US Brokers - Tax liability

hampy

Well-known member
276 5
BBB, Could you elaborate?
Do you know how trading for a living would be taxed in the
Eurozone?
Thanks,
hampy
 

BBB

Experienced member
1,071 3
Well, I may be wrong, but if you take residency in Eurozone, you pay no income tax. You also need no visa or anything. You can just sling your hook, buy a villa on the coast somewhere (+ pool for peanuts by London standards) and pay no tax.

I've yet to investigate it fully, but I have several mates who are IT contractors. They have worked in Euroland for UK, American and Euro companies over there, but never had to pay any tax despite spending all their time there. I think the only requirement is that you leave the country for 24 hrs every 3 months or something silly like that.

Just think - no Tony bLiar, sunshine, fine food and wine every day, beautiful chicks everywhere, the list of benefits is endless IMO. Just got to get round my girlfriend though. Don't think she'll like the idea. She seems to think London is utopia (she's Brazilian)

If anyone has definitive answers Id be grateful too!
 

knorrie

Active member
148 1
BBB - be sure to look into this carefully. I contracted in Germany several years ago and got in with the ex-pat/contracting community. There were all sorts of wonderful characters and stories of various tax avoidance schemes, like guys taking suitcases of cash into Switzerland etc.

However at the time (don't know what the status is now), it was perfectly legitimate to avoid paying tax if you were a) non-resident in the UK and b) not resident anywhere else for more than 6 (or was it 12 - hell this was 17 years ago now) months at a time. So if you genuinely just got 3 or 6 month contracts and moved around for each one, then fine, no tax.

However what several guys tried on was staying at the same client on rolling 6-month contracts for years at a time, without moving house. This didn't stand up to scrutiny, usually as a result of a tax audit at the client, which actually seems to happen quite frequently over there compared to here. One guy got stopped at airport departures when they scan your passport in and got marched off to the bank to settle his huge tax bill in cash or else stay in the cells - they even did this to another guy for non-payment of parking tickets. And a friend of mine from the UK who left Germany for a life in the US got into a dispute with his landlord on moving out of his flat. He was stopped at the airport with his wife + kids waiting to get on the plane, and had to hand over several thousand in cash, completely humiliating (and in fact totally unjust but I won't go into that).

If you think the authorities are bad here, my advice to you is don't go to Germany :)

KenN
 

chump

Senior member
2,212 274
BBB,
"Well, I may be wrong, but if you take residency in Eurozone, you pay no income tax".
You are wrong. See my post above .It applies.

In a past life I advised on tax etc and administrated many of the contracts that 'your' IT friends had. As such I know exactly what they are telling you. As I said before, it is based upon what they think they can get away with rather than what is their legal liability. That liability always rests with the individual and hence so does the risk of not meeting it. To be frank most IT contractors never really understood the way in which this liability arises, or maybe they just 'chose' not to understand.

Knorrie,
"However at the time (don't know what the status is now), it was perfectly legitimate to avoid paying tax if you were a) non-resident in the UK and b) not resident anywhere else for more than 6 (or was it 12 - hell this was 17 years ago now) months at a time. So if you genuinely just got 3 or 6 month contracts and moved around for each one, then fine, no tax".
This is exactly how most contractors misunderstood how their liability arises. Not legal at all.


Knifemac,
IR35 does not apply to this activity. In effect IR35 tries to establish a relationship between the individual and the person (client) they are working for on the basis of if you took out all the middlemen (Ltd co,agency etc) could the relationship be said to be the same as that you would expect to find between an employee and his employer. This to be distinguishable from someone who was supplying a service which was a business in its' own right. Its' quite complex ,but would not apply to this area of activity.

Cheers
 

gmca686

Active member
117 3
Bud Fox,
Unless the law on tax has changed in the last 2 years your statement is wrong. You have lived overseas for longer than a complete tax year, April to April, therefore in the eyes of the tax man you have established "non-residency" status. This frees you from UK income tax and CGT. The only exceptions are incomes from UK sources such as UK company pensions, which are taxed at source under PAYE. It does not matter that you are using a UK broker to trade. That is irrelevant!
I lived in Oman for 4 years and easily established this principle with the tax man. I didn't pay a penny income tax or CGT. Oman didn't have personal tax liabilities either, which was good.
regards, G McA
 

Bud Fox

Newbie
3 0
G McA
I hope your right. But im still think im liable see this quote from IR20 document. see the attached pdf

Non-residents with a UK branch or agency
8.7 If you are neither resident nor ordinarily resident in the UK and carry on a trade,
profession or vocation through a branch or agency in the UK, you will be liable to capital gains tax on any gains on the disposal of assets in the UK which were used in the trade, profession or vocation, or by the branch or agency. You may
also be liable to capital gains tax if the activity ceases or you transfer the assets
outside the UK.


For me the key thing is the 'branch or agency" i.e broker is UK based regardless of my status as non-resident.

whether this applies with a US Broker im still not sure.

With regard to trading in Euroland im not sure about CGT liabilty.
Although i know Estonia has zero CGT, joining EU this year, and apparently a very nice place. A lot of local banks there are taking advantage of its CGT status by setting up brokerage services.

I think the other trick is to establish an offshore company or one in Luxembourg and trade shares through that. Quite a lot of people seem to be offering this stuff in the back of magazines like Economist/Newsweek.

The one trick on living in the uk is to get non-domiciled status. You have to convince the UK tax man that your not going to eventually live here-regardless of whether your resident. I think you can wangle this if your father was not born here. Quite a lot of the rich foriegners take advantage of this loophole and live here tax free. All there houses are owned by offshore shell companies etc.

Regards

Bud
 

BBB

Experienced member
1,071 3
Who was it that said: Only two things in life are certain - death and taxes! Looks like he could have been right!

T333 - Euroland = anywhere in the EU.

Well thanks for the advise folks. Much appreciated - even if you have burst my bubble! I think the case for moving overseas still holds though because of the higher standard of living (imo). Maybe there will be countries where their tax allowance is less than that of the UK.

Anyway, I'm going to ask my mates for a definitive answer on how they do it. I know they have set them selves up as companies, although I dont know for sure which country the company is registered. UK I assume. Some of them have Swiss bank accounts which may help I guess.

Anyway, I'll report back when I get an answer!
 

Trader333

Moderator
8,655 981
BBB,

Sounds like your mates could be engaged in tax evasion which is illegal. I know of some people who got hit up to 10 years after doing this so beware any tactics that are questionnable.


Paul
 

theknifemac

Well-known member
340 0
Agree with Paul. I thought the UK tax rates were lower than most of Europe, thats why so many French people are working over here in the City and living it up in Kensington sur la Thames. If you don't live in the UK long enough to be taxed there then you will be subject to tax where you are working. I have heard that Cyprus has a low rate of tax but not sure if that is true any longer.

Possibly the other new entrants to the EU will have low tax rates. But the EU commissioners are always talking about harmonising tax amongst the member countries.

Stew
 

nomish

Junior member
42 0
i have a question. how do comapnies such as Citibank and other institutions get taxed when they make profits on tradeS?
 

knorrie

Active member
148 1
chump

chump said:
"However at the time (don't know what the status is now), it was perfectly legitimate to avoid paying tax if you were a) non-resident in the UK and b) not resident anywhere else for more than 6 (or was it 12 - hell this was 17 years ago now) months at a time. So if you genuinely just got 3 or 6 month contracts and moved around for each one, then fine, no tax".

This is exactly how most contractors misunderstood how their liability arises. Not legal at all.

What I mean by 'moving around' is moving from one country to another, not staying in any one for more than 6/12 months, depending on whatever each country's minimum stay for paying tax is. You are then essentially of 'no fixed abode'.

That's how this luxury tax-haven cruise liner for the super-rich works - you live full-time on the ship which just sails all round the world:

http://www.ibs-offshore.com/english/residensea.shtml
http://news.bbc.co.uk/1/hi/business/1917261.stm

BBB - maybe you could trade from a wee yacht and just move around various European ports for a few months at a time? :)

KenN
 

BBB

Experienced member
1,071 3
Well I spoke to one of my mates - a case of selective hearing on my part I'm afraid.

He said he does pay tax, but didn't on some of his assignments because they were less than 6 months.

An interesting section in The Sunday Telegraph this morning. It was about moving to France and Spain. In Spain, you pay tax at 45%. You pay if you reside their for 186 days of the year or more. May be get a cheap place in the Costas, and a flat in some Italian city near the Alps for the winter months. Living in two countries, 2 smaller properties (Im young, free, and half single so I dont need a mansion) so I dont have to pay tax in either. Just an idea, but I'll need a few more weeks like last week in the markets before this becomes viable though!!!!

KenN - lol - 'a wee yacht' !!!! lol. Dont you mean one of those inflatable dingies you see kids using on the beach :)


Oh well looks like I'll have to pay tax then. Still, I wont feel as ripped off donating to the coffers of some Euroland countries, as I'll actually get something back - like a decent police service, healthcare, clean safe streets, more honest politicians etc. But thats a different thread....
 

theknifemac

Well-known member
340 0
BBB said:
Oh well looks like I'll have to pay tax then. Still, I wont feel as ripped off donating to the coffers of some Euroland countries, as I'll actually get something back - like a decent police service, healthcare, clean safe streets, more honest politicians etc. But thats a different thread.... [/B]

BBB I think the honest pols rules Italy out then ;)

Mac
 

nomish

Junior member
42 0
There is an alternative solution to legaly not pay capital gains tax is to move to a country which does not tax Capital Gains.

However, getting resident status may not be so easy as self made traders are mostly self-employed. Which isnt so desirable for such countries to take on.

But if you trade under a company and expand to one of these countires you may have better chances of getting citizenship. There is also the time difference factor depending on the markets you are trading in.
 
 
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