I'm self-employed in the UK currently in the 40% income tax bracket. What would you do?

[Martin Everson]

Thanks for that link! The exit tax you are mentioning is for companies according to your link:
'Exit taxation: to prevent companies from avoiding tax when re-locating assets.'

OP says he is self employed so he is free of this burden, isn't he ?

He needs to check how the UK will implement it but I think as a non-entity he is fine. However Poland has implemented it already in their own way and it does not look good . Get out of EU while you can AFFORD to .

 

[gonharpia22]

So to sum it up: OP seems set on Portugal NHR programme. Since that is stricter than most non dom programs he needs to be the non-managing member in an Irish LLP. He needs to do this this year anyway since the NHR is getting cancelled. This time limit AND being a sole proprietor currently saves him from the future exit tax above. This setup doesn't concern UK HMRC as it is Irish. Correct?

 

[jackfrost]

I might have mixed things up here who is trying to do what but if he is going to be (tax) resident in Portugal all the UK law is kind of a second class citizen with Portugals strict laws as in what constitutes foreign sourced income, a foreign company etc.

I had two consultations in Portugal a year ago about moving to PT under non-dom EU NHR with doing IT consulting work while on PT soil for non EU clients. Self employed = absolutely 100% forget it, as a company approx 25-3x% total, foreign company / foreign sourced income structure: no chance (legally).

That was without new ATAD....

 

[gonharpia22]

Self employed = absolutely 100% forget it

I agree, I would try Malta if going self employed.

foreign company / foreign sourced income structure: no chance (legally).

Could you be more specific? 'Foreign' meaning from a Portugal perspective? You're saying company. Companies are subject to the corporate tax rate and then paying dividends (which is subject to witholding tax) to the NHR. The proposed solution is an Irish LLP which is a passthrough taxation entity from an irish perspective so no tax there.

 

[jackfrost]

I agree, I would try Malta if going self employed.



Could you be more specific? 'Foreign' meaning from a Portugal perspective? You're saying company. Companies are subject to the corporate tax rate and then paying dividends (which is subject to witholding tax) to the NHR. The proposed solution is an Irish LLP which is a passthrough taxation entity from an irish perspective so no tax there.

Meaning Portugal will not accept the Irish or UK or whatever company as truly foreign, non-active managed company and its dividends to the PT NHR as passive foreign income which would be tax free in PT for the NHR resident.


Basing this on legally without loosing sleep holding the final money officially in your hands in your name as a PT NHR.

 

[gonharpia22]

Meaning Portugal will not accept the Irish or UK or whatever company as truly foreign, non-active managed company and its dividends to the PT NHR as passive foreign income which would be tax free in PT for the NHR resident.


Basing this on legally without loosing sleep holding the final money officially in your hands in your name as a PT NHR.

Thanks for further explaining what you have stated!

I am going to assume that by the company as - 'truly foreign, non-active managed' you mean 'truly foreign, not actively managed by the NHR resident himself'.

However notice that what this is, is the danger of Portugal deeming the foreign company a local tax resident based on the 'place of effective management and control', and this is not specific to Portugal or NHR one bit. All OECD countries do that if they think you manage a foreign company while you are a local resident.

Also notice that you are still discussing companies and dividends. While the proposed solution is an Irish LLP that is a partnership and not subject to corporate tax and dividend withholding tax.

I will also state that it is possible and within the rights of the Portugal (or any other country that you are a resident of) tax authority to challenge the tax residence of any foreign entity (incorporated or not), and try to deem it local based on the place of effective 'management and control'. This can happen to basically anyone who has income from a foreign entity.

Whoever in the case of the proposed solution:
- The Irish LLP having a local Irish managing member, the company having no Portuguese bank account, or Portuguese sales, or documented day-to-day managing instructions coming from Portugal.
I don't see how such a challenge from the authority (if it even happens), can stand its ground. We are also talking about the income of a one man show here, not multi-millions.

I might be mistaken though. However this still can happen in any other country (doesn't matter if it is a non-dom country or not), doesn't matter where you move to.

 

[jackfrost]

Exactly and these "foreign managed" checks are a lot different in how they are done from country to country e.g. try that from Germany... the tax inspector will have a field day with you, same goes for Portugal. It is not just about having a director etc. You are receiving those dividends, you are the UBO and declaring them (we are talking about fully legal here i suppose) triggers the pandoras box at some point. Will it sail for some time if little? Sure just like fake invoices would. Is that a legal and sound setup? No that would be Cyprus or Malta.

If you are doing IT consulting as one of the OPs stated, you not your fake director will be in contact with clients. It is so easy to take this apart and grill you.

And remember once they dispute your tax filing / setup you have to proof its valid not them.

 

[volcanotnt]

Hey,

I'm a freelancer.
I will try on short write what I know.

I have Scotland LP (2 years), I'm happy to work with that's structure. Maybe I do not know all underwater stones, but what I know, I think this structure very fine work to freelancers.


I recommend to you look to (Scotland (UK) – Limited Partnership).
If you don't receive payment inside on UK, you pay total 0% tax.
Only pay if you transfer money from company to your personal acc (and pay tax on your country, where you resident).

More you can read about that on google.

 

[blackeyes]

OP here. Thank you all for so much useful information. About the two tax consulting companies I contacted:

• Sable International requested a 1500 € upfront payment just for an initial assessment for NHR eligibility, even if the result is negative. The total cost being around 2000€.
• UWU Solutions on the other side offered a quote of 300€ to answer to my questions about the NHR, the total cost for the NHR program being about 2000€ as well.

However I decided to not go ahead with any of them. Based on all the feedback from here I'm mostly convinced that it's better for me to not complicate my life with all this stuff and just focus on generating more income, while paying my taxes as self-employed in whatever country I live.

However there are some points that I still would like clarification on, just for educational purposes:

- At some point in the conversation someone switched the original UK LLP idea from @totlori9 to an Irish LLP. Why was that? Is there any reason why Ireland is a better idea regarding the risk of being questioned by the tax authorities?

- Speaking of which, why was @totlori9 banned? Could an admin comment please? He seemed to provide useful information and proposed interesting ideas, so I would like to know if he had any personal interest on this or what happened...

Thanks!

 

[Jav]

Just because it works for you then it makes no sense to post here without an explanation why it should be better compared to Malta and Cyprus?

Its 10% flat tax. Office is cheap, you can hire an assistant administrator for 500EUR. Accounting is in the limit of 200EUR a month( depends) A good apartment in the capital is 350EUR a month. A pint in a nice bar is 2 EUR. A full lunch is 4EUR. One of the best Greek beaches are 4 hours driving Great and cheap skiing is 2 hours driving so what's not to like in order to spend 190 days.

 

[jackfrost]

Thats 5% more for living somewhere that is not even remotely comparable to Cyprus or Malta (2.5% less though in case of Cyprus).

For low profits that will level out or be cheaper but everything else? Not to say it doesnt have a few nice spots but still... you cannot compare at all.

Also question if you need a corporate structure (corp tax), mandatory social security taxes etc pp.

 

[Jav]

Thats 5% more for living somewhere that is not even remotely comparable to Cyprus or Malta
In what sense?
That is why it's nice we have different options. I can't stand temperatures above 30C and I need to see green fields and/or mountains and snow so for me both are not options in addition to the significant higher cost of living. At the same time british expats are far more in Cyprus and Malta than in Bulgaria so it is matter of preferences. I have mine and recommend the place to other people. Don't forget Bulgaria has been one of the top outsource destinations for the past few years and it is 2 hours flight form most of EU. IT sector is booming as well so a lot of opportunities if you can leave your prejudice at home.

 

[jackfrost]

No prejudice, as an eastern German i have been to Bulgaria more times than i would like to admit.

But yes as said it does have its nice places (wonderful actually!) and of course like you said, the island life might not be for all. It still is the "eastern block" no matter how you want to spin it though and you see and feel that everywhere. Takes a special kind of person (which can be just awesome as well). Lots of people happy in rain soaked Ireland too. It is subjective at the end.

The thing rather is it is not as cheap as people think it is. If you make enough money to really consider moving your life for "financial" reasons it is more expensive than e.g. Malta. I am not up to date with the latest income tax / social security / dividend taxes if you need a corporate structure for VAT etc but in that case Cyprus might also be cheaper and Malta by a long shot. Cyprus got snow and skiing too btw

 

[gonharpia22]

- At some point in the conversation someone switched the original UK LLP idea from @totlori9 to an Irish LLP. Why was that? Is there any reason why Ireland is a better idea regarding the risk of being questioned by the tax authorities?

Hi,

The Irish and the UK LLP are basically interchangeable regarding their tax pass through nature for the mentioned purpose, I think.