HK company, living in Asia... taxes

[michalowskiego]

Im Polish, living in Asia (past 5 years Vietnam), working as freelancer for UK based companies (past 3 years ongoing work for 1 client only). Im getting paid once a month (anything between 3K-6K gbp) to my private bank account in uk (hsbc), registered to my parents address in Poland.

If I understand tax residency correctly I should be paying income tax in Vietnam, is that correct?

To straighten things up, I've setup limited company in Hong Kong and Im looking to open business account with leupay. Then I'm thinking to pay myself dividends to my private bank account in Vietnam - which are taxed 5% from what I gathered.

Does it make sense or could I run into some trouble this way?

Alternatively I could keep my uk hsbc account balance to minimum (get money out the moment Im getting paid) and hope that no one ever notice... but what would happen if they do?

 

[JohnLocke]

You will need to check what the tax regulations & rules in your country of citizens are! Each country has different rules.

 

[michalowskiego]

When you are writing my country you mean Poland, even if I didnt live there since 2005?

 

[michalowskiego]

Any thoughts on my second question?

Theoretically - I keep getting paid to my personal uk account (the one with my parents address in Poland) without paying any tax. UK inland revenue discovers it and... then what?

Would they send question to Polish tax office?

I know its speculating, I just want to know your opinions.

 

[Rafal]

Poland doesn't care about you as long as you don't spend 183 days here, have a "center of vital interests" there or you buy a property.
HMRC may ask polish tax office but I don't think they'll.
Remember, if one day you move back to Poland and you'll buy any property in Poland, tax office may ask you to provide documents about where did your money come from. If you won't provide it, they may impose a 75% tax on it. (Tax on undisclosed revenue sources - in Polish "Podatek od nieujawnionych źródeł przychodów").

You may contact your bank to change your tax residency in their systems. Or open another bank account ex. in Singapore.

 

[mnschwarz]

As stated, each country has their own tax laws. In general though, you won't have to worry about Poland if you're a non-resident. Currently you should be paying tax in both UK and Vietnam. UK because your income is sourced there. Vietnam because you're a resident and they tax on worldwide income. You would have to check if there is a dual taxation agreement between UK & Vietnam (I think there is) to see if you can claim a credit for the previously paid tax & avoid paying twice. That being said, Vietnam isn't going to & doesn't have the means to track you down if you don't come forward for overseas income anyway.

Using your HK company could actually make you worse off. The company should still pay tax in UK based on the source of your income. You would then also have to pay tax on the dividends you paid yourself in Vietnam. The difference being you cant claim the tax credit for previously paid tax as you and the company are different entities.

Always get specialised advice but my thoughts would be to establish a UK company for your UK income. You could then shift profits to HK by charging the UK company and thus lowering your tax bill in UK. Things like management agreements, loans, patents or trademarks etc might be possible. Basically run as many expenses as possible through the UK company to lower the tax bill. You'll need to ensure any related party arrangements are documented correctly and at arms length.

 

[mnschwarz]

Oh and in regards to what would happen if UK discovered you're not paying tax you owed.... you'll most likely have to endure an audit process after which they'll sting you with what they calculate you should have paid, plus fines, plus interest.

 

[michalowskiego]

Currently you should be paying tax in both UK and Vietnam. UK because your income is sourced there. Vietnam because you're a resident and they tax on worldwide income.

I understand Vietnam, but UK?

I'm not British, don't have any properties in UK, I've spend there total of 6 days over last 6 years and my UK bank account has Poland as my address.
Does it mean that if I get a contract from a client based in New Zealand I should pay taxes there?

 

[mnschwarz]

You should consult with a UK tax specialist. Each country is different and I haven't dealt with UK specifically but in general, most countries will tax you at source. For example, I file an Australian tax return for income I source there even though I am a non resident and don't set foot in the country. I should file in Colombia for the same reason though they first deduct withholding tax on payments which reduces my need to do so. I file in Thailand as I source (and remit) income here also.

 

[mnschwarz]

I guess it may actually come back to what kind of freelance work you're doing. The type of income can make a difference. If it's all online and theres no connection to UK other than the company that pays, it may not be deemed to be sourced (or derived from is probably a better definition) there. Also, as in my Thailand case above, remitting funds to that country as you're currently doing might also create that connection. In my experience though, that remittance rule is more for asian countries.

 

[michalowskiego]

Thanks for help and you are right I'll look for a tax specialist both in UK and Poland and post here what the answer was.