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Where Taxpayers and Advisers Meet

UK sales manager of Cyprus company

AlexCh
Posts: 8
Joined: Sun Mar 11, 2018 10:43 am

Re: UK sales manager of Cyprus company

Postby AlexCh » Mon Mar 12, 2018 2:31 pm

Like I mentioned earlier a office is a fixed place of business and therefore a taxable presence is created. The Cyprus Entity would need to register

https://www.gov.uk/hmrc-internal-manuals/international-manual/intm264300

The standard setup would be setup a UK Subsidiary, register for PAYE with HMRC and give the employee a UK contact with salary and other benefits. UK company would pay corporate tax on any sale generated but with the tax much lower in Cyprus you can still have an agreement between UK And Cyprus company for management fees.
Thank you very much for the info.
But it seems we don't have PE now because of:
1) We have an agent of independent status +
2) Our activities (leads generation and sales)whether conducted through a fixed place of business or by an agent, are ppreparatory or auxiliary in character in relation to the business as a whole.

Does it work in our case?

CTA2010/S1143 goes on to say that there is no permanent establishment in the UK if the activities here, whether conducted through a fixed place of business or by an agent, are preparatory or auxiliary in character in relation to the business as a whole. The statutory definition includes the activities that are listed as “activities of a preparatory or auxiliary character

Article 5(4):
e) the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary character;

f) the maintenance of a fixed place of business solely for any combination of activities mentioned in subparagraphs a) to e), provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character.’

GlobalTaxAdviser
Posts: 608
Joined: Fri Dec 05, 2014 1:18 am

Re: UK sales manager of Cyprus company

Postby GlobalTaxAdviser » Mon Mar 12, 2018 4:09 pm

See point C or the Cyprus/UK DTA. Office means fixed place of work hence PE

CTA2010/S1141(1) states that a company will have a PE if and only if:

a. it has a fixed place of business here through which the business of the company is wholly or partly carried on, or

b. an agent acting on behalf of the company has and habitually exercises here authority to do business on behalf of the company.

CTA2010/S1141(2) lists examples (which is not an exhaustive list) of ‘fixed places of business’ such as:

a. a place of management,

b. a branch,

c. an office,

d. a factory,

e. a workshop,

f. an installation or structure for the exploration of natural resources,

g. a mine, an oil or gas well, a quarry or any other place of extraction of natural resources,

h. a building site or construction or installation project.

AlexCh
Posts: 8
Joined: Sun Mar 11, 2018 10:43 am

Re: UK sales manager of Cyprus company

Postby AlexCh » Mon Mar 12, 2018 4:27 pm

See point C or the Cyprus/UK DTA. Office means fixed place of work hence PE

CTA2010/S1141(1) states that a company will have a PE if and only if:

a. it has a fixed place of business here through which the business of the company is wholly or partly carried on, or

b. an agent acting on behalf of the company has and habitually exercises here authority to do business on behalf of the company.

CTA2010/S1141(2) lists examples (which is not an exhaustive list) of ‘fixed places of business’ such as:

a. a place of management,

b. a branch,

c. an office,

d. a factory,

e. a workshop,

f. an installation or structure for the exploration of natural resources,


g. a mine, an oil or gas well, a quarry or any other place of extraction of natural resources,

h. a building site or construction or installation project.
So do you mean the exemption does not work in our case
CTA2010/S1143 goes on to say that there is no permanent establishment in the UK if the activities here, whether conducted through a fixed place of business or by an agent, are preparatory or auxiliary in character in relation to the business as a whole. The statutory definition includes the activities that are listed as “activities of a preparatory or auxiliary character

What does CTA2010/S1143 mean then?

GlobalTaxAdviser
Posts: 608
Joined: Fri Dec 05, 2014 1:18 am

Re: UK sales manager of Cyprus company

Postby GlobalTaxAdviser » Mon Mar 12, 2018 5:14 pm

Preparatory or auxiliary would be considered to be minor activities like supply of information, scientific research, advertising etc

The link I sent was domestic law but DTA supersedes whatever the domestic law says

AlexCh
Posts: 8
Joined: Sun Mar 11, 2018 10:43 am

Re: UK sales manager of Cyprus company

Postby AlexCh » Tue Mar 13, 2018 10:18 am

Preparatory or auxiliary would be considered to be minor activities like supply of information, scientific research, advertising etc

The link I sent was domestic law but DTA supersedes whatever the domestic law says
Thank you for your reply
But as I understand lead generation/sales should be considered as a preparatory or auxiliary activity for an IT company like ours.
Trading is not our main activity - we provide software development services, and the salesperson just does preparatory or auxiliary work - finds clients and communicates with them.
Plus, even if we had this PE it seems there would not be any Corporation tax liability in the UK because all contracts are signed with our Cyprus company and all invoicing associated with it, not with nonregistered UK sales office.

GlobalTaxAdviser
Posts: 608
Joined: Fri Dec 05, 2014 1:18 am

Re: UK sales manager of Cyprus company

Postby GlobalTaxAdviser » Tue Mar 13, 2018 1:43 pm

Lead generation would not count as preparation and auxillary and would be considered as major activity

A office is a fixed place of work under DTA and hence a permanent establishment has resulted.


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