Forum Moderators: martinibuster
If you want to know about taxes in other countries please go to a tax forum!
Are you a member of the tax police? :)
I am British. I live in the UK. I have to pay income to the British government on any income I earn in the US, even if I do not bring the income to the UK. I do not have to pay the US government anything, however, because I do not live in the US. If I were a US citizen, living in the UK, I believe I would have to pay tax to the US government first - then tax treaties between the US and the UK would protect me from paying tax twice (in the US and UK).
If you are German, you could live in *some* other countries (like the UK), earn money in the US, and if you do not bring the money in to the UK then you will not have to pay tax in the US or in the UK. Essentially, you would not have to pay tax at all. You could spend it on a nice house in Italy for all anyone cares. The UK is a weird place in this respect; any individuals of any nationality EXCEPT British (or Americans, who get taxed by their government *wherever* they live) can take advantage of this, which is pretty unfair on all the British people who live here.
I would definitely suggest that anyone who is not UK-domiciled (i.e. not "British"), and who is not a US citizen, and who earns good money online from international companies (mainly US companies today), should consider moving to the UK and becoming resident here for tax purposes for a year or two at least.
I am not an accountant, so don't take any of this as professional advice, but I have looked into this quite a lot. Things may have changed from when I researched it 2 years ago but as far as I could tell, this was the state of play at the time. My only option, as a British person who wanted to stay in the UK at the time, was to pay tax (40% of my earnings).
I have to pay income to the British government on any income I earn in the US, even if I do not bring the income to the UK.
Incorrect...I'm saying no more!
I LEGALLY have to pay income to the British government on any income I earn in the US, even if I do not bring the income to the UK.
There are various schemes which ill-informed accountants have suggested to avoid this, including:
a) setting up an offshore company, and hoping no-one notices
b) setting up an offshore company, managed by an offshore third-party, reporting to an offshore trust held by an offshore nominee company on your behalf. All three offshore entities may reside in different jurisdictions.
Such schemes rely upon the obfuscation of the beneficial owner's identity. If the UK Inland Revenue discover the identity of the beneficial owner, he/she will be fined and liable for tax.
If you are the UK-resident, UK-domiciled beneficial owner of a company in such a structure, then the UK Inland Revenue will consider YOU, as an individual, personally liable for tax on the company's profits, irrespective of whether the profits are distributed as dividends or simply left in the company, and will demand tax payments from you accordingly.
This is all subject to them being aware of the structure in the first place. The latter scheme I describe above is fairly convoluted but is still not guaranteed to "hide" you. The worst case scenario is that such a structure, if discovered, is perceived by the Inland Revenue to be evasion, not technical avoidance, in which case fines and quite possibly prison sentences are to be expected. Not my cup of tea.
If you are NOT the majority shareholder (beneficial or otherwise), and own a "small" percentage in such a company (I am not sure what small is, but it is less than 20%), then I believe the Inland Revenue will NOT tax you personally on offshore company profits unless they are distributed as dividends. What are you going to do with the majority of the shares, however? Do you trust another 4 or 5 parties to legally and beneficially hold the remaining shares?
My best "safe" and legal solution was to set up a UK limited company, pay 19% corporation tax on all profits up to £300k, and pay myself an annual maximum of £35k or so in dividends with the intention of paying myself slowly over the years at below the 40% tax rate - thus paying a total average tax of about 22%; this hasn't happened yet as my personal expenditure is a little too high so I'm perpetually in the 40% tax bracket.
If you have any legal suggestions by which I can avoid paying full UK tax on my overseas earnings, I would genuinely *love* to hear them. PM me if you prefer!
Have a company that is maintaining the website
and one company that hosts the website.
Or alternatively you could be a sole trader for any of the two tasks.
Then it is easy to split the money by writing invoices to your own company for hosting the website or writing scripts or cleaning the database etc...
And always try to "invest the money" in valueable domain names and website scripts as this will be deducted before taxation. So if you are 10,000 pounds above the 35k limit you could just spend 10,000 pounds in december on domain names or buy some competitive websites.
In other words, if at the end of the year or month Adsense would show earnings per country. Then we would know how much to pay to US government and to any countries that requires by low.
For other things it's great to keep record of your expenditures and ask your accountant to help you.
Keep all records and right off all exspences and pay attention to where your are (tax liability wise) throughout the year. You do not want to be in December and panicing because you just found out you have a large liability.
Good luck
