Declaring company abroad and tax returns

Tonyunleashed

Hi,

I am ex-paye, currently unemployed on unemplyment assistance, and have never had to file either an 11 or 11e pay and file form, or a paye form 12.

I want to set up a one person one director german compnay, a varient of a GmbH called an UG or Unternehmergesellschaft (haftungsbeschränkt).
The compnay will not be making a profit as such (for now).

Also, the company (not I )will have an offshore german bank account.


My understanding was that I only have to do the whole pay and file thing if i actually have a non-paye income to declare, which initially wouldn't be the case. So on that basis, can I avoid filing a return decflaring the existance of the profitless german company, at least for now?


Do I have to complete the form 11 flavour of pay and file for this?
If so, for line 228 which asks you to enter the tax numbers of any company you are a director of, does this mean only irish companies or would the german details go here?

Alternatively, is it right not to enter it as above, but insted list the one euro shares as an acqusition in an offshore fund?

If I am not really self emplyed as such, can I avoid filling this return, or file it on paye form 12 when "disposing" of the shares (which will never happen) in satisfaction of my duty?

Thanks

TaxingTimes

Why would you want to set up a profitless foreign company?
However, other than the income tax issues you could be creating further problems:

I assume you are tax resident in Ireland.

As an Irish resident (and only) director of a foreign company, it is likely that you would make the foreign company resident in Ireland and subject to Irish Corporation tax filings, as well as foreign filings.

You should seek professional advice before setting up any corporation no matter where situated to wstablish all of th issues that could arise.

rainbowdash

TaxingTimes wrote: »

Why would you want to set up a profitless foreign company?

Presumably to make money in the future but not make any profit in the first year or so.

I am thinking of being in a similar position, setting up a UK company and drawing welfare benefits here until the enterprise is profitable. Its at the early stage so I would appreciate some comment from those who know.

Tonyunleashed

"As an Irish resident (and only) director of a foreign company, it is likely that you would make the foreign company resident in Ireland and subject to Irish Corporation tax filings, as well as foreign filings."

Could you please show me what this comment is based on? Why "likely".
Surely it is a foreign company, with a german registered office and resident in Germany, thereby entirely off shore and where profits would be taxed as foreign employments or foreign dividends?

Came accross this:

http://personalbusinesstaxguide.net/ireland/ireland_controlled_foreign_corporation_CFC_rules.asp

dbran

Hi Tonyunleashed

Taxing Times is right....

The place of incorporation is irrelevant to the tax residency of a company. It is the company's centre of management that effectively determines the residency status of the company.

http://www.revenue.ie/en/tax/ct/basis-charge.html

There are also tax treaties with Germany to consider.


Kind Regards


dbran

Tonyunleashed

dbran wrote: »

Hi Tonyunleashed

Taxing Times is right....

The place of incorporation is irrelevant to the tax residency of a company. It is the company's centre of management that effectively determines the residency status of the company.

http://www.revenue.ie/en/tax/ct/basis-charge.html

There are also tax treaties with Germany to consider.


Kind Regards


dbran

With Regard to Tax treaties:

A company, which is regarded, for the purposes of a tax treaty to which Ireland is a party, as resident in a territory other than the State and not resident in the State, is to be treated as not resident in the State TCA 1997 s 23A(4) .

With regard to TCA 1997 s23A(4) most tax treaties include in their article on Residence a “tie-breaker” clause whereby the residence of a company is to be treated as situated where its “place of effective management” is. According to the Commentary on the OECD Model Treaty, the place of a company's effective management is the place where key management and commercial decisions necessary for the conduct of its business are in substance made.

I was already planning to execute a power of attorney (i.e. legally give away my control to German residents) to permit the company administration to take place from a hired Registered Office which would also be listed as head office.

Also,

Central Management and control Test
The legislation does not define what constitutes central management and control of a company for the purposes of determining a company’s residence. The central management and control test is applied on the basis of fact and precedent.

Factors to be taken into account in establishing where the company's central management (Germany admin with power of attorney) and control lie include, for example, where the important questions of company policy are determined (in conjunction with german advisors/admins), where the majority of directors reside (ireland), where the negotiation of major contracts is undertaken (germany, company is to be german facing) and where the company's head office is located (Germany). Also, how the company deals with such matters as financing and capital structure (builidng reserves in a germany bank to work towards GMbH status, where there is profit), and where it invests surplus funds (Germany) should also be taken into account.

This rule or test emerged as a result of judicial decisions set down in case law. The most important of these cases is De Beers Consolidated Mines Ltd. v. Howe, 1906, 5 T.C. 198, and Todd v. Egyptian Delta Land and Investment Co. ltd., 1928, 14 T.C. 119. The former case found that a company’s residence is where its real business is carried out and that that was where the central management and control actually abides.
The “central management and control” test was endorsed in Bullock v Unit Construction Co Ltd 38 TC 712. This case is of importance in emphasising the point that central management and control is a question of fact and that central management and control is not necessarily located where it appears to be located, for example, where the board of directors holds its meetings. The ordinary residence of a company should in practice be regarded as determined by its place of residence.


However, if the main issue is liability for Irish Corp tax, and there is no profit to tax, does it really matter one way or the other?

All comments gratefully received!

Mr. Incognito

Oh Dear.

Read the charter.

If you want tax advice visit a professional.

Thread closed.