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Uk ltd 99% of trade is in Germany

Reporting / tax requirements?

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I am speaking to a potential client. Uk limited co with a German director and shareholder, who lives & works in Germany. 99% if their (retail) trade is in Germany, the remainder is importing to UK/Rest of Europe. 

Should they be reporting to the German tax authorities? Anyone any advice/experience with doing so?

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By Matrix
20th Sep 2019 20:08

Based on those facts, you would expect the company to pay tax on its profits in Germany and not the UK. There wouldn’t be much for you to do apart from initial call to HMRC, although I suppose they would need accounts. I probably wouldn’t pursue it, especially if the client doesn’t know if they have to pay tax in Germany or not.

Maybe see if they are on top of the VAT and that will help you decide.

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Replying to Matrix:
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By atleastisoundknowledgable...
23rd Sep 2019 20:21

Matrix wrote:

Based on those facts, you would expect the company to pay tax on its profits in Germany and not the UK. There wouldn’t be much for you to do apart from initial call to HMRC, although I suppose they would need accounts. I probably wouldn’t pursue it, especially if the client doesn’t know if they have to pay tax in Germany or not.

Maybe see if they are on top of the VAT and that will help you decide.

They are registered for VAT in germany and have said they’ll want me to in the uk. I don’t know whether they’ll ask me to do their German vat returns or not. I’ll probably point them towards Avalara

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Psycho
By Wilson Philips
20th Sep 2019 21:20

There’s not really enough to go on but my starting point would be the Double Tax Treaty (after establishing all the facts).

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Replying to Wilson Philips:
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By Tax Dragon
24th Sep 2019 17:27

And, whereas I struggled with s6 of TIOPA in another thread, s18 CTA 2009 is clear even to me.

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By A Mallion
23rd Sep 2019 09:41

They will need to be registered for VAT in Germany.

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By gerrysims
23rd Sep 2019 13:57

You need to be looking at Permanent Establishment and Management and Control. Just because one director and 99% of trade is in Germany doesn't mean it's subject to German tax. VAT and CT need to be considered separately.

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Replying to gerrysims:
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By Matrix
23rd Sep 2019 19:04

Sure.

ALiSKT don’t even think about advising about the German tax aspects.

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Replying to Matrix:
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By atleastisoundknowledgable...
23rd Sep 2019 20:18

Matrix wrote:

Sure.

ALiSKT don’t even think about advising about the German tax aspects.

Have no fear, even I know I shouldn’t do that. I was just trying to ascertain whether I needed to warn them that they needed to consider it.

I’ve not dealt with this before, would the CT600 declare all trade, but DTT reduce the UK CT?

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Replying to atleastisoundknowledgable...:
Psycho
By Wilson Philips
23rd Sep 2019 20:55

As I said earlier, you need to consult the Double Tax Treaty.

I’m not going to do it for you but from memory the Treaty provides that a dual-resident company is deemed to be resident only in the State of its effective management, which I would be surprised if it were not in Germany

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Replying to atleastisoundknowledgable...:
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By Matrix
23rd Sep 2019 20:44

I wouldn’t touch this, it is not worth establishing the facts, dealing with overseas tax advisers, providing high risk advice and dealing with HMRC when you would never need to do this again.

You seem to have loads of interesting work so stick to that.

Regarding the CT600, I imagine you would start with the profit in the accounts and adjust to get the profits taxable in the UK. However you need to start at the beginning which is 1) why does the client have a UK company and 2) why were the direct and indirect tax consequences not addressed in advance?

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Replying to Matrix:
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By atleastisoundknowledgable...
23rd Sep 2019 21:00

Thanks Matrix, you’re probably correct.

When asked why it was a UK company, he (the son of the director/shareholder) said “it was easier for my mum to open a uk company that elsewhere”!

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Caroline
By accountantccole
23rd Sep 2019 17:50

If it is a sole director I think it would be hard to argue that there isn't a branch in Germany

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Replying to accountantccole:
Psycho
By Wilson Philips
23rd Sep 2019 20:39

Even harder, I would suggest, based on the information in the question, to argue that the company is not resident in Germany.

Possibly more relevant to determine whether there is a branch/PE in the UK.

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