UK Double Taxation Treaty - But Monthly Payments in Finland

andycheeseman · Post by **andycheeseman** » Sun Jan 11, 2015 2:18 pm

Hi,

I'll shortly be living in Finland and registering as a sole trader (toiminimi). I provide video production and design work for my UK clients, so there'll be a lot of air travel involved!

As I'll have dual residency, I'll be liable to pay income tax in both the UK and Finland.

Under the double taxation treaty between the UK and Finland; the UK will take precedence given my circumstances.

As the Finnish system asks for the monthly prepayment of income tax (in the UK you pay yearly), I'll still effectively end up paying first in Finland.

My question is, are there any systems in place that I can use to ensure my tax doesn't get taken monthly in Finland? Can I pay yearly like in the UK?

Thanks,
Andy.

NB. Fiscal Domicile - http://www.hmrc.gov.uk/manuals/dtmanual/dt7203.htm

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betelgeuse · Post by **betelgeuse** » Sun Jan 11, 2015 4:16 pm

andycheeseman wrote: As I'll have dual residency, I'll be liable to pay income tax in both the UK and Finland.

It's impossible to have dual tax residence. The tax treaty between the UK and Finland provides the rules to resolve your tax residency. However, this doesn't mean you wouldn't be liable to pay tax both in the UK and Finland.

andycheeseman wrote: Under the double taxation treaty between the UK and Finland; the UK will take precedence given my circumstances.

Then we here are not well equipped to answer your questions.

andycheeseman wrote: As the Finnish system asks for the monthly prepayment of income tax (in the UK you pay yearly), I'll still effectively end up paying first in Finland.

For sole trader the prepayment depends on your income. I have had a small business and sometimes I have paid yearly and sometimes every couple month. So is it your plan to register as a sole trader in both countries?

andycheeseman wrote: NB. Fiscal Domicile - http://www.hmrc.gov.uk/manuals/dtmanual/dt7203.htm

OK so fiscal domicile is what I called tax residence. If you only have limited tax liability in Finland (rajoitettu verovelvollisuus), then it might be the case that you pay nothing in Finland since none of you income might be Finnish sourced:

https://www.nordisketax.net/main.asp?ur ... ng/i03.asp

You are sailing in complex waters, so I would recommend consulting an expert. I would recommend one any way in the beginning so that you run your Finnish operation according to Finnish rules.

andycheeseman · Post by **andycheeseman** » Sun Jan 11, 2015 6:49 pm

betelgeuse wrote:
andycheeseman wrote: As I'll have dual residency, I'll be liable to pay income tax in both the UK and Finland.
It's impossible to have dual tax residence. The tax treaty between the UK and Finland provides the rules to resolve your tax residency. However, this doesn't mean you wouldn't be liable to pay tax both in the UK and Finland.

As I'll be in Finland for longer than 6 months, I'll be considered a resident in Finland AND I also meet the UK criteria for residency. Ultimately, I'm fiscally domicile in the UK (as per the tax treaty and as you imply), but I'll still be 'resident' in both countries.

betelgeuse wrote:
andycheeseman wrote: As the Finnish system asks for the monthly prepayment of income tax (in the UK you pay yearly), I'll still effectively end up paying first in Finland.
For sole trader the prepayment depends on your income. I have had a small business and sometimes I have paid yearly and sometimes every couple month. So is it your plan to register as a sole trader in both countries?

I'll be resident in the UK, so I need to be classed as 'Self Employed' (sole trader). And as I'll also need to file taxes in Finland, I'll need to be a Toiminimi.

Do you have to be registered as a Toiminimi to file taxes in Finland?

betelgeuse wrote:
andycheeseman wrote: NB. Fiscal Domicile - http://www.hmrc.gov.uk/manuals/dtmanual/dt7203.htm
OK so fiscal domicile is what I called tax residence. If you only have limited tax liability in Finland (rajoitettu verovelvollisuus), then it might be the case that you pay nothing in Finland since none of you income might be Finnish sourced:

https://www.nordisketax.net/main.asp?ur ... ng/i03.asp

You are sailing in complex waters, so I would recommend consulting an expert. I would recommend one any way in the beginning so that you run your Finnish operation according to Finnish rules.

As I'll be in Finland for more than 6 months, it looks like I'll become resident and become eligible to pay taxes.

Admittedly, yes; I need to consult Vero and HMRC for greater clarity on the matter. If I can file my tax return in Finland yearly however, that should help with the pre-payment / double taxation issue.

Thanks,
Andy.

andycheeseman · Post by **andycheeseman** » Sun Jan 11, 2015 10:05 pm

For future reference; it would seem that in the situation where you pay Finnish tax in advance, you will get a 'Foreign Tax Credit Relief' in the UK, which you claim when you submit your tax return.

https://www.gov.uk/tax-foreign-income/taxed-twice

betelgeuse · Post by **betelgeuse** » Sun Jan 11, 2015 11:21 pm

andycheeseman wrote: As I'll be in Finland for longer than 6 months, I'll be considered a resident in Finland AND I also meet the UK criteria for residency. Ultimately, I'm fiscally domicile in the UK (as per the tax treaty and as you imply), but I'll still be 'resident' in both countries.

In different context (say social security or taxation) there can be different definitions of residency. The only thing that matters for this discussion is fiscal domicile/tax residency.

andycheeseman wrote: I'll be resident in the UK, so I need to be classed as 'Self Employed' (sole trader). And as I'll also need to file taxes in Finland, I'll need to be a Toiminimi.

Do you mean tax residency here? Why do you need to file taxes in Finland? You say you would be UK tax resident and your income is UK sourced. This would mean you file no taxes to Finland.

andycheeseman wrote: Do you have to be registered as a Toiminimi to file taxes in Finland?

In Finland you file for income tax for one of the following purposes:

You are tax resident
You have Finnish sourced income
You are registered as a business (for example sole trader, Finnish legal entity or permanent establishment of a foreign legal entity ) in Finland

andycheeseman wrote: As I'll be in Finland for more than 6 months, it looks like I'll become resident and become eligible to pay taxes.

This statement is in conflict about your comment about staying UK tax resident.

andycheeseman · Post by **andycheeseman** » Mon Jan 12, 2015 12:34 am

Oh. I see now. It sounds like I'm really complicating things for myself.

It is right then that I don't need to register as a Toiminimi? I can simply remain classed as a UK Sole Trader, live in Finland and file my taxes in the UK?

My confusion around 'residence' is that fact that I have to register at the Finnish police office within 3 months for the 'right of residence'. I understand now that this is difference from 'tax residence'.

betelgeuse · Post by **betelgeuse** » Mon Jan 12, 2015 1:35 am

andycheeseman wrote:Oh. I see now. It sounds like I'm really complicating things for myself.

It is right then that I don't need to register as a Toiminimi? I can simply remain classed as a UK Sole Trader, live in Finland and file my taxes in the UK?

You do not if your interpretation of the tax treaty is correct. I wouldn't put my money on it. My guess is the following: You do not have a house or apartment left in the UK. This makes you Finnish tax resident. Under article 15 of the tax treaty between UK and Finland you do not have permanent establishment in the UK and will only be taxed in Finland. You register in Finland as a sole trader and invoice UK companies following EU rules for reverse charge on VAT.

andycheeseman wrote: My confusion around 'residence' is that fact that I have to register at the Finnish police office within 3 months for the 'right of residence'. I understand now that this is difference from 'tax residence'.

Usually the latter follows from the former but yes they are different things.

andycheeseman · Post by **andycheeseman** » Mon Jan 12, 2015 1:38 am

I will have a residence available to me in the UK, I'll just be spending more time in Finland.

If your permanent home is located in Finland, you will be regarded as a resident, i.e. unlimitedly liable to tax.

In addition, if you have arrived from a foreign country to live in Finland for longer than six months you will be regarded as a resident during your stay in Finland. Even though you may not stay in Finland continuously e.g. because you travel away from Finland from time to time, the six-month period will accumulate and not be broken.

https://www.nordisketax.net/main.asp?ur ... ng/i02.asp

betelgeuse · Post by **betelgeuse** » Mon Jan 12, 2015 2:00 am

andycheeseman wrote:I will have a residence available to me in the UK, I'll just be spending more time in Finland.

Then it's down to center of vital interest.

http://www.us.kpmg.com/microsite/tax/ie ... icle06.htm

Interesting case so please pop by to let us know if/when you have a decision from Vero available.

andycheeseman · Post by **andycheeseman** » Mon Jan 12, 2015 2:02 am

Certainly will do. Thanks for all your input!

tjawatts · Post by **tjawatts** » Wed Jan 14, 2015 12:55 am

You can have tax liability in more than one country as regards to personal income tax.

If you live in Finland and you have family (spouse children etc) and your main residence here then you will probably be generally tax liable in Finland.

If you have source income in the UK (that is work you do physcially in the UK, working remotely in Finland you are working in Finland) then your income in the UK maybe in certain circumstances taxable in the UK (dont know about the UK-Fin tax treaty but that would mean either you pay tax in UK but your Finnish tax rate on any Finnish income takes into account the UK income, or you will have to pay the difference between UK tax and Finnish tax to the Finnish tax man).

T

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