Have Tax Questions? Ask a Tax Expert for Answers ASAP
My business is predominantly buying products in bulk from UK wholesalers and reselling on Amazon UK and I also make a few sales on it's other European websites. With the view of moving to China I have outsourced the handling and preparation of the goods to a specialist UK company, which yes is a cost to me but the only solution I saw to continuing the business as is. So whilst in China my role would be reduced, hands free, instructing and overseeing the process via the internet.
So bearing this in mind, if I ran the business as a Ltd Co, took a salary of no more than the personal allowance limit and drew any other profits as dividends, paid any VAT due, I assume that would cover me as far as HMRC are concerned, but would I be liable for any Chinese tax, when all I am doing in China is purchasing stock in the UK via the internet, to sell to UK residents, and also liaising with my outworkers? Is this deemed to be 'working' in China?
If I retain my UK bank account to which any salary or dividends are paid surely the Chinese authorities cannot tax it!? Then am I free to use my UK cashpoint card at a Chinese ATM without impunity, or better still, open a Chinese bank account and transfer funds from the UK occasionally!?
I'm not trying to avoid taxes I just need to know the simplest and most cost effective route to take, say for a gross income of GBP40,000?
Put the business through an UK company would be my advice. Deduct expenses. Pay yourself and your wife and children even 4500 yuan each [GBP 460]. That is tax free in China. Their 20% rate is for the next 4500 yuan [1500 at 10%]. An income of 40K [just over 390K yuan] is well up into the Chinese 45% rate of tax.
My wife has a job to go to in China so I don't imagine she'll want tax free money from me. My kids are not yet teenagers, is it ok to pay them?
Should I do anything about my tax status with regards ***** ***** remain UK or change to China?
Would I still be liable for VAT in the UK or does the P85 exempt me from all UK tax?
No, the P85 is purely an Income and Capital Gains Tax document.
If the company you operate goes over the 82K VAT turnover limit in any one year then it will have to be registered and VAT will have to be accounted for on the UK based business in the normal manner..
So I would still be liable for UK VAT? Or some sort of Chinese sales tax?
What about company profits over and above expenses and the tax free salary allowance?
OK, I think I'm getting the idea!
So to summarise, any profits on my Ltd Co would be liable to UK tax whilst personal and family drawings (salary, divs, etc) over the 4500 yuan allowance would be taxed in China.
Is that correct?
Also, going back to the mention of payments to children, would these need to be credited to each child's bank account, could it be paid into my own, or could I set up designated accounts for them that I had access to? If all paid to my account would they need to be seen as separate payments or would one combined payment be ok?
.......and thank you for your advice.