Not offshore, but didn't know where to post. Inside EU.

[pizzi]

Hey guys, I'm pizzi.

Today, i had an insight, which led to a debate with a friend. We actually bet on this, so I hope I am right!

Imagine someone wanting to work as a freelancer/contractor. Let this person be spanish resident, opening a company in the UK and providing services (working) in Germany.
I imagine that, by the time the client would be invoiced, the freelancer(also the company director) could just give them any bank account to send the money into (i actually know people who have no problem doing this). This works because the freelancer signs as the Director of the company, and clients trust to pay the Director.
Now, instead of giving company's account (UK), the freelancer would give them a Paysera account (based in Lithuania). Since Paysera is a digital bank, and this plan involves 4 different countries, my guess is that i could successfully get the whole money without paying any taxes. This could potentially be done with Transferwise or Revolut as well. By the end of the tax year, he/she would declare 0 everywhere on tax return, saying that the company is "dormant".

To be honest, if it would be me I wouldn't follow this route. However, I argued that this can actually work, but my friend said eveything is tracked, rendering this impossible to mantain.
Does this scenario make any sense to you?

 

[John Andrews]

Let this person be spanish resident, opening a company in the UK and providing services (working) in Germany.

Spain has strict CFC rules so no, you can't simply open a UK LTD company (unless it's dormant, but ...)

In regards to receiving payment via EMI in your name, it also won't work because the tax authorities in Spain will either automatically obtain records of your account OR you will start to buy nice and expensive stuff and once you get audited you will be in deep s**t. You can avoid the former by banking in a non-CRS country but it's still VERY risky and certainly not a long-term solution.

tl;dr very bad idea, open a spanish company & optimize taxes or move out of Spain.

 

[pizzi]

Spain was an example. For sure other countries let you open a UK LTD company (I know people from all around europe who have).

will either automatically obtain records of your account

The account is in a different country, and it's a digital bank. Is it that easy to get this information?

Yeah, i guess in the end it's not a good idea anyway. Thanks for the input!

 

[Willblack]

Read up on what CRS is and you will see why this simply isn't a viable option.

With that said, nobody will even bother tracking things like this if we are talking about income bellow 50k / year, at least in my country, I wouldn't know about Spain.

 

[James Turner]

Hey guys, I'm pizzi.

Today, i had an insight, which led to a debate with a friend. We actually bet on this, so I hope I am right!

Imagine someone wanting to work as a freelancer/contractor. Let this person be spanish resident, opening a company in the UK and providing services (working) in Germany.
I imagine that, by the time the client would be invoiced, the freelancer(also the company director) could just give them any bank account to send the money into (i actually know people who have no problem doing this). This works because the freelancer signs as the Director of the company, and clients trust to pay the Director.
Now, instead of giving company's account (UK), the freelancer would give them a Paysera account (based in Lithuania). Since Paysera is a digital bank, and this plan involves 4 different countries, my guess is that i could successfully get the whole money without paying any taxes. This could potentially be done with Transferwise or Revolut as well. By the end of the tax year, he/she would declare 0 everywhere on tax return, saying that the company is "dormant".

To be honest, if it would be me I wouldn't follow this route. However, I argued that this can actually work, but my friend said eveything is tracked, rendering this impossible to mantain.
Does this scenario make any sense to you?

Pizzi, It is certainly possible for you to form a UK Company. The UK does not restrict the shareholder or director location for UK Limited Companies in any way. Notwithstanding, doing what you want to do (using Spain as an example) would be tax evasion both in the UK and Spain. UK as the company would have a corporation tax liability here and if you direct company income elsewhere you would be evading UK taxes. Also if the Directors and Shareholders were resident in Spain or any other country taxing on a worldwide income basis, you would not be declaring the income accurately. The banks/EMI's will share information under CRS and the tax authorities will know about this.

 

[jscargo]

As Alex said, I believe if your country is outside of the EU, and the rest of the set up is as you have disclosed, if you invoice below 50k per year I highly doubt anyone will care. If you are an EU resident, then, it is indeed too risky.

 

[JimBeam]

It might work... the question is for how long?
And what will happen next?