Firstly, I would like to thank anyone reading this and willing to elucidate the matter for me.
I am an IT freelancer in Czechia. I probably don’t have to tell you that while the taxes here are decent, the freelance rates are atrocious, and even if I look for remote opportunities in richer countries, they expect to pay me a much lower rate because of my location and since such positions are open to all of EU, it attracts a lot more applicants who also work for cheaper.
So I was thinking about focusing on positions that are fully remote but generally specify something like “must be *** based” from the candidate. The UK for instance offers some nice remote opportunities, but even if you are a contractor, they usually specify you must be within the UK.
I have found out that most of the time this is just because of some legal reason, like them having a hard time suing you for potential damages if you are not from UK and so forth. They should not care if you know the language well and can do the work.
Then I thought I could just create an offshore company in the UK, namely LLP and invoice through that. I could then pose as someone living in the UK and doing all business via my LLP with UK address and bank account.
Since LLP is a pass-through entity, I would avoid the ridiculously high taxes in the UK (no UK-sourced income) and only pay taxes in Czechia. I do not yet know how this will be taxed here and am awaiting a response from my accountant, but it would make sense to me if this was considered the same as my freelance income for tax purposes so a total tax of about 23%.
To take this further, I would like to sever ties with Czechia in the near future and move to a territorial taxation country. Specifically, I am looking at Paraguay, as getting a tax residence there is easy and you don’t have to live there. I would just continue contracting through the LLP as normal, but now I would pay no taxes.
So that is basically my situation, now to the specific questions that I have:
I am an IT freelancer in Czechia. I probably don’t have to tell you that while the taxes here are decent, the freelance rates are atrocious, and even if I look for remote opportunities in richer countries, they expect to pay me a much lower rate because of my location and since such positions are open to all of EU, it attracts a lot more applicants who also work for cheaper.
So I was thinking about focusing on positions that are fully remote but generally specify something like “must be *** based” from the candidate. The UK for instance offers some nice remote opportunities, but even if you are a contractor, they usually specify you must be within the UK.
I have found out that most of the time this is just because of some legal reason, like them having a hard time suing you for potential damages if you are not from UK and so forth. They should not care if you know the language well and can do the work.
Then I thought I could just create an offshore company in the UK, namely LLP and invoice through that. I could then pose as someone living in the UK and doing all business via my LLP with UK address and bank account.
Since LLP is a pass-through entity, I would avoid the ridiculously high taxes in the UK (no UK-sourced income) and only pay taxes in Czechia. I do not yet know how this will be taxed here and am awaiting a response from my accountant, but it would make sense to me if this was considered the same as my freelance income for tax purposes so a total tax of about 23%.
To take this further, I would like to sever ties with Czechia in the near future and move to a territorial taxation country. Specifically, I am looking at Paraguay, as getting a tax residence there is easy and you don’t have to live there. I would just continue contracting through the LLP as normal, but now I would pay no taxes.
So that is basically my situation, now to the specific questions that I have:
- Does anyone have experience with invoicing clients in UK/US/other like this and hiding your true location to get to the better contracts? I am really wondering if it would be enough for a typical client, and am I correct that they would have no way to see that the LLP is owned by someone not residing in the UK?
- To not be tax liable in the UK, the LLP cannot have any “UK-sourced income”. I have not managed to find a complete definition of a UK-sourced income, but if it is similar to the US, then UK-sourced income would be any activity that is physically caried out by the worker in the UK. So, for me as a programmer, since I live and “work” in Czechia, this should not be considered as UK-sourced. Am I correct about this?
- I did think that Paraguay would consider me programming on their land as a locally sourced income, and tax it anyway, but funnily enough it seems like they do not really care, or at the very least it is a big grey area. I have heard from many sources that this is a common practice for programmers. For instance, apparently many programmers from Brazil move to Uruguay (which also has territorial taxation) and work remotely to Brazil with no tax. And even if I had to pay taxes, it would only be 10% corporate + 5% dividends. Paraguay does not even require you to disclose any of your income if you think you owe no tax. Also, since you do not have to really live in Paraguay to retain their residency, couldn’t you then just live and work from somewhere else (not for more than 183 days), and it would then 100% be considered foreign sourced income in Paraguay?
- What about VAT for the LLP as a non-dom, could that be an issue?
