What are the best offshore options for UK resident running a UK ltd?

[JustAnotherNomad]

I don't think so. In this particular case there are not residency permit to ask, no new bank account opening, no new company formation. He will just relocate and that's it.

To give an example, say he buys an apartment in France or Germany (or similar high tax countries) where he spends 89 days per year (which Sark would be cool with). He also applies for tax residency in Sark, where he spends 2 days per year (heck, even 20 days wouldn’t make any difference).
The rest of the year he spends hopping from country to country in Asia.
Then you can bet that at least any money he takes out from the company will be taxable income in Germany/France, possibly even some of the company profits. It won’t make any difference whatsoever if he has tax residency in Sark or not.
In fact, it might not even help him if he spends 200 days in Sark if he owns an apartment in France/Germany. They will probably still tax his worldwide income.
That’s why I said it’s important to find out where you actually want to live.

 

[JustAnotherNomad]

Where would you recommend?

If you can convince the tax authorities that you are not actively involved in the business on a daily basis (or that you always go to the UK when your work is needed), you could look into Portugal’s NHR scheme.
Basically you’d say you’re retired, living only off dividends that are paid by your UK business, which you are no longer actively involved in. There’d be no tax at all in Portugal for 10 years and I’ve heard Portugal is very popular with expats from the UK.
Other options would be Malta, Cyprus, Estonia, Georgia, Thailand, and many others. Once we’re talking passive (dividend only) income, there are lots of options. If you’re still actively involved in the business, it’s a bit more complicated.
Of those countries Portugal or Thailand would be my preferred choices because of the weather and proper city life, or maybe Estonia. With a Schengen mainland country like Portugal or Estonia, nobody is going to check where you actually spend most of your time. So in theory, you could even spend a lot of time in Italy or Spain without anyone noticing. (Not that I’d recommend breaking the law, just stating a fact here.)

 

[Marzio]

it might not even help him if he spends 200 days in Sark if he owns an apartment in France/Germany.

Why in the world somebody with some brain would buy an apartment in France when only having an apartment there would make him immediately tax resident?

Let's make a real example: he will rent out a place in Sark where he will spend a couple of weeks in the summer maybe inviting friends or parents and the rest of the year he could travel in SE Asia between Thailand, Bali, and so on.

IMHO there are less risk going with the Sark route than the NHR in Portugal as you said here "Portugal’s NHR scheme is limited to 10 years, there is a lot of bureaucracy, many, many, many criteria to fulfill etc"

All the other options, as i said, require finding a good agent, dealing with residency permits, starting a new company, opening new bank accounts.

All of that hassle could be avoided by simply moving to Sark and renting a one bedroom apartment.

 

[JustAnotherNomad]

Why in the world somebody with some brain would buy an apartment in France when only having an apartment there would make him immediately tax resident?

Because they want to live in France, not Sark, for example? This was a drastic example, but you can easily trigger tax residency in other ways. Sometimes spending as little as 60 days in a country can trigger tax residency (the equivalent of taxing blonde hair in my example). And you wouldn’t even have to buy an apartment, renting long term would be the same thing. Your Sark residency won’t help you then, at all, as you would simply have to pay tax to both Sark and the other country (double taxation) if there is no tax treaty - and possibly even with a treaty.
Really, just forget about Sark and similar options, unless you actually want to spend a lot of time there AND you can also avoid tax liabilities in other countries.

Portugal is only a poor option if you’re actively involved in the daily operations of the business. If you’re just a passive investor, it’s a very good option, especially if you really want to live there. The 10 year limit is the biggest drawback. But a lot can change in 10 years anyway.

And with none of the options mentioned you’d have to set up a new company (well, maybe Georgia, but just to get residency there, it would just be addition to the UK company). Just keep the UK company and pay yourself in dividends. The simplest/cheapest setup would definitely be Estonia. But if you want to live in a warm place in Europe, I’d go for Portugal - or maybe Malta/Cyprus. Or if Asia is an option, Thailand, Singapore, Hong Kong, Malaysia.
Latin America should have some good options, too.
But considering he’s British, he might want to just lock in EU residency while it’s still easily possible to obtain.

 

[Marzio]

Really, just forget about Sark and similar options, unless you actually want to spend a lot of time there

I'm probably dumb because i really don't see how any country in which you stay less than 89 days, don't have a bank account or any place in your name there would challenge your tax residence.

Since the countries that would challenge your tax residency are the usual suspects OECD high income countries why don't we do a quick check counting how many countries have uncommon tax residency rules?

I only found Norway that uses 270 days during a thirty-six month period and even in that case he would not trigger tax residency there because he could only stay 89 days max per year per country.

All the others follow the 183 days rule and having a place of residence (like Portugal or Estonia)

 

[JustAnotherNomad]

You are making up too strict rules (“nothing in your name”). I said if you spend all year in Sark, it won’t be an issue - and then it can make sense. Actually, “nothing in your name” doesn’t matter as it’s always about the actual facts. Anyway just some examples:

France

Tax residency of individuals is determined by Article 4 A of the French General Tax Code (CGI). Individuals domiciled in France are tax resident in France.
Under Article 4 B of the CGI, regardless of their nationality, individuals are deemed to be domiciled in France for tax purposes if :
• their home is in France;
• their main place of abode is in France;
• they carry on a professional activity in France, salaried or not, unless they can prove that it is a secondary activity;
• they have the centre of their economic interests in France.

https://www.oecd.org/tax/automatic-exchange/crs-implementation-and-assistance/tax-residency/France-Tax-Residency.pdf

Germany

A person’s liability to German individual income tax is determined by residence status. A person can be a resident or a non-resident for German tax purposes. A resident of Germany generally refers to an individual who has a domicile in Germany or spends more than 6 consecutive months in Germany (habitual place of abode). A domicile is a home or dwelling owned by, or rented to, the taxpayer who has full control over the property. Domicile is determined by fact, not by the intention of the taxpayer.

Germany

Thinking Beyond Borders for Germany.

home.kpmg

Italy

According to Article 2 of the Italian Tax Code, an individual is considered an Italian resident for tax purposes if, for the greater part of the fiscal year (i.e. for more than 183 days):

• the individual is registered in the Records of the Italian Resident Population (called Anagrafe)
• the individual has a ‘residence’ in Italy (habitual abode), or
• the individual has a ‘domicile’ in Italy (principal centre of business, economic and social interests, e.g. the family).

Italy - Individual - Residence

Detailed description of individual residence rules in Italy

taxsummaries.pwc.com

There are lots of ways this could trigger tax residency. Obviously not if you live full time in Sark and only spend 2 weeks’ vacation in France per year. But having access to an apartment all year in Germany, even if you don’t spend more than 30 days there, would trigger tax liability in Germany. The same would go for if your wife lives in Italy or you spend 2 months every year working in France.

Yes, it can still work out with Sark, but that’s not because Sark is so great, it’s because you wouldn’t trigger tax residency anywhere else. Then you could also just get residency in Panama or Paraguay or Georgia, without spending any time there. It would be the same thing. So Sark wouldn’t help you at all. It’s only an interesting option if you really want to live there, that’s all. They have good marketing though, I’ll give them that.

 

[xipoid]

The realities of moving to Sark will have been impacted by Brexit. EU citizens can still move under the Withdrawal Agreement, but there are certain obligations around residency (no more than six months' absence per year, for example) which have been agreed upon. Visiting or settling in Guernsey after Brexit - States of Guernsey

 

[khinkali]

Sark looks good for someone who likes the quiet lifestyle and really wants to live there, or for someone who would otherwise be genuinely nomadic. With a UK/IE passport you just rent a property that remains available for your use and pay a few thousand in taxes. Then you have a Sark residential address for banking, insurance, KYC/AML, etc. without the hassle of maintaining legal residence somewhere like UAE and without the PE/CFC worries that you might have if you live in a territorial tax country like GE or TH.

People do get caught living or working in a high tax country while pretending not to and a residence in Sark or wherever won't help. Very few people are genuinely nomadic but Sark looks like a nice technical residence for a real PT.

 

[JustAnotherNomad]

Sark looks good for someone who likes the quiet lifestyle and really wants to live there,

I completely agree.

or for someone who would otherwise be genuinely nomadic.

Why? You’d still have to pay rent. Then I’d rather go for an option like Paraguay/Panama/Georgia if you want it to be cheap.

By the way, Guernsey is still on several tax haven blacklists.

 

[khinkali]

I don't know anything about Paraguay or Panama but in territorial jurisdictions such as Georgia if you're there enough to be tax resident then you need to consider PE and/or CFC, as you helpfully keep reminding people.

The nice thing about Sark is that if you have property at your disposal then you can pay the maximum tax and then not worry about whether your income is offshore/onshore or how many days you spend there. You just need to avoid become tax resident somewhere else, or be taxed for working or having a PE somewhere else.

So Sark could make life easier for a genuine PT who wants a legal residence for their banking, KYC/AML, etc.

 

[JustAnotherNomad]

But with such jurisdictions, there is plenty of experience of the countries not enforcing PE rules, especially if you’re not even present. And I don’t think those countries even have CFC rules. Granted, Paraguay, Thailand and Panama would only issue tax residency certificates if you spend 183+ days there. But if you avoid tax residency elsewhere (as you would have to do with Sark), why would it even matter? And Georgia would issue the certificate immediately and you I’m sure you could also obtain some sort of advance ruling from the authorities. And Georgia has signed lots of tax treaties.

Anyway, it’s always nice to have additional options of course. It just wouldn’t be my first choice, unless one actually wants to spend time there.

 

[Marzio]

The nice thing about Sark is that if you have property at your disposal then you can pay the maximum tax and then not worry about whether your income is offshore/onshore or how many days you spend there. You just need to avoid become tax resident somewhere else, or be taxed for working or having a PE somewhere else.

So Sark could make life easier for a genuine PT who wants a legal residence for their banking, KYC/AML, etc.

Exactly.

But having access to an apartment all year in Germany, even if you don’t spend more than 30 days there, would trigger tax liability in Germany.

I still don't get why are you making those examples. Why he would need to have access to an apartment in Germany all year around? Just to prove that he could trigger tax residency? Germany is not what i would call a "holiday destination" and since he doesn't have any ties to Germany why would he throw away money to rent an apartment that he would not use anyway?

Panama requires to fly there once every 2 years and Paraguay once every 3 years but it's South America. Georgia is a territorial country so he would always be aware of not triggering any PE there. Sark could be reached with a flight from London to Guernsey and a ferry, he will be near to friends and family meaning they could go visit him easier.

At least those are my £0.02

 

[polonieth]

Thanks for the replies. I currently spend around 90-120 days per year in Scandinavia, 90 in the UK, the rest wherever I fancy in Europe.

 

[JustAnotherNomad]

Hey, I think we all agree. I’m sorry, I can be a bit pedantic at times.

It is a great option if you really want to live there. If you don’t really want to live there, I think there are better options, that’s all.

Germany was just an example of a high-tax country. The same would go for many other countries. You wouldn’t be able to have a holiday home in most countries without risking to become liable for taxes. If you’re tax resident in Estonia, you could (probably) own a holiday home in Italy or Spain and spend 5 months every year there legally without any issues, depending on the treaty. That probably wouldn’t be possible with Sark.

 

[JustAnotherNomad]

I currently spend around 90-120 days per year in Scandinavia,

Be careful, as @marzio mentioned, in some Scandinavian countries that would make you tax resident. As a UK resident that’s not a problem because the tax treaty puts your tax residency back in the UK. But if you’re no longer a UK tax resident, that could change. For example, if you spend 100 days per year in hotels in Norway, you would have to pay Norwegian taxes on your worldwide income, even if you own a house in Sark where you spend 200 days. If you had an apartment in Portugal instead, there wouldn’t be such a risk.

 

[khinkali]

not enforcing PE rules

Sure. I met plenty of smalltime expat Web designers and affiliate marketers in Thailand who are never going likely to get an inspection from the Revenue Department. If you're bigger, then foreign sourced income is not what most people think and it'll cost you a lot to bribe your way out. Or there's Bangkok Hilton.

If you're trying to build something substantial and don't want to live in UAE then Sark is a nice route. You can skip around the world enjoying your billions, just don't let the flies settle.

Maybe Georgia or Cyprus works for Fx or crypto, but I don't think that's OP's area and we need threads about that.

90-120 days per year in Scandinavia

Having known people who took a while to escape, that would scare me on principle.

 

[JustAnotherNomad]

If you're bigger, then foreign sourced income is not what most people think and it'll cost you a lot to bribe your way out.

Sure, you’d have to be sure the income will be classified correctly. I know someone managing a multimillion dollar fortune from Bangkok and he’s fine.

Maybe Georgia or Cyprus works for Fx or crypto, but I don't think that's OP's area and we need threads about that.

Why wouldn’t Cyprus work? 60 days and you can receive dividends tax free. I believe you can obtain advance rulings from the tax authorities.

His biggest advantage is that he is only a 50% shareholder and there is substance in the UK.

But we’d need more info from OP for a proper suggestion.

 

[polonieth]

Sure, you’d have to be sure the income will be classified correctly. I know someone managing a multimillion dollar fortune from Bangkok and he’s fine.



Why wouldn’t Cyprus work? 60 days and you can receive dividends tax free. I believe you can obtain advance rulings from the tax authorities.

His biggest advantage is that he is only a 50% shareholder and there is substance in the UK.

But we’d need more info from OP for a proper suggestion.

What more info would you need?

 

[JustAnotherNomad]

Are you actively involved in the daily business? Would you be fine with paying corporate income tax in the UK and living off dividends for a wider choice of countries to relocate to? What kind of country are you looking for (climate, lifestyle, time zone, ...)?
As long as you are willing to actually physically move to a different country, there are lots and lots of options.

 

[polonieth]

Are you actively involved in the daily business? Would you be fine with paying corporate income tax in the UK and living off dividends for a wider choice of countries to relocate to? What kind of country are you looking for (climate, lifestyle, time zone, ...)?
As long as you are willing to actually physically move to a different country, there are lots and lots of options.

Yes, I am actively involved in day to day running, No staff on the payroll, however, just myself and business partner each as 50% owners.

The UK limited needs to stay as my business partner will stay in the UK so yes, we will continue to pay 20% tax on profits. I am fine living off dividends. I do not need to take a monthly salary at all.

Ideally, European (Asia is not for me, neither is South America) as I will be frequenting Scandinavia and back to the UK occasionally.