My client is a private English company whose only shareholder is a German National. The company has made substantial profit. The share holder now wishes to extract the profit by way of dividend.
Can this be done without any tax implication.
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Where is the German citizen resident for tax purposes? UK, Germany, both (i.e. dual) or somewhere else entirely?
If you are asking about the tax implications for the UK company paying the dividend, there aren't any.
If you are asking about the tax implications for the German recipient of the dividend the further information requested by @frustratedwithhmrc will be required.
Thank. And whose tax
Thank you. And whose tax implications are you asking about? The UK company? The German shareholder? Both?
More complicated
Presuming that the only shareholder is also the only director, it would appear that effective control of the company is in Germany... which would likely have German corporation tax implications.
Good point
Presuming that the only shareholder is also the only director, it would appear that effective control of the company is in Germany... which would likely have German corporation tax implications.
But wouldn't the identity of the directors, and the location where they exercise their functions, not trump the residence of the 100% shareholder, if different?
Yes, have to agree here
Presuming that the only shareholder is also the only director, it would appear that effective control of the company is in Germany... which would likely have German corporation tax implications.
Relevant sections are 7-14 AStG, Foreign Tax Act shown below (in German)
http://www.gesetze-im-internet.de/bundesrecht/astg/gesamt.pdf
Basically, a UK company in the control of a German resident would be deemed resident in Germany and therefore subject to German corporate and social taxes.
English praece here:
http://en.wikipedia.org/wiki/Controlled_foreign_corporation#German_rules
Doesn't really help much...
I suspect the German taxman would argue that the father is still controlling the company from Germany and that the son is just a proxy. It would be up to the father & son to prove they weren't and as we know it is hard to prove a negative.
The difficulty with all of this is the risk involved, you might run through the entire life of the contract without any problems and then 3 or 4 years down the line the German taxman comes knocking...