Controlling UK Ltd from Belgium

[Rais]

Hi,

Have been looking on the internet to find a conclusive answer about this, but did not manage to find it. This forum seemed to be most related to my specific situation. Looking to get at least get some pointers on where to look.

To begin, I'm a belgian citizen and resident. I'm also an internet entrepreneur and consultant. Most of my income is semi passive income which is derived from several software products, with the occasional consulting assignment thrown in. All of the income from these products and services comes into a single BVBA/SPRL, of which I am the only director and shareholder.

Now, I'd like to set up a new internet based business. Because of the low capital requirements, I'd like to use a UK ltd company for this. I'll also be moving to the UK later this year or next year. This company would essentially act as a sort of holding company for intellectual property. Royalty payments would be received and paid out to certain parties, in addition to a management fee that'll be paid to my belgian BVBA/SPRL (for the time being).

Many solutions seem to imply that you have to register a belgian branch, but it is my understanding that this is only required if you actually want to pay out salaries to employees/directors. Also, what are the tax implications of this?

Any pointers that could help are greatly appreciated!

[northernladuk]

Did you read the thread on Contracting in Belgium? I know it is about UK based contractors working over there but you do have a UK LTD in common so must be something in 28 pages of responses to help??

[BlasterBates]

My understanding:

If you do business in Belgium i.e. you have a presence there, which you will initially, then you do need a Belgian branch. Once you move to the UK and work from there then you can dispense with the Belgian branch. You can't control a UK co from Belgium, especially since you've been there from the outset. It isn't simply the case that a UK Ltd is only taxed in the UK. European law allows you to use foreign EU companies, but it doesn't change the way you pay tax. You might not be a director on paper but you would effectively and I suspect this would get you into trouble in Belgium.

I would see an accountant because cross border business and tax is complicated.

[Rais]

Did you read the thread on Contracting in Belgium? I know it is about UK based contractors working over there but you do have a UK LTD in common so must be something in 28 pages of responses to help??

Twice. There's a lot of useful information in there, but theres also a lot of information that contradicts each other.

My understanding:

If you do business in Belgium i.e. you have a presence there, which you will initially, then you do need a Belgian branch. Once you move to the UK and work from there then you can dispense with the Belgian branch. You can't control a UK co from Belgium, especially since you've been there from the outset. It isn't simply the case that a UK Ltd is only taxed in the UK. European law allows you to use foreign EU companies, but it doesn't change the way you pay tax. You might not be a director on paper but you would effectively and I suspect this would get you into trouble in Belgium.

I would see an accountant because cross border business and tax is complicated.

Yes, I will. Just want to get an idea of what it encompasses. I don't really care on where it is taxed, I just want to know what the pitfalls are. An Austrian acquaintance has a UK holding company without the local branch (ownership of certain intellectual property plus investors) and a local AT GmbH (BVBA/SPRL equivalent). He's also the only director - trying to find out how to work in a similar way (if possible) in a legal way.

[ASB]

You can't control a UK co from Belgium

[picky]
Of course you can. You could control it from Venus if you could get there. (Caveat: there may be Belgian law which attempts to prevent it, but that would give rise to interesting issues under international treaties).

i.e. can't is much too strong a word. That implies some sort of prohibition.
[/picky]

However, that said, I certainly agree that the taxation consequences will be interesting. From a POV of the UK authorities the business will probably be resident and ordinarily resident in the UK and would be expected to pay UK taxes on its worldwide income. There may potentially be some reliefs under DTA's dependant upon other factors.

The residency of the company should not affect the residency of the controlling directors.

From the Belgian POV the OP will still be resident in Belgium, at least in the interim, thus his position is likely to be:-

1/ UK will want PAYE on directors fees - though this isn't necessarily certain - it depends whether he was resident in the UK before taking up the position. If he is NOT travelling to the UK to undertake directors duties then he is probably OK, if he is travelling and the duties are very limited then they may fall under the allowable guidelines (can't be bothered to look them up but 30 days sounds familiar though this has always been contentious).

In effect the UK would probably like to tax the directors fees and bonus but may well have no basis on which to do.

2/ The income from the UK company will come under the Belgian tax rules and be chargeable accordingly. In the event that they have suffered UK tax there should be relief available under the DTA for this, either that the UK gets sole taxing rights or credit is obtained.

3/ Because the OP is resident in Belgium this may mean that the company is considered, by the belgian authorities as Belgian resident. They will then also seek to charge whatever is attributable under the Belgian corporate tax rules. This could be the entire income of the company or it could be just that attributable to Belgian business (dependant upon how the Belgian corporate taxation rules kick in). Again of course some reliefs should be available under the DTA's.

Of course, the same problem exists with wherever the company does business.

The OP also mention royalty payments and licencing/management fees. This is an area of particular concern to all taxation authorities, because by being a little creative substantial profits can be moved between regimes whic coincidentally have more favourable taxation rules.

Certainly what the OP wants to do is entirely possible, it is likely to mean that all the income is effectively subjected to the higher rate between the countries.

Social Security is also relevant. In terms of the salary and any bonus paid whilst the OP is non resident this should not be subject to EE or ER ni.

[BlasterBates]

Lets put it this way, you're living in Belgium and you have a business, then normally you should register it in Belgium. It is what you do on a day to day basis, manning the phones, negotiating with clients, chasing up revenue, checking the accounts etc etc...this is a business activity in Belgium and should be registered as such.

If you hand it over to a bunch of accountants who carry this out in the UK then that's fine then it would be a UK business, and if you fly there two days a week and work there that's fine, even if the royalties stem from Belgium because it would be a UK export company. The point is where is the "activity".

That's what I mean you can't sit their doing all the work for the business in Belgium and then claim it's actually a UK co.

[ASB]

Lets put it this way, you're living in Belgium and you have a business, then normally you should register it in Belgium. It is what you do on a day to day basis, manning the phones, negotiating with clients, chasing up revenue, checking the accounts etc etc...this is a business activity in Belgium and should be registered as such.

If you hand it over to a bunch of accountants who carry this out in the UK then that's fine then it would be a UK business, and if you fly there two days a week and work there that's fine, even if the royalties stem from Belgium because it would be a UK export company. The point is where is the "activity".

That's what I mean you can't sit their doing all the work for the business in Belgium and then claim it's actually a UK co.

I do largely actually agree. But this is precisely why corporates generally also have residency rules associated with them to. The point was that there is nothing to prohibit a Belgian being sole director, employee etc of a UK company. The taxation consequences will flow from how and where it is managed and what and where it's operation are.

Royalty and IP related payments can also have interesting VAT consequences, so that is another area the OP needs to consider carefully.