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Old Dec 9th 2017, 11:33 am   #16
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Default Re: Tax Advice - working for a UK Ltd company and in Italy

Dear All,

Thank you for all your replies.

I've understood now that I need to accumulate both incomes and declare them in Italy.

It seems so complicated though. I never imagined it to be!

I will have to be an Italian resident as I shall be living with my partner here and we plan on getting married next year. He is an Italian national. Also, the work I shall be undertaking in Italy will be on a part-time basis and involves me being physically in Italy.

Ultimately from what the accountant told me, earning over €30,000 is pointless as taxes are so high. This is disappointing as I potentially could earn more in my profession.

I wanted my children to be born in the UK, can I forget that now?
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Old Dec 9th 2017, 2:01 pm   #17
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Default Re: Tax Advice - working for a UK Ltd company and in Italy

To clarify a bit further, this work you'll be doing on a part-time basis that involves you being physically in Italy, is that employment or self-employment?

Yes you're correct that if you're resident in Italy you declare total worldwide income in Italy.

You're weaving yourself a potentially very complicated web, and if services are excluded from the UK/EU transitional / trading agreement after early 2019, which the current Brexit negotiations suggest may well be the case, then it could get even more complicated for an EU resident providing services in the UK.

You need to either get yourself a good international tax advisor (not cheap), or bite the bullet and read all the regulations very carefully and then discuss it with HMRC and the Italian tax people. Since as a solicitor you probably like studying legal texts and figuring out what's legal and what's not legal, you may feel confident in doing this but most people wouldn't.
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Old Dec 9th 2017, 3:15 pm   #18
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Default Re: Tax Advice - working for a UK Ltd company and in Italy

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Originally Posted by Donna Noble View Post
If you're resident in Italy it would be better for you to do all your tax reporting if possible, in Italy, rather than paying some in the UK and then off-setting that amount against your Italian return. .....
But if she is working while in the UK she must pay tax in the UK. It is possible that she could "get away with" working in the UK for a few weeks each year, but if her business and much of her work is located/performed in the UK, then she cannot unilaterally decide to pay tax only in Italy.
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There's also the healthcare angle to consider, of course. If you end up being classed as resident in Italy but HMRC agrees to you continuing to pay NICs in the UK because that's where you essentially carry out your work, then the UK will also (at present at least) fund your healthcare in Italy. ....
(i) NICs don't pay for healthcare/insurance

(ii) someone who has worked for at least three years in the UK can elect to continue (or start) paying voluntary Class 2 or Class 3 NICS (Class 3 is the default, but most people who were/are working, or looking for work, both before and after they leave the UK, will likely be approved to pay Class 2) and there are good reasons to do so for [I]most[/I people]. In fact I do so myself despite having left the UK 17 years ago.
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Old Dec 9th 2017, 3:37 pm   #19
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Default Re: Tax Advice - working for a UK Ltd company and in Italy

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Originally Posted by Pulaski

(i) NICs don't pay for healthcare/insurance
If it's agreed that you remain the UK's responsibility for healthcare and social security even though you live abroad, because all or most of your work is done in the UK, then you and your employer pay NICs on the same basis as if you were UK resident and you remain in the UK social security. These aren't voluntary contributions, and they do entitle you to UK social security including the NHS.

If it's agreed she's not the UK's responsibility for social security, which the more she says the more likely it seems, then no employer/employee NICs will be deducted from her salary and as you say she may have the option of continuing to paying voluntary contributions.

There are plenty of Brits who live in France and commute back to the UK every week to work. They and their employers pay full NICs and their dependants are covered for healthcare by the UK. If they basically work full time and earn all their earned income in the UK then it's clear cut but since it seems the OP will be working in Italy as much if not more than in the UK, I can't see it applying.

Last edited by EuroTrash; Dec 9th 2017 at 3:44 pm.
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Old Dec 9th 2017, 3:43 pm   #20
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Default Re: Tax Advice - working for a UK Ltd company and in Italy

Thank you for all your responses.

As I mentioned previously. I shall only be seeing my clients in the UK. I'll be travelling to the UK once a month and shall remain there for around 5days to perform this work. I am a solicitor so will be travelling to represent clients in court, advise them in the office, attend prisons etc. This is clearly work that I can only do in the UK.

I'm sorry if I wasn't clear before. I have set up a Ltd company of which I am the only employee. I shall send invoices once a month and receive payment into a British business bank account. Corporation tax is compulsory and shall be paid in the UK (as that's where the business is) it's just the remaining tax that I'm worried about.
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Old Dec 9th 2017, 3:45 pm   #21
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Default Re: Tax Advice - working for a UK Ltd company and in Italy

How much are these level 2 NICS contributions?
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Old Dec 9th 2017, 3:53 pm   #22
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Default Re: Tax Advice - working for a UK Ltd company and in Italy

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How much are these level 2 NICS contributions?
Class 2 is peanuts - around £143-£144/yr at the moment.

They are thought to be going away, but they haven't yet, and Class 3 appears to be the default alternative, at about £715/yr.
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Old Dec 9th 2017, 4:17 pm   #23
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Default Re: Tax Advice - working for a UK Ltd company and in Italy

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I have set up a Ltd company of which I am the only employee. I shall send invoices once a month and receive payment into a British business bank account. Corporation tax is compulsory and shall be paid in the UK
OK so just to be crystal clear. Your company (ie you, but acting on behalf of the company not on behalf of yourself personally) will send invoices to the clients you represent, and payment will be received into the company bank account. Then, your company (you again, obviously, but acting on behalf of the company) will prepare the payroll once a month with any deductions that have to be made and report it to HMRC, send your payslip to you and pay your salary to you out of the company bank account into your personal bank account. You pay personal tax on your salary and declare it as part of your worldwide income in Italy if that's where you live. The company submits its accounts to HMRC and pays whatever tax is due on its profits. I assume that's what you meant, only it's a bit confusing when you say 'I' when you actually mean the company because it makes it sound as if they're the same entity, and they're not.

Last edited by EuroTrash; Dec 9th 2017 at 4:20 pm.
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Old Dec 9th 2017, 7:22 pm   #24
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Default Re: Tax Advice - working for a UK Ltd company and in Italy

Yes, you've explained my circumstances correctly. I said 'I' as I wanted it to be clear that I was the only one working for the company and there were no other employees.

From what you said (and what I have understood), forgive me, I'm new to this and dealing with all changes involved with relocating.

I shall be paying corporation tax in the UK as that is where the company is. Profits from my UK Ltd company I shall declare with my income from Italy and pay tax on this 'worldwide' income in Italy, my country of residence.

Do you know how it works paying myself a salary from my UK company to myself. I'm aware it's £950/month tax free then you pay tax on dividends on any additional amount. However, considering I have an income in Italy, will, £950 be reduced?
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Old Dec 9th 2017, 8:02 pm   #25
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Default Re: Tax Advice - working for a UK Ltd company and in Italy

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Profits from my UK Ltd company I shall declare with my income from Italy
Sorry but you're still confusing me with your terminology. The company has profits and it declares those to HMRC. You personally don't have profits, you have a salary, and that's what you declare as part of your worldwide income. Hopefully this is what you meant.

Quote:
Originally Posted by rzm View Post
Do you know how it works paying myself a salary from my UK company to myself. I'm aware it's £950/month tax free then you pay tax on dividends on any additional amount. However, considering I have an income in Italy, will, £950 be reduced?
I'm fairly sure your income in Italy would not affect your UK tax code, non residents can claim a full personal allowance.
However I think dividends would be taxable in Italy if you're tax resident in Italy, not in the UK. Your earned income for work actually carried out while your bum is in the UK, is taxable in the UK, but dividends are classed as unearned income which is normally taxed in the country where you live.

It really is vital to get proper advice on all this. It's a bit of a minefield, and there can be penalties for getting it wrong.
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Old Dec 9th 2017, 8:12 pm   #26
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Default Re: Tax Advice - working for a UK Ltd company and in Italy

This is what I am worried about. What are the penalties (I'm scared to ask).

I can't wait to have an accountant and do the job that I am actually good at.
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Old Dec 9th 2017, 8:36 pm   #27
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Default Re: Tax Advice - working for a UK Ltd company and in Italy

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Sorry but you're still confusing me with your terminology. The company has profits and it declares those to HMRC. You personally don't have profits, you have a salary, and that's what you declare as part of your worldwide income. Hopefully this is what you meant. .....
And to be clear, there is no reason under UK law, that the net profit for the company cannot be greater than the salary plus related payroll costs (employer's NICs).

For example, the company makes a profit before tax of £3,000/mth, and pays tax of £750/mth. The Company also pays a salary of £1,000/mth, plus payroll costs of say £150/mth. There is a "difference" between the company's after-tax profit of £2,250 and the total salary of £1,150, which the UK would call "retained profit" of £1,100/mth, and becomes part of the reserves of the company. .... I do not know how the Italy taxing authorities would see that amount.

(This is actually a bad example, and is somewhat "inside out" as payroll is deducted before a company's taxable profit, but I presented the numbers this way for clarity, not because this is the order in which profits, taxes, and salary are actually calculated.)
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Old Dec 9th 2017, 9:39 pm   #28
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Default Re: Tax Advice - working for a UK Ltd company and in Italy

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Originally Posted by Pulaski View Post
And to be clear, there is no reason under UK law, that the net profit for the company cannot be greater than the salary plus related payroll costs (employer's NICs).

For example, the company makes a profit before tax of £3,000/mth, and pays tax of £750/mth. The Company also pays a salary of £1,000/mth, plus payroll costs of say £150/mth. There is a "difference" between the company's after-tax profit of £2,250 and the total salary of £1,150, which the UK would call "retained profit" of £1,100/mth, and becomes part of the reserves of the company. .... I do not know how the Italy taxing authorities would see that amount.
Yes absolutely. I don't know either how Italy would regard it, or even if they would be entitled to regard it at all.

However I may be missing something here but I can't see any simple advantage to the OP in having the company build up a lot of money in the bank, that she can't get her hands on except via a salary which would presumably be taxable in the UK, or via dividends that I think would be taxable in Italy. Obviously there can be a lot of advantages in owning a company that's making a lot of profit, but it would need careful management and since her interest seems to be in the activity rather than in the business, she'd need tax advisors and wealth management experts to look after it.
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Old Dec 10th 2017, 8:22 am   #29
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Default Re: Tax Advice - working for a UK Ltd company and in Italy

Good morning!

You can see how complicated this is!

I have another question. If I declare my worldwide income in Italy as I am resident here, can I state that I have paid my taxes for the Ltd company in the UK as all the work for that company was carried out in the UK and I can have a file evidencing this i.e. Court date hearings, client meetings, visiting clients in prison etc?

I'm presuming my accountant (and hoping) in Italy would do all the calculations and explain to the Italian authorities why tax was paid in the UK ... is this even possible to do it this way around? Would this make financial sense?

I am just fearful of even the accountant getting it wrong.
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Old Dec 10th 2017, 8:24 am   #30
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Default Re: Tax Advice - working for a UK Ltd company and in Italy

Do you know how much dividends are taxed at in Italy?

And is it £950 or £1000 that's tax free per month as a salary?
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