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Where Taxpayers and Advisers Meet

Tax risk on business entities

craig524
Posts:3
Joined:Thu Sep 01, 2016 10:25 am
Tax risk on business entities

Postby craig524 » Thu Sep 01, 2016 10:44 am

Hi,

We have a UK sales entity, and we intend to put it in Dormant, but currently still active; we also have a manufacturing entity abroad, we want to use the manufacturing entity to export goods to local channel partners in UK because they have better control of the market.

My only concern is whether we will being considered as tax evasion? Can anyone advice? thanks.

GlobalTaxAdviser
Posts:633
Joined:Fri Dec 05, 2014 1:18 am

Re: Tax risk on business entities

Postby GlobalTaxAdviser » Thu Sep 01, 2016 9:07 pm

Hi

No risk of Tax Evasion as long as the contracts are negotiated concluded overseas though you probably will have a permanent establishment in the company overseas and should pay taxes over there.

Kind Regards

GTA

craig524
Posts:3
Joined:Thu Sep 01, 2016 10:25 am

Re: Tax risk on business entities

Postby craig524 » Fri Sep 02, 2016 8:48 am

Hi GTA,

Many thanks for your reply, based on your comments I have concluded two potential issues, can you comments?

1, According to the place of effective management rule, if the contract has been negotiated and concluded in the UK, even the contract has been signed by the foreign manufacturing entity, the revenue should be recorded in the UK book and taxed locally?

2, If no UK sales staff negotiates or concludes any sort of contract within the country, but the contract has been concluded overseas, we will probably have permanent establishment issue, it is more likely than not the manufacturing entity has to be taxed in the overseas country where the contract has been signed?

GlobalTaxAdviser
Posts:633
Joined:Fri Dec 05, 2014 1:18 am

Re: Tax risk on business entities

Postby GlobalTaxAdviser » Fri Sep 02, 2016 11:42 am

Hi

I have known instances where the UK company negotiates the contract and the contract is concluded and signed overseas.

Some double tax treaties talk only about conclusion while some others mention negotiation and conclusion

It is a grey area and subject to interpretation in parts. The Substance of the transaction is the key

There maybe other factors in your decision to move like differing tax rates, costs etc

Kind Regards

GTA

craig524
Posts:3
Joined:Thu Sep 01, 2016 10:25 am

Re: Tax risk on business entities

Postby craig524 » Fri Sep 02, 2016 12:06 pm

Thank you!


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