Our first blog on the topic of working overseas, summarised the process by which we ensure our ‘Proactive and Commercial’ objectives are achieved. The first stage is ‘Understanding the Project’.
When asked to advise the tax consequences of any overseas project, we firstly ask clients to describe exactly what they will supply: i.e. is it a sale of goods; services; equipment rental; hire of personnel or any combination of these? The various overseas tax consequences, both for corporates and their employees, differ significantly for each of these.
We also establish exactly where the overseas work will be performed and, in particular, whether this will be onshore or offshore in the foreign country. This information is vital as the overseas tax consequences between onshore and offshore work can vary considerably, whether under the overseas country’s domestic law or any relevant double tax treaty. We therefore must be able to differentiate between onshore and offshore work so we can advise accordingly.
The expected duration of the overseas work requires to be established, and any likelihood of work extensions. This is necessary as, in many countries, the duration of time spent in the overseas country can determine whether or not a tax liability arises.
Who will perform the work overseas? Employees, contractors, self-employed consultants or any combination? The overseas income tax and social security consequences must be established for each type of worker. In addition, we must identify whether our client will have any wage tax withholding responsibilities (akin to UK PAYE) for all types of worker used.
Finally, we should know who our client’s customer is and, in particular, whether that customer is registered in the overseas country in question. This often determines whether the customer has any withholding tax responsibilities when they come to pay our client’s invoices.
Once we have a detailed description and understanding of the overseas project, it is vital that the draft contract for the work is reviewed, for tax purposes, before it is signed. Our next blog will explain why this stage is critical, and also how AAB assists clients perform such reviews arriving at final contracts that are robust to any tax authority challenges, thus adding commercial value to them.
if you would like to discuss this topic further, please contact Ruth MacNamee, Assistant Manager, email@example.com