Contractors’ Questions: How to get the most out of my dual citizenship?

Contractor’s Question: I’ve discovered I’m entitled to Swiss citizenship due to my mother being Swiss. I am therefore debating a permanent move there but initially, at least, I would be coming back to the UK for half the week (even though I would count my main residence as Switzerland), to continue my current work. At present I have my own limited company. Where would I be paying tax?

Expert’s Answer: While working across two countries may seem like the ideal solution for a contractor who can choose between two home countries, splitting your working time equally between countries can be a complex matter.

This is mostly due to this issue of tax residency, which determines where you will pay tax on your worldwide income and earnings. In this particular case, you would be considered tax resident in both the UK and Switzerland.

Although being tax resident in both countries would not see you subjected to double taxation thanks to the double taxation avoidance treaties concluded between the UK and Switzerland, you would not be able to optimise your tax situation in either country and therefore may end up paying the top rate of tax in both the UK and Switzerland.

In addition, working as a UK limited company in both countries presents further complications. Within international contracting there remains much confusion surrounding working overseas as a UK limited company which, regrettably, is not viable. Many countries will not allow you to operate within their jurisdiction as a UK limited company for anything longer than a business trip, while in others you may be obliged to register as a contractor in that country. The same principle applies to working in the UK as part of a foreign limited company.

Working as part of a UK limited company while travelling back and forth to Switzerland would only be possible if the majority of your work is completed in the UK and you only undertake work overseas as part of foreign business trips. Of course, it is wholly acceptable for a UK contractor to live and work in Switzerland  under a Swiss company or payroll provider, but working as a UK limited company is not compliant in the eyes of the Swiss authorities.

Although splitting your time equally between the two countries is an attractive option, you would be in a much better position committing to residency in one territory or the other. Choosing to reside in Switzerland but continuing to carry out all of your work in the UK and billing as a limited company would still mean you are a Swiss tax resident, however your Swiss taxation costs would be minimal over your UK taxes. In this instance, it is imperative that you are fully visible to the authorities in Switzerland and declare your UK income and assets in order to avoid being taxed incorrectly. 

Upon entering Switzerland you must declare your income and assets which will then determine how much tax you will be likely to pay. From this figure, the Swiss authorities will deduct the amount of tax which you have already paid in the UK and then charge you the rest. As a UK national and UK tax resident you will still be taxable in the UK, and your taxes will be processed in the same way as you are used to.

Committing the majority of your time to either the UK or Switzerland is one way to make the most of your dual citizenship. The most important point, however, is that you seek expert advice on how to optimise your situation based on where you decide to live. This will ensure that, whichever country you are living and working in, you are doing so in the most beneficial way and with the assurance of complete compliance.  

The expert was Matt Walters, head of operations at overseas contracting advisory Capital Consulting.

Editor’s Note: Related Reading –

Why the EU’s contingent worker laws won’t worry contractors

Don’t dismiss your ‘Ltd’ when contracting abroad

Contractors’ Questions: Is ‘Ltd’ tax-efficient in Sweden?