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Where Taxpayers and Advisers Meet

Partner in LLP invoicing LLP from foreign entity - possible?

ololol
Posts: 3
Joined: Mon Oct 12, 2020 12:41 am

Partner in LLP invoicing LLP from foreign entity - possible?

Postby ololol » Mon Oct 12, 2020 12:49 am

Hi

My partner (UK citizen) and I (Polish citizen) have formed LLP in the UK to provide consultancy business. We as individuals are partners in LLP.

Apart from LLP, I have a sole trader legal entity in Poland, which enjoys decent flat tax rate of 19% (regardless of income) vs. 32% personal income tax.

My partner is reporting taxes in the UK on his personal level.

My question is - can I use my sole trader Polish entity to invoice LLP for my share of money -> be taxed in Poland with 19%?

Example
  • Client wires us 1,000
    I invoice LLP and draw 500 -> taxed in Poland
    Remaining 500 is drawed by my partner -> taxed in the UK
Not sure if explained correctly, but you hopefully get my idea. What are my options?

Thanks!

bd6759
Posts: 3297
Joined: Sat Feb 01, 2014 3:26 pm

Re: Partner in LLP invoicing LLP from foreign entity - possible?

Postby bd6759 » Mon Oct 12, 2020 1:19 pm

No. That’s not how a partnership works.

ololol
Posts: 3
Joined: Mon Oct 12, 2020 12:41 am

Re: Partner in LLP invoicing LLP from foreign entity - possible?

Postby ololol » Tue Oct 13, 2020 1:54 am

Yep, figured it out and got this idea - don't see any issues here, but shout if I'm mistaken.

We dissolve LLP and create LP instead - where only my friend is the sole member.
I would break all legal ties with the UK and only own my sole trader entity in Poland, where I reside.

In terms of accounting

Clients wires 1,000 to LP -> revenues for LP of 1,000
I invoice LP for 500 -> expense for LP of 500 -> revenues for myself for 500
LP’s profit is 500 -> which is all distributed to my friend as a sole owner of LP

This way I can still enjoy my favourable taxation in Poland and there are no issues about cash distribution we encounter when I’m a partner.

Any question marks here?

bd6759
Posts: 3297
Joined: Sat Feb 01, 2014 3:26 pm

Re: Partner in LLP invoicing LLP from foreign entity - possible?

Postby bd6759 » Tue Oct 13, 2020 10:01 am

That doesn’t work either.

1. A partnership cannot have one partner. That’s just nonsense.

2. Invoicing a trading entity does not necessarily mean that the entity can deduct that amount in computing its taxable profits.

ololol
Posts: 3
Joined: Mon Oct 12, 2020 12:41 am

Re: Partner in LLP invoicing LLP from foreign entity - possible?

Postby ololol » Tue Oct 13, 2020 1:25 pm

You're right, I misread the thing with just one partner.
I will speak to an advisor, but what would be my options then (except my friend setting up a sole trader and me invoicing him - as we need a 'prestige' element with legal entity for our clients)?

bibescu
Posts: 20
Joined: Tue Sep 21, 2010 9:33 am

Re: Partner in LLP invoicing LLP from foreign entity - possible?

Postby bibescu » Thu Oct 15, 2020 7:33 pm

Firstly, it is important to know if you are a tax resident in the UK.
In this case, you are taxed on your worldwide income.


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