Tax While Working Abroad

Tax While Working Abroad

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Please can someone give me some guidance on the following scenario.

I work as a freelancer, employed by my wife's limited company.

I am not a shareholder and take a salary of £25K.

My client is requesting that I go abroad for upto 3 years and work abroad (in China). I would be back in the UK for approximately 30 days a year. This would be on holiday and I would not be working during this time in the UK.

Question 1: Am I right in thinking that I will not have to pay any UK Income tax on my salary as I would be working full time abroad for 48 / 49 weeks of the year?

My Limited Company will be charging me out at nearly triple the rate that it does in the UK. I expect to be rewarded for this and will expect a doubling - at least - of my salary while I am working abroad.

Question 2: If I don't have to pay any tax (as detailed above) and I increase my salary, could the Inland revenue see this as some form of tax evasion?

Any advice would be much appreciated.

 

Replies (16)

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By Tim Vane
22nd Sep 2015 23:37

How would you be evading tax exactly? Your income would not be taxable in the UK but it will be taxable in China. I understand that employees pay a higher rate of tax in China than freelancers, so you would probably be advised to seek expert advice on how to structure your tax affairs while over there.

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By JCresswellTax
23rd Sep 2015 09:59

Maybe

This is one of the ones John S was speaking about.

Hi soletic, are you just looking to get some free advice on a forum or do you fancy appointing a specialist tax advisor and paying for good advice?

Regards,

Joan.

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By BroadheadAccountants
23rd Sep 2015 11:41

Chinese advice?

Hi Soletic

 

It may be an idea to seek specialist advice regarding the Chinese side.  The ideal advisor would also know generally about UK expats and the trading form of choice.  I wonder if some of your future colleagues in China have an advisor or if your client knows of one?

 

Good luck with the posting!

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Caroline
By accountantccole
23rd Sep 2015 13:11

Take specialist advice

You've got a minefield of issues here.

- the timing of your departure and whether you will have severed enough ties with the UK to be non resident

- if you are employed abroad you may have to consider local employment legislation and be paid via a payroll in China (or is the employment element only for your wife's business?  What are you doing and where would these duties be performed in the future?)

- would your working in China constitute a Chinese branch of your own business or your wife's?

You need to talk to someone who understands tax in China and in the UK.  That is very specialist knowledge, so it won't be cheap, but getting it wrong could cost you a lot.

 

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Replying to zebaa:
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By soletic
24th Sep 2015 20:56

Hi,

I will still be employed by my wife's limited company and I will get my salary in the UK. So it will be no different to what I am doing now but I will be doing it in China. 

I will be Project Managing Chinese Engineers on behalf of a large British firm which has offices in China. This British firm has a contract with my wife's limited company for my services. 

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By Bungo
23rd Sep 2015 15:53

Oh dear

 I have worked overseas for seven of last ten years. No HMRC do no see it as tax evasion if you don't pay UK tax on employment income whilst you are resident and employed for extended periods overseas.

But it doesn't mean you don't pay any tax! The overseas governments have generally taxed me (one didn't, Bermuda).

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By Tim Vane
24th Sep 2015 22:53

Do you somehow believe that the Chinese tax authorities will not want you to pay tax on your UK employment income because it is paid from a UK company? It would be advisable to assume that they will be very interested.

Also, the fact that you are working full-time in China may well mean that your wife's company will be treated as having a permanent establishment in that country. That could have all sorts of implications for her company which may then need to itself become registered in China, with all the relevant accounting and tax requirements.

I am sure your wife will be taking expert advice on the ramifications for her company, and I would advise you do the same from a personal tax perspective. As already alluded to, doing anything without consulting an expert can only end badly.

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By BroadheadAccountants
25th Sep 2015 10:12

Open minded

If me I would be looking to all solutions and possibly avoid using the UK Limited company.

 

(I agree with Tim Vine; expecting Chinese tax to be payable).

 

Rob Auton - "I heard a rumour that Cadbury is bringing out an oriental chocolate bar. Could be a Chinese Wispa."

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By KateR
28th Sep 2015 11:54

Working in China

I have a client with own limited company who went to work in China last year on a short term contract.The hiring company (Chinese) insisted on the contract being with him personally and described him as the 'employee', he was then subjected to Chinese tax on these earnings. We are still trying to get the appropriate paperwork certifying tax deducted. I was only told about the contract after it had been signed. So I would agree with previous posts get specialist advice.

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By peterlashmar
28th Sep 2015 13:09

China

Sounds like a lucrative contract. Do not let it become a tax nightmare.

There are a number of issues that you need to deal with which have been referred to already.

1- who is contract? We have some clients who have similarly had consultancy type positions in China and the Chinese insist of those being personal and are taxed in China. I do not see how the Chinese authorities would allow you to be in China for 44 weeks a year for the next 3 years without requiring very complicated Visas and collecting tax from you. 

2- the position which you advise for your wife's company sounds very complicated indeed. Germany has a much higher consultancy supply in to China than UK and it may be better to obtain advice in Germany.

The obvious question is - what has she done before when supplying workers overseas?

3-  If you want to do this yourself then ask the Chinese embassy in London what their position is. 

4- Lastly, you do not need to worry about the Inland Revenue. That was disbanded on 18 April 2005! The current UK tax authority is HMRC.

 

In whatever way you and your wife's company very definitely need expert advice from all perspectives.

 

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By itp3asso
28th Sep 2015 13:36

SOLETIC Nice monicker . Shsme about the detivation.
Soletic is a Latin derivation for the english verb to tickle.
Is this boy ' avin' a larff?

Get yourself Accounted up preferably via a Chinese accountancy practice with a UK branch !

BTW " My client { the wife} is requesting I go abriad for ....three years"

Tru love never runs smooth .............

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Morph
By kevinringer
28th Sep 2015 13:40

Please clarify

OP says he works for his wife's company of which he is not a shareholder but later talks about "my client" and "my company". Please clarify. Also, is the OP's/OP's wife's company UK based?

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By peterlashmar
28th Sep 2015 15:29

China tax

Confucious say     "free advice is worth the price you pay".

 

Confucious also say "what is my wife's is hers and what is mine is my wife's"

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By paddy55
29th Sep 2015 00:07

UK/China tax

Hi Soletic,

A good starting point would be to study the UK/China double taxation treaty.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/fil...

 

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By peterlashmar
29th Sep 2015 15:03

UK and China tax

As soletic is not sure who he is working for or who owns the agency company that he may work for I feel that the full text of the UK and China double tax treaty would be as much use to him as a chocolate teapot.

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By paddy55
29th Sep 2015 23:35

UK/China tax

May I also suggest to Soletic that in addition to studying the UK/China tax treaty that he also studies the following: a) who is regarded as a UK tax resident 1) under UK law and 2) under the tax treaty and b) an outline of Chinese taxation with special emphasis on taxation of employees.

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