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-   -   Double Taxation Agreement (https://www.englishforum.ch/finance-banking-taxation/107174-double-taxation-agreement.html)

turingmachine 23.02.2011 12:24

Double Tax Agreement
 
Hello,

I will be moving to Zurich this week to to start a 6 months contract as a software engineer. I was wondering if someone could help me as I am unsure if I am liable to pay an additional tax if I go back to the UK after 6 months. I will be taxed as a Suisse resident through a 3rd party payroll company and will be taxed 30% and my rate is 830CHF a day.

The recruiter has told me that I won't be taxed but a colleague has told me to stay in Switzerland for a year so I am not liable for any tax if I go back to the UK; otherwise I will had to pay the difference between UK and Suisse tax.

Thanks,
Jim.

turingmachine 23.02.2011 13:49

Double Taxation Agreement
 
Hello,

I am from London and will be moving to Zurich this week to to start a 6 months contract as a software engineer. I was wondering if someone could help me as I am unsure if I am liable to pay an additional tax if I go back to the UK after 6 months. I will be taxed as a Suisse resident through a 3rd party payroll company and will be taxed 30% and my rate is 830CHF a day.

The recruiter has told me that I won't be taxed but a colleague has told me to stay in Switzerland for a year so I am not liable for any tax if I go back to the UK; otherwise I will had to pay the difference between UK and Suisse tax.

Thanks,
Jim.

IanSmithUK 05.05.2011 00:26

Re: Double Taxation Agreement
 
Given your post was made in February, I would be interested to hear what you did, and if you went to Switzerland anyway, what your experience has abeen.

I am in a similar position in that I have been offered a six month contract and need to make a decision in the next day or two.

Thanks to these forums I found out about the "double-taxation" rule which my agency had known about but neglected to inform me about until I brought it up this afternoon. The agency called it the "183 day rule" and after I pointed out that we've gone from "earn about 100/day more than your UK daily rate through your own UK company at the moment" to "and pay a lot more tax and insurance, and pay for a higher cost of living, and expensive accommodation and occasional flights back to UK, and work a longer standard week etc" this wasn't looking like the contract that had been "sold" to me.

Like many (I suspect), I have been a bit naive going in and hadn't realised the various issues around Switzerland (had been told I couldn't use my UK company and would have to form a Swiss company, but not that it required 10,000 deposit). The trouble is the only contracts in my line of work (Silverlight development) seem to be the investment banks and I can't get a sniff of an interview in London for some reason so a contract in Switzerland seemed a good way of getting into this line of work that might in a year's time help me break the Catch-22 situation in London.

The agency are now talking about trying to negotiate a new one year contract with a longer (3 month) notice period to get round the double-taxation rule, but I'm not convinced that helps much as the end-client seems to have some track record of suddenly deciding to cut back on contractors or introduce 10% pay reductions or enforced holidays. Not getting a renewal on a six month contract, or being "let go" early would be a financial disaster with UK tax of 40% having to be paid on top of the Swiss tax.

Would love to hear any other contractor's experiences of starting out with this sort of six month contract.

05.05.2011 00:55

Re: Double Taxation Agreement
 
Many years ago I was told by BAE Stevenage personnel department that any money earned abroad should be kept off shore during the first tax year (6 April to 5 April) and should only be brought into the UK during (or later than) the following tax year.

Obviously you need to ask your UK tax inspector if this loophole is still open.

NotAllThere 05.05.2011 09:08

Re: Double Taxation Agreement
 
It's very simple. If you live in country A and are tax resident in A and B, then you pay taxes in A, as normal,,and submit a tax return to B. In your tax return you declare the taxes you paid in A, and that is deducted from your B liability. You then pay the difference. There are no refunds in double taxation - you pay the higher amount.

Given that, you need to work out your tax residency. You can be resident in more than one country. If you're in Switzerland for six months, then return to the UK, then you'll most likely be resident in both countries, and pay tax in CH, then the remainder in the UK.

Bear in mind that rates in Switzerland haven't fallen much in the last few years, but the exchange rate (to the UK) has altered dramatically. I'm convinced that agencies are using this to give what seems like a good rate to UK contractors, while enlarging their profit margin. It's what I would do...

You cannot work through your UK ltd co in Switzerland, except under very specific circumstances. You must go through a payroll company, or create a Swiss company, which takes 20'000CHF + a few K of fees.

Ittigen's loophole is almost certainly closed.

apacuk 15.05.2011 13:45

Re: Double Taxation Agreement
 
In general this is correct. However, between UK and Switzerland the Double Taxation Treaty is more beneficial and seems to suggest that Swiss earned income, if you're paid by a Swiss company and using a Swiss office, is only taxable in Switzerland and not taxable in the UK at all.

The caveat is that when the UK Tax work out your UK tax bands, they can take into account your Swiss earning in order to do so - so you'll probably find yourself in the UK 40% band.

This is what I'm being advised - I'm interested in any "real life" experiences of people who have done this. Of course, if you did pay UK tax on your Swiss earnings less a credit for Swiss tax paid, even though I believe this is wrong, I don't expect HMRC will correct anyone.

lankylewis 31.10.2011 19:39

Re: Double Taxation Agreement in UK
 
Hello
Not sure if this adds anything to the thread but I have been thinking about the dble taxation agreement with the UK and wondering if I have understood the situation correctly.

I am non-res in the Uk and now living is Switzerland.

We have an income in the UK as well as my salary here. My UK income is added to my swiss income to calculate the tax rate I pay on my Swiss salary. Does that sound correct?

Thanks for any advice.

terramundi 31.10.2011 20:54

Re: Double Taxation Agreement
 
yes, that's right. They use it to calculate your tax rate but you don't pay tax on it. However you pay UK tax on UK income (if that income is over the tax free allowance) - you'll have to fill in a UK tax return every year in order to pay your UK tax if you haven't had it deducted at source

We have never been asked by the UK authorities about our foreign income to calculate our tax rate in the UK - we are non-resident but domiciled in the UK. They have only been interested in income earned in the UK

fatmanfilms 31.10.2011 22:32

Re: Double Taxation Agreement
 
To stop being liable to UK taxes you have to 'LEAVE' permanantly , the definition of leave is open to interpretation however unless you are away for at least 1 UK tax year you will not have left.

If you have a wife, children & house available to you in the UK, you visit every 2nd weekend, it's most unlikely that the revenue will accept you have 'left permanantly', you would just be working away from home.

UK tax is self assesment, it's up to you to pay, not up to the Revenue to ask you to pay......

The Spartan 25.05.2012 15:32

Re: Double Tax Agreement
 
Nice to see someone had good advice before coming here, I for one had none and was told conflicting things. Your friend was indeed correct If you're not out of the country for a whole tax year you have to pay taxes in the UK when you return.

My searches to find some loophole have proved fruitless so I'm thinking of knocking it on the head and going back as lets face it, it's a bit of a sham in the sense that I lose 30% of my income here (only 8-9% in tax) and then the taxman in UK wants a slice on top.


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