Director of UK ltd company, moved to Greece permanently - brain is melting over tax compliance šŸ§ 

Tax and legal
1

Hi, first post here. Really happy to be part of the community.

Could really do with some guidance to solve my remote working conundrums.

Essentially Iā€™m a digital marketer and who moved out of the UK in 2019. I set up a UK ltd company in 2020.
All of my work is online, I setup partnerships with companies all over the world, and get my income from various affiliate platforms.

The plan was/is:

  • work remotely in Greece as a non-resident director for my UK company
  • take income as a small salary + dividends, declaring this as worldwide income in Greece and pay the tax difference according to the dual tax treaty

However after taking advice from a few specialists, it seems that I would most likely run the risk of ā€œpermanent establishmentā€ rules ie that my company should actually be based in Greece, not the UK - due to the fact that Iā€™m the only employee and Iā€™m making all the business strategy decisions.

Iā€™ve also been advised that I would be operating a ā€˜dual resident companyā€™ and would likely need to apportion my profits between the UK (as the company is registered there) and Greece, as I operate the business from here.

My intention is to only pay taxes in the UK, (and then declare this in Greece as worldwide income as per the DTT) because even though I donā€™t live there any more, thatā€™s where Iā€™m from, thatā€™s where my business advisors are, my industry contacts - despite the fact I can conduct everything remotely.

I would like, at all costs, to avoid paying tax directly into the Greek system, or working as a Greek-resident contractor for my UK company. Not only is this not tax-efficient, it makes no sense as I will never be doing any business in Greece and we already have a tax treaty to deal with cases like mine.

Really scratching my head on this one. No-one has come up with a solution for me yet, apart from incorporating in the BVI or somewhere else!

Final word. Iā€™m not trying to dodge taxes, do anything illegal. I just want to be able to operate my UK company from Greece, and be compliant in both countries.

Looking forward to any insights :pray:

2

The only way you are going to be able to avoid paying taxes in Greece is to not exceed 182 days of residence in the country. As a non resident you would only be liable to pay tax on Greek sourced income. If you stay 183 days or more you are going to get taxed on your worldwide income. You would be able to get relief for any tax paid in another country where the income is sourced but any Greek tax due in excess of that relief would have to be paid. The best way for you to minimize your tax exposure would to be to create a limited partnership. That way money retained in the partnership would be untaxed until it was distributed to the partners. You could take little out to keep your taxes low while in Greece and then at some point in the future move to a low tax jurisdiction and take the money you have accumulated out.

Here is a guide that might help. https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Tax/dttl-tax-greecehighlights-2020.pdf

1 Like
3

Thanks Callum, Iā€™ve not considered the partnership route - Iā€™ll do some research in this area.

Regarding paying taxes in Greece, I have no ā€˜Greek sourced incomeā€™ - all of my income comes from various monetization platforms on my websites, and gets paid directly into my UK business account.

So, in my understanding I will pay taxes in the UK as normal, and then this will be declared to the Greek authorities (as my worldwide income), and then I will be taxed whatever differential is calculated in Greece, as per the tax treaty.

My problem is that as a non-UK resident sole director, HMRC may consider that my company is actually a Greek company, not a UK company, despite the fact I have zero Greek sourced income.

4

Here is some information on Partnerships in the UK. Differences Between A Business Partnership & A Company

1 Like
5

Jeff, this is where you are confused: You say you have no Greek source income when in fact all your income is Greek source. What matters is where you perform the work.

Youā€™ll have a hard time legally keeping any of the income outside the Greek tax net if you (as the only person in the business) live and work full-time in Greece.

6

Thanks Thomas, yes it is confusing, however not as black and white as you state - at least according to the compliance experts Iā€™ve spoken to in Greece and UK.

Your assumption is correct if I was a sole trader, invoicing from a Greek address - this would undoubtably put me into the world of ā€˜Greek sourced incomeā€™.

However, itā€™s not necessarily the same case if youā€™re a director of a foreign company - where you would declare any salary/dividends as ā€˜worldwide incomeā€™, paying the tax differential in Greece, on top of the usual corporate/personal taxes in the UK (courtesy of the 1953 DTT).

According to to my consultant in Greece, the model I described above is legit, legal and non-problematic, assuming that indeed, my company is actually regarded by the Greeks as a UK companyā€¦

The real issues are from the UK side, one problem being that over time, Iā€™m increasingly likely to fall under ā€˜permanent establishmentā€™ rules, which then will cause my company to fall within the remit of Greeceā€™s tax laws.

Of course if thereā€™s absolutely no way to do what I want to do, Iā€™ll have to reincorporate in Greece, but Iā€™m prepared to explore all options including taking on staff, premises, in the UK - basically anything to avoid having to turn my UK business into a Greek business.

1 Like
7

+1 for Thomasā€™s comment, HMRC is happy that you pay taxes in the UK, but the Greek government is not, since you live in Greece, the Greek government considers you a UK company so you have to pay local corporate tax etc. Also, depending. In the country, using an offshore company when you could use. a local one is considered an offense, as in Italy.

You could do what Callum says, but it is not compliant because that company/partnership is still considered Greek based. To keep a partnership in the UK, you should have a reason to show why you need that, for instance, if you have another person or another company (a company not controlled by you) in the partnership, and that company or person is not resident in Greece.

BTW I did not know about ā€˜permanent establishmentā€™, interesting

1 Like
8

Note that I state ā€œas the only person in the businessā€.

While Iā€™m not expert on Greek taxes and how strictly they enforce rule in practice, your current setup will clearly be affected by their place of effective management rules for determining corporate tax residency.

There are many things you can do to give the company a firmer tax home in the UK, including hiring high level employees, management board members, etc there. Did you have a look at the tieā€“breakers in the Greek/UK DTT (typically article 4)?

Either way, as long as youā€™re still managing the company full time from Greece youā€™re very likely to always at least have a PE in Greece, so you better get help from professionals in regards to how you assign profits between the PE and UK entity.

Edit: The UK/Greece tax treaty is so old that it doesnā€™t follow the OECD standard format and the residency rules are laid out in Article 2, not Article 4. Hereā€™s a relevant section:

a company shall be regarded as resident in the United Kingdom if its business is managed and controlled in the United Kingdom and as resident in Greece if its business is managed and controlled in Greece

1 Like
9

Thanks Ricardo,

Interesting what you say about partnerships, Iā€™ll keep this in mindšŸ™

I think everything you say makes sense legally, but intuitively, if my customers/audience are in the UK , my industry contacts are in the UK, my business consultant is in the UK - then I canā€™t reconcile in my head why I should shutter my UK company and incorporate as a Greek entity.

1 Like
10

Very useful stuff Thomas, really appreciate your input.

I think this is the tactic I need to pursue - adding a directors/management, perhaps giving voting rights only to UK shareholders.

One other related question if I may. Regarding a business being ā€˜managed and controlledā€™ in country Xā€¦

Letā€™s say I had a software business, with my own servers located in a UK data centre, but I performed all of the work remotely in country Y.

In my mind, the physical infrastructure is integral to the business so would fall into the category of a PE. Or is my thinking way off?

*asking because all of the existing legislation Iā€™ve come across so far relates to business practices that pre-date the internet, and require a ā€˜physicalā€™ presence. Havenā€™t spoken to anyone who can translate existing rules into rules that apply to a business that is entirely ā€˜digitalā€™

11

Then it looks that you have a legitimate reason to have and keep a UK company.

12

Well, yes, you would think so. But legally it seems this is not the case.

13

Ask yourself this: Where is the value created? All the intellectual capital is created in country Y, and the location of where the servers are is pretty insignificant (unless it for some reason is important for the actual business), or if youā€™re employing a significant number of staff to run your own data center (not just having a server in someone elseā€™s).

Can server location be one of many factors that can weigh in one direction or another? Probably, at least in some countries.

But do you think (even intuitively) that it matters more for tax residency if you select London or Frankfurt when setting up your AWS account than where the value/IP is actually created? Is it the software you develop or where the bits are stored that will make or break your business?

Anyway, the hard part of your puzzle does not involve the UK at allā€¦ What you need to get expert advice on is the Greek perspective. What does it take (in practice) to keep a foreign registered company somewhat or completely outside of the Greek tax net? What would it take to only have a PE in Greece, and not risk the entire company being deemed tax resident there? And how do you legally minimize the amount of profit that needs to be assigned to the PE?

I canā€™t answer these questions, unfortunately. And I doubt anyone else here can either. So better find the best local tax advisors you can that are used to dealing with cross-border issues.

14

The value/ā€˜intellectual capitalā€™ I would say is created in my brain, but fuelled by meetings, interviews, business developments in the UK - not Greece. And that value is then marketed back to a UK audience, not a Greek audience.

Which is why Iā€™m trying to avoid incorporating in Greece, having a Greek company name, Greek company address, etc etc.

My question about servers is I guess moot from what you say, but I was wondering if youā€™d had any experience/knowledge of nomads using this type of infrastructure to determine PE, as opposed to renting an office etc.

Regarding the ā€˜hard piece of the puzzleā€™, Iā€™ve spoken to half a dozen accountants in Greece, as well as specialist tax consultants- and, as I said in a previous post, the problem is not in Greece, because Iā€™m not trying to ā€˜escape the tax netā€™, Iā€™m legally declaring all my WW income in my Greek tax return - the same principle to having a UK pension/savings/rental income whilst having a permanent residence in Greece.

Iā€™m guessing though that Iā€™ve exhausted the knowledge base here.

Not sure where to look next. Seems that tax specialists donā€™t have the answers, nor do remote-working experts.

Thanks for your help anyway

15

A practical way to address the PE risk might be to i)incorporate a Greek company which employs you and provides services to the UK company under a boilerplate service agreement with a clear ā€œno agencyā€ clause and ii)appoint a UK resident director to the board of your UK company who enters into all contracts in the UK and goes on the record as exercising mind and management from the UK iii) travel to the uk for a board meeting every now and then to make decisions, authorise contracts etc. If you do not enter into contracts for UK co while in Greece or manage the UK co in Greece there should be no obvious triggers for a PE.

16

Unfortunately, even though you have a legitimate reason to keep a UK company they are going to look at where effective managerial control takes place to determine tax residency. The other alternative is just not stay in Greece more than 182 days in a tax year. You could get yourself another bolthole in somewhere like Cyprus and stay half the year there.