Do I need an offshore company or is being UK-non-resident enough?

[Craig Wrong]

Hi, I'm planning on becoming UK non-resident when I arrive in Thailand in the next few weeks. I have studied the Statutory Residence Test and aim to remain UK non-resident for a number of years. If I cannot achieve zero or very low tax in Thailand I will probably go the route of an offshore company.

Ideally I would continue working as a regular employee of my UK company. As I understand it, I would need to be in Thailand approx half a year to be even qualified to become Thai-tax-resident but even then it sounds hard to achieve it, not that I would want to. I have read of people with the Elite visa only being taxed on funds brought in to Thailand, and digital nomads seemingly paying zero tax but its hard to find good examples of UK company employees.

If necessary I will spend less that half a year in Thailand to stay low tax. Im just wondering what people's experience are... and what might be pitfalls of just relying on Thai authorities not being interested in my case. HMRC seem to be only interested to confirm that I am non-resident rather than whether I am resident in another country

Any constructive input appreciated.

Cheers

 

[username84447]

I have no idea how to be a non-resident of UK, so i can't comment on that.

As for Thailand, I'm looking to move there soon too. Strictly speaking, you're not meant to be working in thailand on the thai elite visa, therefore working for uk company would be against your visa conditions.

If you stay a non resident of thailand then you might be able to get by without a problem. I'll be making sure i get thai residency for tax purposes as it will be required to cut ties with Australia.

Don't you still have to pay tax in UK if working for a UK company even as a non resident?

Taken from:

Tax on your UK income if you live abroad

Find out whether you need to pay tax on your UK income while you're living abroad - non-resident landlord scheme, tax returns, claiming relief if you’re taxed twice, personal allowance of tax-free income, form R43

www.gov.uk

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You usually have to pay tax on your UK income even if you’re not a UK resident. Income includes things like:

• pension
• rental income
• savings interest
• wages

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[JustAnotherNomad]

That's really a question for a Thai accountant, but being an employee while living in Thailand indeed sounds like you're working from Thailand.
It might be better to use an offshore company (but be aware of transfer pricing regulations) and pay yourself dividends.
That way, you would have passive income instead of a salary.
But again, you really need to discuss this with a Thai accountant. There's probably a large gap between what the law says and how it is enforced by the Thai authorities.

 

[Craig Wrong]

I have no idea how to be a non-resident of UK, so i can't comment on that.

As for Thailand, I'm looking to move there soon too. Strictly speaking, you're not meant to be working in thailand on the thai elite visa, therefore working for uk company would be against your visa conditions.

If you stay a non resident of thailand then you might be able to get by without a problem. I'll be making sure i get thai residency for tax purposes as it will be required to cut ties with Australia.

Don't you still have to pay tax in UK if working for a UK company even as a non resident?

Taken from:

Tax on your UK income if you live abroad

Find out whether you need to pay tax on your UK income while you're living abroad - non-resident landlord scheme, tax returns, claiming relief if you’re taxed twice, personal allowance of tax-free income, form R43

www.gov.uk

-----
You usually have to pay tax on your UK income even if you’re not a UK resident. Income includes things like:

• pension
• rental income
• savings interest
• wages

-----

Thanks for the reply. I just called Siam Legal who appear as the first google result for Thai legal services, and I think I used to see them a lot on Thaivisa.com (now 'Aseannow') . They are an agent for the Elite visa and the guy said working is fine as long as its from your thai home, for a foreign company. Its not quite legal but it seems to agree with other reports online.

This site seems to agree too Thailand Elite Visa Review: What You Should Know Before Applying

>>Don't you still have to pay tax in UK if working for a UK company even as a non resident?

I wonder if they're talking about "UK sourced" income from when non-resident people work whilst physically present there?

 

[Craig Wrong]

That's really a question for a Thai accountant, but being an employee while living in Thailand indeed sounds like you're working from Thailand.
It might be better to use an offshore company (but be aware of transfer pricing regulations) and pay yourself dividends.
That way, you would have passive income instead of a salary.
But again, you really need to discuss this with a Thai accountant. There's probably a large gap between what the law says and how it is enforced by the Thai authorities.

I think you're right for long term. Eventually the rules will be enforced more strictly and the international info-sharing will highlight these kind of loopholes. I will call a Thai accountant though too, good idea

 

[JustAnotherNomad]

You'll also want to check if you would still have to pay NHS contributions as a remote employee, even if you don't have to pay UK income tax.

 

[Craig Wrong]

You'll also want to check if you would still have to pay NHS contributions as a remote employee, even if you don't have to pay UK income tax.

good point, thanks

 

[uplana]

That's really a question for a Thai accountant, but being an employee while living in Thailand indeed sounds like you're working from Thailand.

For OP - exactly and that's why this may not work for you at all, otherwise ask an Thai accounting as suggested your plan may not work just like that.

 

[Craig Wrong]

For OP - exactly and that's why this may not work for you at all, otherwise ask an Thai accounting as suggested your plan may not work just like that.

Thanks. I understand already that legally someone cannot work in Thailand without a work permit. For me, its good enough that one of the most prominent thai-american elite visa agents says its OK. I imagine the governments thinking in this area is that even though they are not getting income tax, at least they're getting the visa fee ($18000 minimum)

My short term plan is to be simply non-UK-resident, therefore not taxable by the UK government. I intend to do this by travelling from country to country, not staying long enough in any country to become tax resident there. The Elite visa is a back-up. If for some reason I want/need to stay in Thailand longer than the 183 days (thus triggering the official thai-tax-resident status) its 99% safe to continue working there under the Elite visa. Hopefully by then I will have moved on to my longer term solution which will also give me more flexibility with the number of days I can spend in the UK each year. I will be probably create a new post for the long term plan.

 

[khinkali]

working is fine as long as its from your thai home, for a foreign company

A few years back Chiang Mai immigration police rounded up some expats and then released them in line with the thinking above; they don't want the effort of chasing semi-nomadic freelancers for tax. Maybe I worry too much about these things but I don't like to be reliant on immigration and tax officials' leniency. If they decide to re-interpret the law and enforce it, they can go back some years. If you're single, living on the beach and making a few hundred bucks a month then who cares? Just jump on a plane if things go bad. The risk will grow if there are large sums involved and you develop economic or family ties to the country. On the other hand, "everyone does it" and it would be quite a dramatic change to start chasing resident non-citizen individuals for working from home for foreign customers.

As a shareholder, if you remit dividends from your non-Thai company in succeeding years it's foreign source income. Thailand does have Permanent Establishment rules to tax your non-Thai company for operating in Thailand, but were you actually working there? This means your UK company pays UK corporation tax before sending the dividend but you could move the company somewhere that won't tax the profit, if your suppliers and customers don't mind being invoiced from a low tax country.

My short term plan is to be simply non-UK-resident, therefore not taxable by the UK government. I intend to do this by travelling from country to country, not staying long enough in any country to become tax resident there.

I suggest leave by April 5 to get a clean break. You don't have to become resident somewhere else in order to leave the UK for the whole tax year, but split-year treatment is trickier and needs a full time new job, tax residence or new home somewhere.

 

[Craig Wrong]

Thanks for your considered reply.

As a shareholder, if you remit dividends from your non-Thai company in succeeding years it's foreign source income. Thailand does have Permanent Establishment rules to tax your non-Thai company for operating in Thailand, but were you actually working there? This means your UK company pays UK corporation tax before sending the dividend but you could move the company somewhere that won't tax the profit, if your suppliers and customers don't mind being invoiced from a low tax country.

Yes this is the longer term plan. My UK company manufactures and sells 95% amazon 5% ebay. It would be painful to move the sales to an offshore company, setting up new amazon accounts, having to get feedback from scratch, applying for SFP and FBA again blah blah...... I'd prefer it if the Offshore was just charging mgmt / marketing/ graphics fees back to the UK company to minimize profits there. That's what Im looking at next. Do I have to upgrade my offshorecorptalk account to get access to advisors who can look at my specific situation?

I suggest leave by April 5 to get a clean break. You don't have to become resident somewhere else in order to leave the UK for the whole tax year, but split-year treatment is trickier and needs a full time new job, tax residence or new home somewhere.

I have been reading the govt website and also a guidance book regards SRT including split year treatment. I have not yet seen anything about the job having to be "new" - I intend to continue the same job as manager of the UK co, just at a vastly expanded salary (because no more dividends). There also seems no requirement for me to be tax residence elsewhere for split year treatment. Or a home elsewhere.

RDRM12060 - Residence: The SRT: Split year treatment: Case 1: Overseas work criteria - HMRC internal manual - GOV.UK

www.gov.uk

 

[Craig Wrong]

I have been reading the govt website and also a guidance book regards SRT including split year treatment. I have not yet seen anything about the job having to be "new" - I intend to continue the same job as manager of the UK co, just at a vastly expanded salary (because no more dividends). There also seems no requirement for me to be tax residence elsewhere for split year treatment. Or a home elsewhere.

RDRM12060 - Residence: The SRT: Split year treatment: Case 1: Overseas work criteria - HMRC internal manual - GOV.UK

www.gov.uk

I do have my own home in the UK. I am already UK tax resident for 2020/21 but as far as I can tell, split treatment means that I well be treated as UK non-resident for the period from the date I leave onwards

 

[khinkali]

I have not yet seen anything about the job having to be "new"

Maybe I was taking "starting" and "begin" too literally in the HMRC booklet (page RDRM12040, two before the one you quoted). When I read the relevant legislation I'd say the wording supports your view not mine. I've read chatter that split-year treatment is challenged more than the main statutory test so I would be cautious.

I'd prefer it if the Offshore was just charging mgmt / marketing/ graphics fees back to the UK company to minimize profits

Profit shifting is not always straightforward. I think you need qualified advice before invoicing away the profits to a tax haven. I guess it depends how much.

 

[Craig Wrong]

relevant legislation

and further down the rabbit hole we go! thanks for that Yes defo will be needing advise on tax haven