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bigduckontax
bigduckontax, Accountant
Category: Tax
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I would like to know if hiring someone who is not a

Customer Question

Hi I would like to know if hiring someone who is not a resident in the UK and pay the taxes for them in the UK, could said taxes be compensated somehow against the taxes that someone would have to pay in their country of residence, if there is in place a treaty for the avoidance of double taxation between the UK and the other state?

Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question.
If they are not resident in the UK why are you paying UK taxes on their behalf? There is no requirement so to do as they are not liable to UK taxation; you can pay them gross. This saves an awful lot of palaver on your part.
The UK has hundreds of Double Taxation Treaties. You can find a list here:
https://www.gov.uk/government/collections/tax-treaties-signed-and-in-force
I do hope that I have shown you a way forward with your question.
Customer: replied 2 years ago.

Hi,

Thank you for your answer. I understand that they are not subject to UK tax...please allow me to explain a little:

I have been asked by a friend in Rumania who is an IT company owner...

so it is about software developers... in Romania, the taxes on labor force are very very high - for instance for a salary of 2000 Euro an employer has to pay approx. 85% of the net salary as tax. Normally, because the law permitted this the majority of the IT companies have them employed as authorised natural persons and paid for them approx. 25% as tax. However, this is no longer possible as they now will have to pay taxes as for any other employee, namely 85% tax.

So could we find a way.. paying taxes for them in UK and somehow compensate them against the taxes payable in Rumania?

Thank you,

Roxana

Expert:  bigduckontax replied 2 years ago.
The UK has a Double Taxation Treaty with Romania covering income tax. Any tax deducted in the UK would be allowed as a tax credit against Romanian tax on the same income stream.
If you paid them by paying into a UK bank account there would be no UK tax to deduct. They could then draw through an ATM in their own country.
Customer: replied 2 years ago.

Thank you for you reply and my apologies for not replying to you any sooner.

I understand your suggestion to pay them through a UK bank but we all know how difficult it is to open accounts for non-residents :)

So to understand correctly - if taxes are paid in the UK, in Romania there will be no other payments to make or will still be taxes to be paid in Romania as well?

Thank you,

Roxana

Expert:  bigduckontax replied 2 years ago.
OK Roxana, any tax deducted in the UK where he is not subject to tax would be allowed as a tax credit against Romanian tax through the Double Taxation Treaty, but the treaty does not protect against differences in tax rates and Romania is a very high tax rate country so he will probably have to settle the difference there.
I would suggest that to get around the tax position you open an additional bank account for the company and give him the ATM card. His emoluments can then be transferred to that account and he can draw on the card; a quick and simple solution.
Customer: replied 2 years ago.

Thank you. Misfortunately if we do this we will have to hire and outsource around 200 people, and opening an account for 200 people would be very difficult. :)

Thank you for your clarifications, this was a big help.

Have a nice day

Roxana

Expert:  bigduckontax replied 2 years ago.
Yes, well that does put a rather different complexion on it doesn't it?
Personally I would think it better that these operatives be paid gross and let them settle with the Romanian tax authorities. It would be much simpler for you that the palaver of running 200 PAYE accounts.
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Expert:  bigduckontax replied 2 years ago.
Thank you for your support.

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