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Client moving overseas temporarily

Client is a ltd co, providing software dev services to a client based in the EU.

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Client is a ltd co, providing software dev services to a client based in the EU.  Client (director) plans to move to Germany (unrelated to the contract) for 12 months (no longer) and I am looking at the implications of this temporary stay overseas on (principally) the company.

Client suggested setting up a German company and "invoicing the contractor through this during his stay".  I can't see any logical reason for doing that personally and for just 12 months, I think this would overly complicate matters.  The way I see it, there is no reason for him not to continue working through the UK company (assuming UK tax resident status can be maintained for the company and the director - he won't be there for a full tax year). 

I am struggling with the Germany/UK DTT much more than I have with other treaties which have been much clearer.  I suspect the director will become a German tax resident aswell as remaining a UK resident, but that the DTA will prevent double taxation.  German advice is also being sought.

If this was a permanent relocation, then the company would become non-resident along with the director, but for 12 months I'm not sure.  I don't think it will, as whilst the company will be operated from Germany for 12 months, I would argue that this doesn't constitute a 'permanent establishment'.  Yes, central management and control will be carried out from Germany for 12 months but will then revert back to the UK.

It is a minefield, so any nuggets of wisdom will be gratefully received!


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By accountantccole
28th Jul 2021 12:21

We have a lot of clients that operate UK cos but deal with the French profits through a French company, so keeping the UK entity ticking over and having a cross charge for this period seems sensible.
I assume the client has a right to work in Germany/no visa issues?

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Replying to accountantccole:
By Manchester_man
03rd Aug 2021 13:20

Thanks for the response. I'm not even sure client has got as far as getting permission to work in Germany yet; I understand he is looking into this.

It is looking like a permanent establishment will be created by virtue of the company being operated overseas for more than 6 months, so I presume the French company idea is to avoid having to apportion profits between the UK and France? I.e. simply create a French company and the UK company invoices the contractor and then a cross charge is made by the French company?

Apologies if I've misunderstood.

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