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bigduckontax
bigduckontax, Accountant
Category: Tax
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I have an UK Limited Company.From the UK ltd i pay myself

Customer Question

I have an UK Limited Company.
From the UK ltd i pay myself a salary in Holland. Over this salary i pay income tax and social security costs.
The end profit, after paying all the costs is around 30.000 pounds a year.
Over this i pay company tax a 20% VAT 6.000pounds.
finally a 24.000 Pound are left over, taxed, in the company.
In holland they pay 15% dividend tax.
There are tax agreement between UK and holland.
As i read it, they say that, due to double taxation you do not have to pay the tax again, when i take the money out of my LTD. and transfer to holland.
I should pay 15% dividend tax,
but this already had been taxed 20% in the company.
is this correct, according tax agreements holland/uk?
rgrds
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question. Unfortunately, not quite; always bear in mind Benjamin Franklin's dictum that in life there are but two certainties, death and taxes.
If you are a director of an UK company you are an employee per se and must be remunerated under PAYE arrangements. There is no way around that and you should be paying UK Income Tax and NI on any salary paid by the company. Failure so to do could make the company liable to penalties from HMRC for non compliance with PAYE regulations. I assume from the tenor of your question that on this salary you are paying Dutch Income Tax. If so this is wholly improper. I have explained that you should be paying UK taxes and any tax deducted would be allowed as a tax credit against any Dutch tax liability on the same income stream under the Double Taxation Treaty between the two countries.
Dividends under the UK Corporation Tax (CT) regime are paid with a notional 10% deduction of income tax, but dividends are not allowable against CT. If the company declared a dividend and paid you same then persumably Holland would apply their rate of tax (15%) but the tax credit at 10% created would offset this leaving an additional 5% liability.
I am so sorry to have to rain on your parade. If you are operating under the Dutch tax regime you may need to consult a local, trusted professional to assist you in this matter.
bigduckontax and other Tax Specialists are ready to help you
Customer: replied 3 years ago.

Thank you very much for your reply,

i do note that i work as a service provider out of holland.

the salary what i get, goes through a payroll service in holland that sends the uk limited a monthly invoice.

i am not the director of the uk limited.

my wife is the (non uk resedent director) of the uk limited.

According my accountant this is accepted by th HMRC.

What about director not having a salary?

then all above should be withing PAYE regulations.

regarding the tax and dividend, yes its difficult, i get many different answers on this. everytime i hesr new stories about tax agreements between holland and the UK.

i will have to dig deep into this.

regards

Expert:  bigduckontax replied 3 years ago.
There is no problem with a director not being remunerated. I am the Company Secretary of two companies, in neither of which is the director paid. It is a perfectly normal practice frequently seen in clubs and voluntary organisations which operate under a limited company envelope. You have done the correct thing in PAYE terms, thank goodness.
The Double Taxation Treaty regarding dividends says the following:
'Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State.'
So the advice I gave you is substantially correct and you may incur the additional 5%, the difference between the Dutch tax on dividends and the UK tax credit. You can find full details of the treaty from the link below; Section 10 covers dividends.
http://www.hmrc.gov.uk/taxtreaties/in-force/2008-netherlands-uk-dtc.pdf
As I warned you, you may need to consult a Dutch tax expert locally.
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Customer: replied 3 years ago.

Thank you for the details and helpful link.

Regards

Expert:  bigduckontax replied 3 years ago.
Thank you for your support.