VAT / NO VAT on invoices to UK based companies

[DUS]

Hi,

I will be moving from Europe to Thailand next month. My intention is to work as a freelancer for my latest/previous employer in the UK. As such I will have to invoice this client (i.e. previous employer) on a monthly basis. As a "digital nomad" I won´t have a legal entity in TH and will do my online work "under the radar".

My question: Since I will not show VAT on the invoices is there a text I should put on my invoices to this UK client, such as „Recipient is liable for VAT“? Is this a "must", "nice to have" or should I absolutely stay clear of mentioning VAT responsibilities at all?

I hope there are some TH based freelancers reading this and who can provide some insight on this topic. Thank you!

Cheers

DUS

[blackcab]

You are not VAT registered so you don't charge VAT. You don't even mention it.

It really is that simple.

[rwdrwdrwd]

Where will you be receiving the money, and will you be invoicing as an individual?

Edited May 4, 2016 by rwdrwdrwd

[steve187]

where will be the business address on the invoice be located

Edited May 4, 2016 by steve187

[DUS]

Hi,

Thank you for your replies.

I will invoice as an individual with my address in Bangkok. The money will go into one of my UK bank accounts.

DUS

[Koosdedooes]

Hi,

Thank you for your replies.

I will invoice as an individual with my address in Bangkok. The money will go into one of my UK bank accounts.

DUS

How do you propose dealing with your UK income tax ?....income is UK sourced, your invoicing as an indivdual not as a legal company, you are liable for UK tax and NI

For your cunning plan to work, you need to invoice company to company, not individual to company

What you going to do when the UK company asks for your tax number in Thailand to pay you ?

Edited May 4, 2016 by Koosdedooes

[DUS]

How do you propose dealing with your UK income tax ?....income is UK sourced, your invoicing as an indivdual not as a legal company, you are liable for UK tax and NI

For your cunning plan to work, you need to invoice company to company, not individual to company

What you going to do when the UK company asks for your tax number in Thailand to pay you ?

Re income tax: On what grounds should I be tax liable in the UK? I am neither a UK citizen nor (no longer) a UK resident.

Re "Cunning plan to work" and company to company invoicing: I am surprised that you say that an individual can only invoice as a Company but not as an individual. This is contrary to everything I´ve read about this topic before. If I were still based in the UK I would start as sole trader.

Re tax number: Will look into this if and when asked. I spoke to "my client" in the UK about it and they said "they don´t care about my tax number". Obviously, that might change in the future or with another client.

Edited May 4, 2016 by DUS

[Koosdedooes]

How do you propose dealing with your UK income tax ?....income is UK sourced, your invoicing as an indivdual not as a legal company, you are liable for UK tax and NI

For your cunning plan to work, you need to invoice company to company, not individual to company

What you going to do when the UK company asks for your tax number in Thailand to pay you ?

Re income tax: On what grounds should I be tax liable in the UK? I am neither a UK citizen nor (no longer) a UK resident.

Re "Cunning plan to work" and company to company invoicing: I am surprised that you say that an individual can only invoice as a Company but not as an individual. This is contrary to everything I´ve read about this topic before. If I were still based in the UK I would start as sole trader.

Re tax number: Will look into this if and when they asked. I spoke to "my client" in the UK about it and they said "they don´t care about my tax number". Obviously, that might change in the future or with another client.

You wiil be liable because you are being paid from a UK based company as an indivdual into a UK bank account thats why, in essence your being paid a salary, you have no legal entity to invoice company to company through

the company itself has to account to the tax man where the money is going and these days, the HMRC certainly has an eye on things, in order to offset any individual tax liabilites, one has to invoice company to company....have you learned nothing from the release of the panama papers ?....why do you think all these foreign offshore companies where set up ?

Edited May 4, 2016 by Koosdedooes

[rwdrwdrwd]

Nearly posted this earlier, but it felt a bit off topic. It isn't now.

Since the UK taxes UK income of non residents, the best structure for a UK citizen wishing to freelance remotely for UK entities is to set up an offshore company and invoice through that.

For example

1 - Hong Kong Company with Hong Kong bank account

2 - Personal banking in Singapore

3 - Reside in Thailand

4 - HK company invoices UK clients

5 - HK company pays dividends to personal bank in Singapore

6 - Keep the money in Singapore until the next Jan 1st then bring it to Thailand.

This setup is 100% tax free, and no need to think about stuff like VAT.

The only ongoing costs are yearly audits and company registration renewal (all in around a grand a year). You can get even less bureaucracy by having a BVI company with a HK bank account.

The setup works because

- HK and BVI do not apply corporate tax to foreign income

- Singapore does not apply income tax to non SG income of non residents

- UK does not tax non UK income of non residents

- Thailand only taxes non Thai income of residents if it is remitted to Thailand in the year it is earned.

Edited May 4, 2016 by rwdrwdrwd

[rwdrwdrwd]

In terms of not being allowed to invoice as an individual - pretty sure that is not true.

http://www.accountingweb.co.uk/any-answers/issuing-an-invoice-as-an-individual-non-uk-resident

http://ask.metafilter.com/266947/Incredibly-basic-question-on-freelancing-invoices-and-self-employment

I certainly did it for years without issue, to the UK, US with some big companies.

Perhaps something has changed that I am unaware of though.

Edited May 4, 2016 by rwdrwdrwd

[Koosdedooes]

In terms of not being allowed to invoice as an individual - pretty sure that is not true.

http://www.accountingweb.co.uk/any-answers/issuing-an-invoice-as-an-individual-non-uk-resident

http://ask.metafilter.com/266947/Incredibly-basic-question-on-freelancing-invoices-and-self-employment

I certainly did it for years without issue, to the UK, US.

There is no issue invoicing as an indivudual, the OP is misunderstanding what i meant, but the fact is invoicing as an indivdual nets you "zero benefit" from a personal income tax point of view...

[rwdrwdrwd]

Ah I see - yes, I agree there is no benefit at all - the income is taxable.

[Koosdedooes]

Ah I see - yes, I agree there is no benefit at all - the income is taxable.

I suggest the OP does a bit of home study on what he is trying to do, tax implications and offshore company structures before jumping in with both feet

[DUS]

It is going offtopic but this is of course still hugely interesting to me.

When I asked a tax consultant / accountant in London about my scenario (the meeting took place last Jan) he clearly said that I would be not liable to UK income tax because by the time I am in Thailand I am neither a UK resident nor a UK resident and as such I would technical become ta liable in Thailand. Of course, tax liability in Thailand in my case this is another topic in itself so let's not get into a discussion about it. He said the fact that my client is a UK based company was irrelevant as far as my tax liabilities are concerned. He said I should imagine invoicing companies residing in the UK, in Germany, France and other countries around the world that this would not mean I become tax liable in all these countries. Well, that's how I remember what he told me. Unfortunatley, I didn't ask him about VAT because I was only interested in getting his view on my income tax situation.

[DUS]

There is no doubt that the income generated is subject to income tax. But I doubt HMRC will have a legitimate claim.

[Koosdedooes]

It is going offtopic but this is of course still hugely interesting to me.

When I asked a tax consultant / accountant in London about my scenario (the meeting took place last Jan) he clearly said that I would be not liable to UK income tax because by the time I am in Thailand I am neither a UK resident nor a UK resident and as such I would technical become ta liable in Thailand. Of course, tax liability in Thailand in my case this is another topic in itself so let's not get into a discussion about it. He said the fact that my client is a UK based company was irrelevant as far as my tax liabilities are concerned. He said I should imagine invoicing companies residing in the UK, in Germany, France and other countries around the world that this would not mean I become tax liable in all these countries. Well, that's how I remember what he told me. Unfortunatley, I didn't ask him about VAT because I was only interested in getting his view on my income tax situation.

Your source of imcome is in the UK, your using a UK bank account being paid from a UK company as an indivdual, in other words your working as an employee

your accountant maybe correct in saying your not liable for UK tax because your not resident, but any UK sourced income will be liable for income tax...i think you misunderstand what he was talking about, and this is reason both myself and others have suggested invoicing through an offshore company...company to company...then indivdual income tax in the UK doesnt come into it, i cannot comment on what happens in France or Germany, but do understand tax issues around incomes sourced in the UK

[Koosdedooes]

There is no doubt that the income generated is subject to income tax. B

ut I doubt HMRC will have a legitimate claim.

Your contradicting yourself...the income will be subjected to income tax in the UK and HMRC do have a legimate claim..why dont you try them on and see what happens...as you stand you are working for a UK company who is paying your salary as an individual in UK and HMRC will want their pound of flesh, only way you will not be liable for UK tax on the UK income is if its less than the personal allowance which used to be GBP 9k p.a....so if your earnings are less than 9k p.a. then you will not pay income tax and if this is case thats why the said accountant your not liable for tax, as your not earning enough Edited May 4, 2016 by Koosdedooes

[rwdrwdrwd]

OP - I found this book extremely useful in terms of getting to grip with the general approaches - https://www.amazon.co.uk/Non-Resident-Offshore-Tax-Planning-Your/dp/0957602405

Edited May 4, 2016 by rwdrwdrwd

[DUS]

Thank you! I am grateful for your input even though I am surprised by the conclusions you draw. I will certainly contact the accountant again.

My previous UK employer and "client to be" has been working with freelancers (former employees) across the EU and the rest of the world for years now. When I contacted a few of them some weeks/months ago, they all told me that they are being taxed in their respective home countries (where they set up as "sole traders" / individuals and not as companies/legal entities).

You stressed the fact that I plan to have my clients paying into one of my UK bank accounts as if was an important factor. If it is, I can easily have my clients pay into either my accounts in Germany or in Thailand. Would this, in your opinion, make a difference?

[Koosdedooes]

Thank you! I am grateful for your input even though I am surprised by the conclusions you draw. I will certainly contact the accountant again.

My previous UK employer and "client to be" has been working with freelancers (former employees) across the EU and the rest of the world for years now. When I contacted a few of them some weeks/months ago, they all told me that they are being taxed in their respective home countries (where they set up as "sole traders" / individuals and not as companies/legal entities).

You stressed the fact that I plan to have my clients paying into one of my UK bank accounts as if was an important factor. If it is, I can easily have my clients pay into either my accounts in Germany or in Thailand. Would this, in your opinion, make a difference?

Even a sole trader is a legal entity in the same way as a company is...so there is your answer, could also be a closed corporation, a limited liability company, sole proprietor, dependent on where you come from...but the fact remains these vehicles are legal entities...which your not operating as an individual, operating as an individual without fronting it through a legal entity you are seen for tax purposes as an "employee" and as a result you will be taxed as an employee

The bank account is is not the deciding factor...the UK company has to account where the money is going as part of their tax/ accounting practices..and regular payments to personal account in the name of "Mr Smith" will raise questions...however regular payments to "Smith Associates Ltd" Singapore or Hong Kong will not

Edited May 4, 2016 by Koosdedooes

[wjcdavies]

1. Dont invoice them vat (you cant unless you are invoicing them from a uk vat registered company...which you are not)

2. Ideally you woukd setup a thai company and invouce from this and funds would be transferred to this account. Ask ur accountant in thailand about how to invoice (vat?) and what luabilities you will have on this side in terms if income tax etc

[rwdrwdrwd]

Thai company would be a dreadful choice, huge tax implications as well as extreme bureaucracy.

Edited May 5, 2016 by rwdrwdrwd

[wjcdavies]

Well yes, that maybe the downside. The thing is i thought advise for alegit process was being sought; if its about maximising financial gains then why stop at circumventing thai tax....add uk vat invoice too!

[wjcdavies]

Well yes, that maybe the downside. The thing is i thought advise for alegit process was being sought; if its about maximising financial gains then why stop at circumventing thai tax....add uk vat invoice too!

[Gsxrnz]

I can't believe the conflicting opinions. Treat the taxman like a mushroom....keep them in the dark!

The OP should invoice in GBP, no VAT (either UK or Thai). Get the GBP paid to his UK account. He will then be subject to UK non resident tax status on any interest earned, but not the core payments, which doesn't mean bugger all as he shouldn't declare the income in the UK or in Thailand anyway.

His customer has a legitimate invoice in the UK so he has no problems.

Problem sorted.

Anybody who volunteers to pay tax is warped.

[wjcdavies]

I guess that's why some pay so much, to compensate for the ones who don't want to.