Portuguese Resident having a UK Limited Company

Portuguese Resident having a UK Limited Company

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I have a prospective client who is only resident in Portugal but would like to open a UK limited company.

Some of his work could be in the UK (but not definite that any would) but I suspect the majority if not all will be worldwide.

I am aware that the company will pay corporation tax on the profits but would the sole director (the Portuguese resident) need to complete a self assessment on any dividends he takes or would this all be taxable in Portugal. I will be strongly suggesting that he must open a UK company bank account.

Would he need to register as an employer in the UK if this was his only income or can he just take 'dividends'?

If there is any other applicable advice for this then please feel free  :).

Replies (8)

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By Tim Vane
25th Nov 2015 15:05

Well, he will need to register as an employer if he employs anybody. Is he going to employ anybody? Is he going to have a permanent establishment in the UK? Is he going to have any UK income that would mean he would have to register for SA? Is he going to come to the UK to open a UK bank account? Is he going to appoint an expert to look after his affairs?

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Replying to jcace:
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By jaksun
25th Nov 2015 21:28

He will not be employing everyone as any work will be done by him. The only income he will have will be any money he takes from the company. I believe he will come to the UK to open the business bank account. He will be looking to have a UK accountant if he does open a UK Ltd company but I assume he will also need a Portuguese account to ensure correct tax is paid on his income according to their tax regulations. I'm just confused as to what is taxable in the UK and what is taxable in Portugal.

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By JimFerd
25th Nov 2015 15:09

He'll need to pay UK tax on any UK dividends, which will include the dividends from his UK company.

From April 2016 there are new dividend tax rates coming in, and any tax due will need to be paid via self assessment.

He'll also need to declare the UK dividends on his Portuguese tax return.

If he doesn't want to be remunerated via salary, then I'd say there's no need to set up a PAYE scheme - although I believe some people think that all trading companies need one (even if salaries aren't paid).

He'll need to speak to his Portuguese accountant to help him determining whether it's better from him to be paid in salary/dividend/capital etc.

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By Tim Vane
25th Nov 2015 15:28

How on earth can you determine that from the information given?

(EDIT - Have I misremembered the DTT?)

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By Portia Nina Levin
25th Nov 2015 15:35

There will not be any UK tax on the dividend income, unless there is other income in the UK from which he wants to use his personal allowance, because dividends are disregarded income (assuming that is not changed, which we have no reason to think it will).

Unless something is going to be done to get the effective place of management and control of the company in the UK, then what you will have is a UK incorporated, but Portuguese resident (by virtue of the tiebreaker in the treaty), company, with an adviser that is in way over their head.

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By JimFerd
25th Nov 2015 15:40

Well the only two questions he asked are:

1) Would he need to complete an SA return in respect of the UK dividends. The answer would certainly be yes - should any tax arise.

2) Would he need to register as a "UK employer". I presume by this he is referring to a PAYE scheme - To which the answer is "maybe".

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By jon_griffey
25th Nov 2015 15:40

Bank account

It is easier for a camel to go through the eye of a needle than for a non-resident to open a UK bank account.

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By Matrix
25th Nov 2015 22:01

If you are confused as to what is taxable in the UK and what is taxable in Portugal then you should decline the engagement.  The answers will depend on the facts. You need to read the replies already given and determine the motivation for opening a UK company, don't just open it up.  It may not even be UK resident as advised above.  Ignore the advice about taxing UK dividends.

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