Dividends for non resident for tax purposes
Discussion
I know someone who is non resident for tax purposes. British passport holder lives in Switzerland.
He operates a number of UK companies from Switzerland. He owns all the shares in these limited companies
He pays himself dividends and tells me he is not liable for tax on this dividend income because he is non resident. Apparently Switzerland don't want any slice of non Swiss income. So effectively he pays corporation tax but no other tax. His companies sell items zero rated for vat.
Is this correct?
Also, if he rearranged his companies into LLP with his wife the other partner, would he then be paying zero tax entirely since there's no corporation tax on LLP? My understanding is that each member of the LLP pays tax at their marginal rate which presumably means he pays no income tax since he's non resident?
Can't be right, surely?
He operates a number of UK companies from Switzerland. He owns all the shares in these limited companies
He pays himself dividends and tells me he is not liable for tax on this dividend income because he is non resident. Apparently Switzerland don't want any slice of non Swiss income. So effectively he pays corporation tax but no other tax. His companies sell items zero rated for vat.
Is this correct?
Also, if he rearranged his companies into LLP with his wife the other partner, would he then be paying zero tax entirely since there's no corporation tax on LLP? My understanding is that each member of the LLP pays tax at their marginal rate which presumably means he pays no income tax since he's non resident?
Can't be right, surely?
MrJuice said:
I know someone who is non resident for tax purposes. British passport holder lives in Switzerland.
He operates a number of UK companies from Switzerland. He owns all the shares in these limited companies
He pays himself dividends and tells me he is not liable for tax on this dividend income because he is non resident. Apparently Switzerland don't want any slice of non Swiss income. So effectively he pays corporation tax but no other tax. His companies sell items zero rated for vat.
Is this correct?
Also, if he rearranged his companies into LLP with his wife the other partner, would he then be paying zero tax entirely since there's no corporation tax on LLP? My understanding is that each member of the LLP pays tax at their marginal rate which presumably means he pays no income tax since he's non resident?
Can't be right, surely?
The first bit is right, dividend income is taxed in the hands of the holder wherever they are tax resident.He operates a number of UK companies from Switzerland. He owns all the shares in these limited companies
He pays himself dividends and tells me he is not liable for tax on this dividend income because he is non resident. Apparently Switzerland don't want any slice of non Swiss income. So effectively he pays corporation tax but no other tax. His companies sell items zero rated for vat.
Is this correct?
Also, if he rearranged his companies into LLP with his wife the other partner, would he then be paying zero tax entirely since there's no corporation tax on LLP? My understanding is that each member of the LLP pays tax at their marginal rate which presumably means he pays no income tax since he's non resident?
Can't be right, surely?
An LLP is different, if it is carrying on a trade in the UK then the partners are deemed to have a place of business in the UK regardless of their residence and would pay tax accordingly. It would likely be a worse situation for him than using a Ltd company.
dingg said:
Why so interested in someone else's affairs?
Because he told me about his affairs in a nice way and not bragging. I knew that LLP members paid tax on their drawings and wondered whether he might further benefit of he set himself up as a LLP given he's non resident for tax purposes. But the third post suggests otherwise. Interesting set up through.
UK passport, UK company, no VAT because digital download business, no dividend tax. Just corporation tax to pay. Jammy.
MrJuice said:
dingg said:
Why so interested in someone else's affairs?
Because he told me about his affairs in a nice way and not bragging. I knew that LLP members paid tax on their drawings and wondered whether he might further benefit of he set himself up as a LLP given he's non resident for tax purposes. But the third post suggests otherwise. Interesting set up through.
UK passport, UK company, no VAT because digital download business, no dividend tax. Just corporation tax to pay. Jammy.
I've managed to escape from the UK system myself for a 10 year period by moving to a more tax friendly area.
He also sounds like he’s tax resident in Switzerland
All tax-resident individuals are taxed on their worldwide income and wealth. An individual is deemed to be a tax-resident under Swiss domestic tax law, if:
the individual has the intention to permanently establish his/her usual abode in Switzerland, which is usually where the individual has his/her centre of vital interest, and is registered with the municipal authorities, or if
the individual stays in Switzerland with the intention to exercise gainful activities for a consecutive period (ignoring short absences) of at least 30 days, or if
the individual stays in Switzerland with no intention to exercise gainful activities for a consecutive period (ignoring short absences) of at least 90 days.
All tax-resident individuals are taxed on their worldwide income and wealth. An individual is deemed to be a tax-resident under Swiss domestic tax law, if:
the individual has the intention to permanently establish his/her usual abode in Switzerland, which is usually where the individual has his/her centre of vital interest, and is registered with the municipal authorities, or if
the individual stays in Switzerland with the intention to exercise gainful activities for a consecutive period (ignoring short absences) of at least 30 days, or if
the individual stays in Switzerland with no intention to exercise gainful activities for a consecutive period (ignoring short absences) of at least 90 days.
MrJuice said:
Because he told me about his affairs in a nice way and not bragging. I knew that LLP members paid tax on their drawings and wondered whether he might further benefit of he set himself up as a LLP given he's non resident for tax purposes. But the third post suggests otherwise.
Interesting set up through.
UK passport, UK company, no VAT because digital download business, no dividend tax. Just corporation tax to pay. Jammy.
It's not 'jammy', as non resident, he can only come to the UK for a certain amount of days per tax year inorder to remain non-resident.Interesting set up through.
UK passport, UK company, no VAT because digital download business, no dividend tax. Just corporation tax to pay. Jammy.
A lot of UK residents will pay tax,as they like being here enough. If he doesn't then as long as he doesn't breach his number of days, those are the international rules.
hmrc said:
You’re automatically non-resident if either:
1) you spent fewer than 16 days in the UK (or 46 days if you have not been classed as UK resident for the 3 previous tax years)
2) you work abroad full-time (averaging at least 35 hours a week) and spent fewer than 91 days in the UK, of which no more than 30 were spent working
Jammy is Phil Green, whose wife stays non resident and has everything in her name, so Phil can work in the UK.1) you spent fewer than 16 days in the UK (or 46 days if you have not been classed as UK resident for the 3 previous tax years)
2) you work abroad full-time (averaging at least 35 hours a week) and spent fewer than 91 days in the UK, of which no more than 30 were spent working
Edited by hyphen on Sunday 6th September 14:10
db10 said:
He also sounds like he’s tax resident in Switzerland
All tax-resident individuals are taxed on their worldwide income and wealth. An individual is deemed to be a tax-resident under Swiss domestic tax law, if:
the individual has the intention to permanently establish his/her usual abode in Switzerland, which is usually where the individual has his/her centre of vital interest, and is registered with the municipal authorities, or if
the individual stays in Switzerland with the intention to exercise gainful activities for a consecutive period (ignoring short absences) of at least 30 days, or if
the individual stays in Switzerland with no intention to exercise gainful activities for a consecutive period (ignoring short absences) of at least 90 days.
Switzerland is a tax haven... people don't move there to pay the same amount of tax.All tax-resident individuals are taxed on their worldwide income and wealth. An individual is deemed to be a tax-resident under Swiss domestic tax law, if:
the individual has the intention to permanently establish his/her usual abode in Switzerland, which is usually where the individual has his/her centre of vital interest, and is registered with the municipal authorities, or if
the individual stays in Switzerland with the intention to exercise gainful activities for a consecutive period (ignoring short absences) of at least 30 days, or if
the individual stays in Switzerland with no intention to exercise gainful activities for a consecutive period (ignoring short absences) of at least 90 days.
Lookup 'Switzerland lump sum taxation'
Switzerland has a complex tax system that includes a 35% withholding tax on foreign dividend income.
Due to tax treaties (particularly the Swiss/EU cross border treaty) this can, however, be reduced to 0% on foreign (UK, in this case) income.
If your friend has had several years of paying no tax on his dividends then he has no doubt got everything set up properly, as the Swiss do not mess about with stuff like this!
Due to tax treaties (particularly the Swiss/EU cross border treaty) this can, however, be reduced to 0% on foreign (UK, in this case) income.
If your friend has had several years of paying no tax on his dividends then he has no doubt got everything set up properly, as the Swiss do not mess about with stuff like this!
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