Submitted by Sestini & Co
| on Thu, 06/30/2022 - 9:05 | In Uncategorized
Rachel Sestini recently spoke to Pedro Guimarães of Canopy Community, an organisation that exists to support entrepreneurs and innovators on their lifelong journey.
Pedro is an entrepreneur with over 20 years of experience and Rachel is an entrepreneur herself, having founded Sestini & Co Group in 2013. The tax arm, Sestini & Co, works with high-net worth individuals and entrepreneurs to help them better organise their tax, specialising in working with clients in the US and UK.
During the interview, Rachel and Pedro covered many issues related to tax, including the recent trend where many US clients are moving from the UK to other European countries post-Brexit, in order to continue to enjoy the freedom of movement that the EU offers.
Rachel noted that if someone is considering moving jurisdiction, they should consider whether they’ll work remotely or be physically present, as there are a range of factors to consider for this.
As a hypothetical example, Pedro lives in Portugal but has US and UK clients. Rachel suggested the best scenario is generally to have a company located in the country where you’re working. Portugal is popular as it has the benefit of a good network of double taxation agreements with other countries.
Moving on to the US as another example, American residents pay tax wherever they live and the US has complex reporting requirements for people who own non-US businesses, so owning a non-US business wouldn’t be as favourable and for US residents it’s generally more tax efficient to have a US company.
If you’re not American and are moving from country to country, you’d need to break residence in order to ensure that you don’t incur tax liabilities in a country you’re not living in.
When considering where to locate a business, it’s important to note that the corporation tax rate varies significantly between different regimes, Rachel highlighted. There are a number of other factors to consider when deciding where to base a business, including the cost of payroll (social security tax), sales taxes and VAT. Legal and administrative costs will be a variable factor too and could tip the balance in favour of certain countries, especially if tax rates are similar in places. Employment law comes into the decision-making too.
Tax breaks are also available in different countries. In the UK there is the Enterprise Investment Scheme, where any equity investment that comes in can be approved by HMRC and qualify for tax relief — this can be attractive in the early stages of a business as you mitigate your risk. If you’re investing in a company in another country, you might not get the same tax advantages.
A changing environment
Bear in mind that the political situation is ever evolving, Rachel noted, and tax rules change frequently, so Sestini & Co reviews the tax situation with clients on a regular basis.
When asked for any final tips if someone is thinking of moving, Rachel stressed the importance of planning.
Whilst it’s not always possible to know exactly how long you’ll be living somewhere, it’s useful to consider different scenarios so that you can be prepared.
For example, the UK has a different tax year to most other countries (which run from the 1st January to 31stDecember). The UK’s tax year starts on 6th April and finishes on the 5th April. So, if you have tax filing requirements in both countries, you’ll have different deadlines and income will be reported differently on each tax return.
As another example, the US has a Federal and State system so may have different state filing and payment requirements depending on which area of the US you live, whereas the UK only has one tax system that applies.
To discuss your tax affairs, contact us on 01761 241 861 or email@example.com or make an appointment to visit us at our Somerset or central London office.