UK citizen is not a UK tax resident, they generally wouldn’t be liable for UK tax on foreign income unless it is remitted to the UK.
2.
- Simply having or using a UK bank account doesn’t necessarily make someone liable for UK tax. However, if money flows through the account that represents income generated in the UK (e.g., payments for services performed in the UK), it might attract UK tax obligations.
- The key distinction lies in the source of the income and where the business activity generating that income occurs.
3.
- If the person is operating a business or earning income in the UK—such as consulting, property rentals, or selling goods/services—they may have UK tax obligations, regardless of where the business is registered.
- Conversely, income solely generated abroad (e.g., in Romania) and not linked to the UK would typically fall outside the scope of UK taxation if the person is not a UK tax resident.
4.
- If the company is registered in Romania, and all business activities occur there, the company’s income should generally be taxed in Romania.
- The issue may arise if:
- The individual channels personal income from business activity through UK accounts without reporting it.
- The individual claims tax residency in Romania but fails to meet Romanian tax filing obligations.
5.
- If someone lives and works predominantly in Romania, they would likely qualify as a tax resident of Romania under Romanian tax law.
- Romania could assert a claim to tax residency if the person is spending significant time there, has a primary home there, or conducts business primarily there.
- Dual residency issues (e.g., between the UK and Romania) are usually resolved under the double taxation agreement (DTA) between the two countries, if one exists.
6.
- Failure to Report: The issue highlighted in the article appears to involve an alleged failure to report income in the UK, potentially violating UK tax laws.
- Intentional Evasion: If the individual deliberately avoided declaring income, this could constitute tax evasion—a serious offense in most jurisdictions, including the UK.
- The absence of proper business structures or legitimate financial documentation could make the case more suspicious to authorities.
Conclusion:
Using a personal UK bank account for income alone doesn’t constitute doing business in the UK. However, if there’s a pattern of
unreported income, authorities may investigate for potential tax evasion. Residency claims in Romania would depend on the individual's ties to Romania and compliance with Romanian tax laws. For individuals in complex cross-border situations, legal and financial advice tailored to their specific circumstances is essential.
4o
You said:
So if a person lives in a territorial tax nation (say
Thailand) owns a say a
offshore company in
Seychelles, and all operations are overseas outside of the UK and they save the funds in the UK for security, then its outside of the UK and outside of say Thailand (Territorial) and then based on that Seychelles (pre-2019 tax rules).Therefore his failure was living in ROmania
ChatGPT said:
You've outlined a plausible scenario where an individual could minimize tax obligations legally by leveraging residency and territorial tax rules. Here's a breakdown of how such arrangements typically work and where Andrew Tate's case might have diverged:
1. Territorial Tax Systems (e.g., Thailand)
- In territorial tax nations like Thailand, only income sourced locally (or brought into the country in certain cases) is subject to taxation.
- If the individual's offshore company in Seychelles operates entirely outside Thailand, and income is not remitted into Thailand, it would generally fall outside Thai tax jurisdiction.
2. Offshore Companies in Seychelles
- Seychelles, before 2019, offered tax benefits to International Business Companies (IBCs):
- Income earned outside Seychelles was not taxable locally.
- The company could hold funds offshore and conduct international business without triggering Seychelles tax obligations.
- The individual’s personal tax liability would still depend on their country of residence, not the location of the company.
3. Saving Funds in the UK
- Merely saving funds in the UK for security doesn’t necessarily trigger UK tax liability, provided:
- The funds originate from activities conducted outside the UK.
- The individual is not a UK tax resident.
- The UK’s role here would be as a custodian of funds, not as a jurisdiction of taxation, assuming no business activities or income generation occur in the UK.
4. Romania’s Role in Tate's Case
- The critical issue seems to stem from his residencyin Romania:
- Romania has a worldwide taxation system for residents. If an individual is deemed a Romanian tax resident, all global income is subject to Romanian taxation.
- If Tate spent significant time in Romania or declared residency there, Romanian tax authorities could claim he was evading taxes by not reporting global income.
- Unlike Thailand’s territorial system, Romania’s worldwide taxation system creates a significant compliance burden for residents.
5. Failure to Structure Properly
- Tate’s alleged issues likely arise from not aligning his residency and business operations:
- By living in Romania and maintaining personal bank accounts in the UK, he may have created a taxable presence in both jurisdictions.
- Without clear legal separation between personal and business finances, authorities could argue that his operations lacked transparency, making it easier to allege tax evasion.
- A more tax-efficient approach might have involved:
- Avoiding residency in a worldwide tax jurisdiction like Romania.
- Establishing residency in a territorial tax country with no remittance rules (e.g., Thailand, UAE).
- Ensuring the offshore company had no UK links or operations.
6. Lessons from This Case
- Residency is Key: Living in a country with worldwide taxation rules (like Romania) requires reporting global income, even if it’s earned offshore.
- Corporate Structures Matter: Using offshore companies in low-tax jurisdictions like Seychelles can be effective, but they must be properly administered without links to high-tax jurisdictions.
- Banking Isn’t the Issue: Storing funds in the UK isn’t inherently problematic, provided there is a clear audit trail showing the income’s foreign source and tax compliance.
- Documentation is Crucial: A lack of formal qualifications, business structures, or intellectual property could raise red flags for tax authorities.
Conclusion
Yes, the primary failure was
living in Romania, a country with a worldwide tax system, while allegedly not declaring global income. If he had structured his residency in a territorial tax nation (e.g., Thailand) and maintained proper separation between his offshore company and personal finances, his situation might have been entirely different. This case highlights the importance of aligning residency, business operations, and banking practices in a compliant and coherent manner.
