Company Bank Accounts

the O Reilly connection

What is the law in relation to company bank accounts? If Company A is incorporated in Bermuda and opens its main bank account in the UK, is the company bank account subject to UK or Bermuda taxes?

Peregrinus

https://www.boards.ie/discussion/2058310689/company-bank-accounts

Location of the bank account is not usually the central question.

Where does company A generate its income? If company A is carrying on a trade in (say) the UK, then the profits of that trade will be subject to UK corporation tax, regardless of the fact that company A is incorporated in Bermuda and regardless of where the profits are banked.

Suppose company A also carries on a trade in France. The profits of that trade will be taxable in France. If the company remits them to the UK the question arises of whether the profits are now also taxable in the UK?

The quick-and-dirty answer is"

If company A is incorporated in the UK, it's liable to UK tax on the profits of its worldwide business (but it gets a full credit for foreign tax paid on profits earned outside the UK).

If company A is not incorporated in the UK but has its head office there , it's only liable to tax on the profits (a) generated in the UK, or (b) generated elsewhere but remitted to the UK.

But this gets very complicated very quickly, with tax treaties, anti-avoidance legislation, etc coming into play and cutting across these basic principles.

Plus, of course, this is just UK tax law. Other countries might have entirely different tax laws in relation to the foreign earnings of companies.

the O Reilly connection

https://www.boards.ie/discussion/comment/121023622#Comment_121023622

So is it unusual for Irish or UK banks to offer offshore banking facilities?

Victor

https://www.boards.ie/discussion/comment/121029867#Comment_121029867

Unusual, but not necessarily abnormal. With internet banking, several non-traditional finance centres have developed. Also, a company may have many bank accounts, depending on its needs, e.g. day to day banking might be met from a local account, but big purchases might come from a foreign account.

the O Reilly connection

thank you

Marcusm

https://www.boards.ie/discussion/comment/121023622#Comment_121023622

Peregrinus

I have no idea where you get the idea that remittance basis applies to the taxation of companies in the U.K. - it simply doesn’t. Plus, for U.K. resident companies, it is not the case that a worldwide basis generally applies as many/most will apply a branch exemption in respect of the profits of a foreign trade and/or in respect of the receipt of most types of foreign dividends. I appreciate that you are trying to provide examples but these are unhelpful ones as they might be assumed to be factual. Might be worthwhile to change U.K. to Ruritania.

Peregrinus

Marcusm is right to correct me. The default position in UK law is that a UK-resident corporation is liable to tax on the profits of its worldwide trade, but between the provisions of double taxation agreements and the accommodations in UK law for overseas branches etc this default rarely operates in practice.

3DataModem

I know and Irish company that has a Lithuanian Bank Account, Spanish Bank Account, and Irish Bank Account, all of whom hold funds for the Irish company.

The location of the bank account is generally irrelevant to the tax liability, it's the domicile of the Company (and the countries the Company does business in).

Edit:  Peregrinus' answer above is good.