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Receiving money in the UK when based in another European country (Czech Republic) - UK tax liability
Thread poster: Nicholas Miller

Nicholas Miller  Identity Verified
Czech Republic
Local time: 21:21
Member (2014)
Czech to English
+ ...
Nov 13, 2017

Since UK clients and agencies are always complaining of how badly off they are when it comes to paying for work by bank transfer, I have been allowing them to pay to my UK account.


My question is simply, am I allowed to do this without incurring a UK tax liability?


- I am a UK citizen, but my domicile is the Czech Republic, so I pay all my taxes there,
- All income is declared and taxed in the Czech Republic.


Thanks


 

Thomas T. Frost  Identity Verified
Member (2014)
Danish to English
+ ...
Tax where you work Nov 13, 2017

I and many others are doing the same in the UK and other countries.

Liability for income tax is based on criteria such as residence and place of work, not on which bank account you use, so this does not make you liable for income tax in the UK. Only the US makes its expat citizens liable for US taxes.

You can look up in the relevant double tax agreement where you have to pay tax as a freelancer. I have never seen one that didn't say it's where you work.

You have to declare this income in your country of residence, of course.

Inversely, using a bank account in the UK cannot be used as a vehicle to avoid tax if you live in a high-tax country.

The Double Taxation Convention with Czechoslovakia entered into force on 20 December 1991. It continues to apply to the Czech Republic and the Slovak Republic.

UK/Czechoslovakia Double Taxation Convention


ARTICLE 14

Independent personal services

(1) Income derived by a resident of a Contracting State in respect of professional services or other independent activities of a similar character shall be taxable only in that State unless he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities. If he has such a fixed base, the income may be taxed in the other Contracting State but only so much of it is attributable to that fixed base.
(2) The term "professional services" includes especially independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, dentists and accountants.


 

Sheila Wilson  Identity Verified
Spain
Local time: 20:21
Member (2007)
English
+ ...
Anywhere, anyhow, any currency Nov 13, 2017

Thomas T. Frost wrote:
I and many others are doing the same in the UK and other countries.

You have to declare this income in your country of residence, of course.

As a translator, it's unwise to close bank accounts when you relocate. It can be uneconomic to keep some open (I've just closed my French one for that reason), but if it's serving you and your clients well then keep it. Just make sure you apply the correct exchange rates (ECB?) as at the correct dates (invoice date? month/quarter/year end? an average across the year?) when making your Czech tax returns.


 

Stuart Hoskins
Local time: 21:21
Czech to English
+ ...
Czech VAT red tape? Nov 14, 2017

My point is largely irrelevant at your end because, under Czech law, it's the agency's liability (not yours) to make sure they are paying to a registered account: VAT is being (albeit reverse-)charged along the way, so does that mean you would have to register your UK account with the Czech authorities? You don't want to give anyone an opportunity to classify you as an "unreliable VAT payer" ("nespolehlivý plátce") on grounds that money is being paid into an account that hasn't been registered for VAT. Just a thought.

[Edited at 2017-11-14 07:42 GMT]

[Edited at 2017-11-14 07:43 GMT]


 

Nicholas Miller  Identity Verified
Czech Republic
Local time: 21:21
Member (2014)
Czech to English
+ ...
TOPIC STARTER
Thank you Nov 14, 2017

Thanks for your help Thomas and Sheila. Thanks for the links Thomas. I thought I'd wait a day or two in case anyone was to reply with any wildly different information.

So that presumably applies to any income taxed in the domicile.

I use the Czech National Bank rate on the date of issue for accounting purposes. As I said, I have been offering this option for income from UK clients, but I was keeping the income coming into the UK account to within the UK annual non-tax allowance (11,000 I believe) just in case it applied. When I reached that limit I wasn't sure whether I should stop any further payments going there this year.

Obviously asking a colleague is preferable to contacting the UK inland revenue. I pass all the criteria for non-domicile status, but you never know who you'll get on the other end of the line. I don't want to be accused of laundering or something.

Nick


 

Thomas T. Frost  Identity Verified
Member (2014)
Danish to English
+ ...
No Nov 14, 2017

Nicholas Miller wrote:

So that presumably applies to any income taxed in the domicile.


No.

You need to examine each type of income. They are clearly categorised in the tax agreement.

Public-sector pensions are often taxed in the country of origin, for example. So if you have been a Whitehall mandarin and you retire outside the UK, your mandarin pension will probably be taxed in the UK.

Some tax-happy countries such as Denmark tax all pensions paid from Denmark to non-residents.

In most cases private pensions are taxed in the country of residence, though.

In most cases employment is taxed in the country where you work (not necessarily where you live).

In most cases interest is taxed in the country of residence.

You also need to be aware which taxes are covered by the agreement. If a tax is not covered by an agreement, it is the legislation of each country that applies directly.

And then there is the US, the only country in the world that taxes everything everywhere on the planet if you're a US citizen.


 

Nicholas Miller  Identity Verified
Czech Republic
Local time: 21:21
Member (2014)
Czech to English
+ ...
TOPIC STARTER
Bonus answer from Thomas Nov 14, 2017

Many thanks Thomas for the added information.
I found information about capital gains tax in relation to property in your link, another tax that may be of interest to anybody, not just a translator. The liability is based on the location of the property. In this case it looks like the Czech Republic is the better place to sell your houseicon_smile.gif


 

Thomas T. Frost  Identity Verified
Member (2014)
Danish to English
+ ...
UK not under Czech jurisdiction Nov 15, 2017

Stuart Hoskins wrote:

My point is largely irrelevant at your end because, under Czech law, it's the agency's liability (not yours) to make sure they are paying to a registered account: VAT is being (albeit reverse-)charged along the way, so does that mean you would have to register your UK account with the Czech authorities? You don't want to give anyone an opportunity to classify you as an "unreliable VAT payer" ("nespolehlivý plátce") on grounds that money is being paid into an account that hasn't been registered for VAT. Just a thought.


This sounds puzzling.

Surely if someone is using a UK account, it's for use with by UK clients. But a client in the UK is not subject to Czech law.

There is no VAT "charged along the way", as it is the client in the UK that has to account for VAT. The translator in the Czech Republic has no VAT to pay, so how could they be an "unreliable VAT payer"? If no VAT is paid to the translator, what do they need an account "registered for VAT" for?

Perhaps the restrictions you mention refer only to clients in CZ.

In any case, there is freedom of movement of capital in the EU, so they could not legally prevent anyone from using an account elsewhere.

Some countries seem to try to make it as difficult as possible to run a business, not realising that the more restrictions they introduce “to combat fraud”, the more productive people will go elsewhere to run their businesses.


 

Tom in London
United Kingdom
Local time: 20:21
Member (2008)
Italian to English
UK tax liability Nov 15, 2017

If you have any income in the UK, including interest on bank accounts, that income must be declared. Not to do so would put you in serious trouble.

 

Tom in London
United Kingdom
Local time: 20:21
Member (2008)
Italian to English
Be aware Nov 15, 2017

Nicholas Miller wrote:

Obviously asking a colleague is preferable to contacting the UK inland revenue. I pass all the criteria for non-domicile status, but you never know who you'll get on the other end of the line. I don't want to be accused of laundering or something.

Nick


Be aware that the UK tax authorities, as well as those of other countries, monitor websites such as this one.


 

Thomas T. Frost  Identity Verified
Member (2014)
Danish to English
+ ...
Where does it say that? Nov 15, 2017

Tom in London wrote:

If you have any income in the UK, including interest on bank accounts, that income must be declared. Not to do so would put you in serious trouble.


There are some guidelines from the HMRC here:
https://www.gov.uk/tax-uk-income-live-abroad

Self-employment income from work outside the UK is not "UK income", even if it is paid into a UK bank account.


When to report your income to HMRC
You usually have to send a Self Assessment tax return if:

you rent out property in the UK
you work for yourself in the UK
you have a pension outside the UK and you were UK resident in one of the 5 previous tax years
you have other untaxed income
You don’t need to report your income to HMRC if you’ve already claimed tax relief under a ‘double-taxation agreement’.


In any case, it's important in such cases to research which laws and treaties apply, and then understand them properly – or get a competent advisor to look at it if it's too complicated.


 

Thomas T. Frost  Identity Verified
Member (2014)
Danish to English
+ ...
And so what? Nov 15, 2017

Tom in London wrote:

Nicholas Miller wrote:

Obviously asking a colleague is preferable to contacting the UK inland revenue. I pass all the criteria for non-domicile status, but you never know who you'll get on the other end of the line. I don't want to be accused of laundering or something.

Nick


Be aware that the UK tax authorities, as well as those of other countries, monitor websites such as this one.


Let them monitor all they want. There is nothing illegitimate going on here. Self-employment income from work outside the UK is not taxable in the UK. End of story.


 

Sheila Wilson  Identity Verified
Spain
Local time: 20:21
Member (2007)
English
+ ...
It isn't UK income Nov 15, 2017

Tom in London wrote:
If you have any income in the UK, including interest on bank accounts, that income must be declared. Not to do so would put you in serious trouble.

There's no question of the payments being regarded as "UK income". For the OP it's Czech income, taxable in his country, with the funds simply being received in the UK.

Any interest is a different thing - that is UK income. In my own case, my UK bank doesn't pay me a cent (or even a penny) in interest; my French bank used to pay net interest so the question of tax liability didn't arise. It's only if gross interest is paid into his account that the OP will have any liability.


 

Sheila Wilson  Identity Verified
Spain
Local time: 20:21
Member (2007)
English
+ ...
Registered bank accounts? Nov 15, 2017

Stuart Hoskins wrote:
under Czech law, it's the agency's liability (not yours) to make sure they are paying to a registered account: VAT is being (albeit reverse-)charged along the way, so does that mean you would have to register your UK account with the Czech authorities? You don't want to give anyone an opportunity to classify you as an "unreliable VAT payer" ("nespolehlivý plátce") on grounds that money is being paid into an account that hasn't been registered for VAT.

I'm no expert on VAT - we don't even have it in the Canary Islands icon_smile.gif. But surely it's the business (including the self-employed freelancer) that's registered (or not) for VAT, isn't it? Why would bank accounts be registered for VAT? After all, there are countless other ways to receive money from clients (PayPal, Skrill, cash, postal order, Western Union...) so it certainly wouldn't ensure that VAT was paid on all income.


 

Thomas T. Frost  Identity Verified
Member (2014)
Danish to English
+ ...
Interest Nov 15, 2017

Sheila Wilson wrote:

Tom in London wrote:
If you have any income in the UK, including interest on bank accounts, that income must be declared. Not to do so would put you in serious trouble.


Any interest is a different thing - that is UK income. In my own case, my UK bank doesn't pay me a cent (or even a penny) in interest; my French bank used to pay net interest so the question of tax liability didn't arise. It's only if gross interest is paid into his account that the OP will have any liability.


Non-residents' UK interest isn't taxable either if a double tax agreement gives the country of residence the exclusive right to tax it, as it is nearly always the case. The one with the Czech Republic says:


ARTICLE 11

Interest

(1) Interest arising in a Contracting State which is derived and beneficially owned by a
resident of the other Contracting State shall be taxable only in that other State.
(2) The term "interest" as used in this Article means income from Government securities,
bonds or debentures, whether or not secured by mortgage and whether or not carrying a
right to participate in profits, and other debt-claims of every kind as well as other income
assimilated to income from money lent by the taxation lent by the taxation law of the
State in which the income arises.
(3) The provisions of paragraph (1) of this Article shall not apply if the beneficial owner
of the interest, being a resident of the Contracting State, carries on business in the other
Contracting State in which the interest arises, through a permanent establishment situated
therein, or performs in that other State independent personal services from a fixed base
situated therein, and the debt-claim in respect of which the interest is paid is effectively
connected with such permanent establishment or fixed base. In such case the provisions
of Article 7 or Article 14 of this Convention, as the case may be, shall apply.
(4) Where, owing to a special relationship between the payer and the beneficial owner or
between both of them and some other person, the amount of the interest paid exceeds, for
whatever reason, the amount which would have been agreed upon by the payer and the
beneficial owner in the absence of such relationship, the provisions of this Article shall
apply only to the last-mentioned amount. In such case, the excess part of the payments
shall remain taxable according to the law of each Contracting State, due regard being had
to the other provisions of this Convention.


For administrative reasons you may have to tell the HMRC that as a resident of whatever country, your UK interest is not taxable in the UK.


 
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