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Self Employed UK, resident in Sweden Tax Advice

No UK company

philios33
post 24.Sep.2012, 11:20 PM
Post #1
Location: Gothenburg
Joined: 24.Sep.2012

Hi

Please could someone help me with what seems to be my unique situation.

I have looked on HMRC website & migrationsverket website and cannot find any useful information on how I should continue to conduct my business. I will first outline my original situation.

I was working a contract in London as a self employed person. Normally you would setup a company in the UK to get paid through since it is a bit cheaper tax wise, but I never got around to it and so I am still a sole trader. This means that I do not have a uk limited company, I simply pay tax via hmrc on any profits from my business. I do not have a seperate business bank account. I pay NI Class 2 when I receive a bill from HMRC and I pay the appropriate NI class 4 percentage on my profits. Simple right?

Now I want to move to Sweden. I have negotiated to keep my job (an ongoing contract) with my London company. I work remotely and I plan to stay in Sweden on a permanent basis here with my GF. Essentially my question is, What is the best thing to do now, regarding migration, social security & taxes?

Pay in UK, or Sweden? I especially don't want to pay tax in both UK and Sweden.

I initially thought I could do this (see link), since I have worked 25% of the tax year in UK already.

http://www.hmrc.gov.uk/cnr/ca3837-info.htm

This only actually is relevant to NI and has nothing to do with tax. I have also had a response from HMRC which has denied me this application. They say that because I wish to move permanently and be resident in Sweden, I must pay Swedish Social security. Fair enough, I thought. I will move everything over to Sweden then. One complication I forsee is how I get paid. I must get paid to a UK bank still because the company I work for is in UK, even though I am working in Sweden. I know that making overseas payments from my UK bank costs £25 a pop, so I want to try and avoid this if possible.

I moved at the start of September so I am here now and I need to register with migrationsverket. Problem is that because I am not employed or self employed in Sweden, will I have to register as "With my own assets"?

http://www.migrationsverket.se/info/199_en.html

This is fine, but it also states that I need to prove I am covered by social security in another country, which I cannot do If I move permanently. Ahhhhhhh. So perhaps starting a business in sweden is a better option.

http://www.migrationsverket.se/info/5967_en.html

A quote here says

"If you want to register as self-employed, you must prove that you own a business in Sweden."

AHHHHHHHHH. I dont own a business in Sweden. I want to start a business. So do I do this first??? This whole thing has me totally confused and would be glad if someone could offer me some free tax advice on what I need to do.

I know I need to visit migrationsverket within 3 months anyway to get a residancy permit, so perhaps they can help me. But I don't really want to go that route not knowing my options.

This is one option I have thought of. Start a swedish company. Apply for residancy permit as Self Employed. When I receive my money from my contract in the UK, immediately transfer it all to my Swedish company bank account. Pay Swedish Tax and Social Security on this income. DO NOT pay any tax or NI in UK. Pay myself a small salary and take dividends when I need them. And also, claim back costs of transferring funds as a company expense? If I do it this way, it's going to look dodgy to HMRC that I am getting paid in to a UK bank and not paying any tax in UK isn't it?

Sorry for the long post, but I think my situation is quite unique as I have found no-one has the exact same situation as me. I know that I will be paying swedish tax from uk income, but I don't really have any other choice, do I?

Thanks

Phil
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PDX
post 25.Sep.2012, 07:47 AM
Post #2
Location: Stockholm
Joined: 2.Aug.2011

It's not at all an uncommon situation. But first, why do you insist on the UK bank account? The company paying you should not care about this, they might just as well pay into a Swedish account, right?

Second, as you will be resident in Sweden, you have no choice but pay Swedish taxes and associated social security costs.

There are companies that do invoicing on behalf of freelancers, perhaps that is what you could use? Search for "fakturera utan företag" which means "invoice without company", contact e.g. these ones and ask if they could do invoice your UK client(s) on your behalf:

http://www.frilansfinans.se/t_index.php
http://www.f-bolaget.se/
http://www.coolcompany.se/

They will take care of all payments on your behalf.

But seriously, if you are making any decent money, stop being lazy and set up a company on your own rolleyes.gif .

~~~PDX~~~
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PDX
post 25.Sep.2012, 07:53 AM
Post #3
Location: Stockholm
Joined: 2.Aug.2011

As far as registration as self-employed goes, Migrationsverket also says:

"If you are still in the process of starting a business in Sweden, enclose:

proof of previous experience and competence in the area

contracting agreements or information about contact with customers."

I suppose it would be a lot easier though to just start a company, it is quite trivial anyway.

~~~PDX~~~
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skogsbo
post 25.Sep.2012, 08:16 AM
Post #4
Joined: 20.Sep.2011

I can here with the intention of being self employed from the off. I have a small UK income and we have a house there, which we rent out. I arrived and told Migration of the position literally the first working day here, sent proof of income and relationship to sambo, got permanent residency within 1 week - 10 days.

Physically took this to Skatteverket(tax office), applied for personal number. This came within about a week.

Applied for F Skatt, ie self employed. I didn't register a business name or a specific business, partnership etc.. Just literally declared that I am self employed, I have an income from the UK and I'm going to do this in Sweden to make more money here. They had ummed and arrrhhed for a few days when i called them to check progress about doing a UK credit check first, to see if they would let me declared zero profit in year one and pay it all at the end of the year, my Swedish lassie spoke them for 2 mins telling them I or we were credit worthy, they didn't check anything else. F skatt paperwork posted to me the next day.

Once you get your personal number, you can get a bank account here then. Again go in person, take your migration and personal number paperwork, plus your passport. Go to a small branch, if the manager thinks he's gaining good trade, it will happen quickly. My manager at Handelsbanken, sat down with me at a computer and processed the account there and then, so I didn't need to fill in a form. Bank card arrived literally within 24hrs, pin code the day after.

It's easy, do what you can in person, as it's quicker than posting stuff. Use somebody who is Swedish to speed things up if the jargon or forms baffle you. It's just matter of setting up your bank accounts to make it easier for you. Bear in mind that the Swedish tax office will get access to your account balance, to assess tax on interest etc. but not your transactions. So there is no hiding stuff. wink.gif But also read all the information on the Swedish sites that you've looked at already. Plenty of things you can write off against tax with a home office and transport.

You'll get loads of horror stories on here, but do as much in person as possible, be positive, polite and professional, it seems to bring like a response.
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philios33
post 25.Sep.2012, 10:28 AM
Post #5
Location: Gothenburg
Joined: 24.Sep.2012

Hi PDX

Thanks for the information. You have cleared up a few uncertainties that I had. But now I wonder about a few more things.

Regarding me setting up a company, I was referring to a UK limited company is what I didn't have. The reasons for not setting one up were not due to me being lazy, but rather because it would have been less profitable for me. I did do the sums, and I'm not making mega bucks, but it was easier and cheaper without a company and accountant to pay.

As far as a Swedish company is concerned I would gladly set this up and take a hit with an accountant just to get things going and doing things right.

So invoicing is not really the problem. How I do it, and how do I get the money from GBP to SEK is the real issue. The company that I work for is a UK company so how can they pay money in to my swedish bank account? They certainly would not pay the £25 each time to pay me abroad. This could be the best way, but I would have to reduce my invoice by £25. I will ask them about it. I have researched this issue, and there is no simple way to get money from another country easily without paying a fee every time.

I have worked out that keeping my money in £££ and just using my UK card is by far the best way to transfer money to SEK. My bank uses great rates and I only pay 1.5% commission. But I dont really want to be withdrawing money from hole in the wall, then paying it back in to my swedish account in cash, do I?

Other option is if I were to invoice in SEK, then convert it for them to GBP, would that be acceptable?

Skogsbo, thanks for the advice. I will take your advice once I have worked out how I will do things.

Thanks

Phil
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skogsbo
post 25.Sep.2012, 10:37 AM
Post #6
Joined: 20.Sep.2011

run bank accounts in 2 countries, especially if you'll visit the UK quite often. As you can them use this account when there commission free etc.

Plus, get paid into your UK account, but transfer money yourself in large amounts every few months. It's cheaper on fees and you can shop around for the best rate and just seize the moment. Your employer will pay on a given date, even if the exchange rate took a dive that morning.

Plus, once you are here you might will change banks or accounts for a better deal, it's less hassle for your employer and you then.
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philios33
post 26.Sep.2012, 09:38 AM
Post #7
Location: Gothenburg
Joined: 24.Sep.2012

Hi skogsbo

That was one of my options. Although it may draw red flags from the HMRC system if it sees payments going there without me paying tax. That was my only concern really.

Another options is to use something like this:

https://transferwise.com/

Looks quite good and I could get my boss to pay my contract using this instead.

In any case, I will definately run 2 bank accounts. I will be contacting hmrc soon for advice and also an accountant in Sweden when it's all set up.

I will get back to you guys to update you on my situation.

Thanks for all the fast and great advice!
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skogsbo
post 26.Sep.2012, 10:28 AM
Post #8
Joined: 20.Sep.2011

when you leave the UK tell HMRC, there will more than likely be a form to fill out and then they'll leave you alone. Provided you have no other UK interests that are taxable; shares, a property being let etc. in which case there are different forms again!

Your employer may well have to do something similar. It's a tricky one in that technically you should get a p60 from them, upto the point of being in the UK, stating tax paid to date, because it's quite likely they'll ping for a full return for the year you leave.(if you don't do them yourself voluntarily already).

Then you'll start a fresh here.
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philios33
post 9.Oct.2012, 03:54 PM
Post #9
Location: Gothenburg
Joined: 24.Sep.2012

Hi again

I have spoken to a UK tax woman and a Swedish accountant today. I wanted to update everyone on my situation to help others that may be in this situation.

Firstly, I have filled in a P85 (leaving the UK) form from HMRC and will send it soon. Since I am living here on a permanent basis, I am considered a permanent resident in Sweden and hence I will pay Swedish Tax and NI. The P85 form is just so that HMRC will leave me alone with regards to filling in tax returns. I will update below on the response from HMRC, but it's pretty standard and I doubt anything will go wrong.

The tax woman I spoke to in London specialises giving advice to expats and she assures me that it is all to do with WHERE you are permanently based. If you are temporarily based in Sweden you can probably keep paying tax in uk, but as far as being permanently based in Sweden, you must pay Swedish tax if you are making money here (even for overseas clients). It also does not matter that UK clients will be paying money to UK bank accounts, or paypal account. How you organise your money is your business.

I have just had a rather lovely lunch with a guy from moorestephens who has answered all of my questions. His name is Niklas Larsson (niklas.larsson@moorestephens.se) I met him at his office, he showed me around and also paid for a lovely lunch we had at a restaurant in Haga. What's more, he answered all my questions that I had regarding tax. Aren't Swedish people lovely.

If anyone is looking for an accountant for their company, I would recommend him. He speaks very good english and is very nice.

Basically, as I explained above, you can handle your bank accounts how you want, as long as you convert your income to SEK and disclose it in the normal manner. He also suggested that it wasn't really necessary to create a limited company unless you are earning more than 400.000kr a year (£40k) since you can be a sole trader and pay around 27% tax rate anyway. It keeps things simpler for you. You do not need to have a chartered accountant running your business for you, and it seems many swedes don't if they are sole traders. The tax forms are apparently quite simple. This is why I couldn't find any accountants willing to help with sole traders.

There is a slight difference in the way that social security (national insurance) is paid tho. In UK you pay a fixed percentage (9% i think) of your freelancing profits and that is added to your tax bill. In Sweden a percentage of your income (before expenses) about 30% is used to pay for social security. I am not sure whether that figure is also used as an expense also, or whether you get taxed on the amount before social security deductions. He suggested I purchase some decent accounting software for my business. He suggested something called Visma (AKA SVCS). It sorts everything out for you. All you have to do is enter the data. And I think because in Sweden there is a standard for balance sheets, its quite easy to use with the tax return forms.

The only complication is VAT. In sweden you still need to pay VAT even though you are a sole trader and have no limited company. He said the software will help with this.

I will be registering with migrationsverket and skatteverket soon. Will keep you updated on any problems.

Thanks

Phil
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Bender B Rodriquez
post 9.Oct.2012, 05:50 PM
Post #10
Joined: 25.Mar.2006

As a sole trader taxes are quite easy to calculate. Have a look at this site for more info: http://www.verksamt.se/portal/en_GB/web/international/home

If you have an operating profit of 400000kr, your taxable profit is 75% or this, i.e. 300000kr.
You tax free allowance on this profit is 16300kr (decreases with profit) and the remaining 283700kr is the taxable income. On this income you first pay social insurance (egenavgifter) of 29.71%, i.e. 89100kr, and tax (about 31%), i.e. 87900kr. Your total tax+social insurance is thus 177000kr and you will have 223000kr in you pocket.

For larger profits it will be more beneficial to create a limited company (aktiebolag).

Here is a calculator in Swedish:
http://www.verksamt.se/portal/web/guest/st...na-ut/din-skatt
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Taxalien
post 9.Oct.2012, 10:13 PM
Post #11
Joined: 24.Dec.2009

I think you are really entering into a small personal tax disaster with your setup.

I'd seriously advise you to get professional international tax advise before you proceed with anything.

Especially VAT is very tricky when it comes to cross border transactions such as the one you are outlining. You can make all sorts of plausible conclusions only to find out that you should eg. have been VAT registered in the UK because that is where your client resides and that is who you are providing your services etc to.

Addendum: VAT complication is only regarding goods and do not apply to services. But you didn't say I think what you do ... so I wasn't sure what you are up to. Threashold is £70K.

It would have been very easy to mitigate all that by opening up a UK limited company and operating through that the whole time. It would have made no tax difference to what you do in terms of yourself personally in Sweden, but it would have allowed you to mitigate the tax regime here in Sweden. For example, as a UK citizen you would have had some protection against double taxation visavi your UK limited company in terms of dividends and if you ever decided to leave Sweden and still had profits inside your company then you would still have been able to withdraw this nearly tax free after you had left Sweden. In fact you could probably be trading that way and disappearing for 1 year and then take it out with no Swedish tax periodically if that is an option available to you, given your personal circumstances of course.

Regarding the double taxation treaty note that it is a 12 month rolling period and that the tax years in Sweden and UK are different.
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Taxalien
post 9.Oct.2012, 10:42 PM
Post #12
Joined: 24.Dec.2009

If you operated with a limited company (assuming Sweden, but it could also be a UK limited), then the equation would look like this:

400000 profit.
Less 127 750 kr for dividends / .88 = 145170 kr.

400000 - 145170 = 254830 kr

254830 / 1.3042 = 195391 (=your gross salary for the year)

The actual income tax you would pay on that would be somewhere between 20-30%. I am guessing closer to 20%, but we can use 30% to keep things neutral with the sole trader example.

195391 x 0.7 = 136774 kr in your pocket.

+ 127 750 x 0.8 = 102200 kr

= 238974 kr.

But not that it will probably be more, since you will not pay 30% tax on your gross salary.

Caveat: the 127 750 dividend provision only exists for companies in which you owned the shares on the 1st of January that tax year. So startups are excluded from that.

There are a number of other issues such as expense rules that are very much different from a sole trader than a limited company in Sweden. Meaning that the taxation laws are much more trickier.

I checked it and you would only pay 19% tax on your salary.

So the correct numbers are:

195391 x .81 = 158652 + 102200 = 260852
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nordic_bear
post 10.Oct.2012, 04:00 PM
Post #13
Joined: 11.Jun.2012

Sorry to hijack your thread but your post caught my attention. You mentioned that you wished you had opened a UK limited company before leaving the UK. My question...! Why would it be beneficial to still have a limited company back in the UK? Does this affect which country you pay your taxes/NI to? Once again sorry for the hijack.. I'm just very confused myself and im in a situation not too far from your own. Thanks.
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Bender B Rodriquez
post 10.Oct.2012, 06:07 PM
Post #14
Joined: 25.Mar.2006

Theoretically it should make no difference since you still need to pay taxes on salary and dividends according to your residence. That is, your UK company should not pay UK/NI if you are resident in Sweden. If your company still pays UK tax/NI, double taxation treaties usually kick in, meaning that you can deduct UK contributions from your Swedish tax.

However, as Taxalien said, it may be beneficial to have a UK based company if you intend to move back to the UK, since instead of paying dividends you could reinvest money in the company (which is not taxable in Sweden), and later pay dividends when you are back in the UK. Legally, I think this only works if you are in Sweden less than 5 years. If you stay longer in Sweden you become fully tax resident, which means that you need to pay Swedish tax on dividends up to 10 years after you move back to the UK. Also, I guess the UK also has rules on how much you can reinvest and how much you need to take out in salary/dividends.
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Bender B Rodriquez
post 10.Oct.2012, 06:19 PM
Post #15
Joined: 25.Mar.2006

QUOTE (Taxalien @ 9.Oct.2012, 11:42 PM) *
If you operated with a limited company (assuming Sweden, but it could also be a UK limited), then the equation would look like this:400000 profit.Less 127 750 kr for dividends ... (show full quote)

That is substantially better than being a sole trader.
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