Need some help with my contract!

Closed Thread
  1. #1

    Need some help with my contract!

    Hi everyone!

    I have lived for more than 7 years in Hong Kong which explains why I have a Hong Kong permanent ID.
    I am now spending most of time out of Hong Kong especially in Spain which is my second home.
    A company with office in Hong Kong is offering me a job to work in Spain.
    I do have some concerns though since I do not know what my obligations are, in both countries, especially in terms of taxation.
    The company does not want to invest in any branch office for the moment so it offers me to work from home in Spain.
    Nothing will be declared there in terms of activity, salary…in order to avoid being exposed to taxes payment.
    The working contract is set up between me and the Hong Kong office and mentions that I will be working from home in Spain in order to explore the market.
    They are telling me that as long as I spend most of my time out of Hong Kong I will not have to pay any taxes in Hong Kong and should not worry.

    Since I don´t want to take any risks in both territories, I would need some help here:
    - Can such a contract really work?
    - Is it possible not being exposed to any taxes in such a case?
    - What risks I am taking if I accept their contract?
    - Since I cannot possibly declare anything in Spain, should I insist to pay taxes in Hong Kong to avoid any problem in the future no matter how much time I spend there?

    Thanks in advance for any advice that may help!!!


  2. #2

    Join Date
    Mar 2007
    Location
    Gold Coast Marina
    Posts
    17,934

    My understanding is that work done in overseas jurisdictions is exempt from HK tax. MrMovingin07 looked at this for some contract work he was doing in Saudi Arabia a few years back.

    I'd be MUCH more worried about Spanish tax - which we are not at all able to help with. Certainly in most places they would see right through your setup and tax you anyway.....

    EDIT: clarified details with MrMovingin07

    Last edited by MovingIn07; 24-04-2010 at 07:42 AM.

  3. #3

    Join Date
    Jul 2005
    Location
    mid-Levels
    Posts
    873

    Whilst you won't be liable for HK taxes, you will be liable for Spanish taxes irrespective of where you contract stipulates you are employed.

    ultimately for EU (which Spain is part of) taxes are largely based on residence i.e. where you were living mostly when the work was being done.

    You will need to research this but my logic says you will pay Spanish taxes.


  4. #4

    Join Date
    Aug 2009
    Posts
    2,715

    you will certainly pay spanish taxes and it can be due for two reasons: one is that your work would be based in spain, secondly most EU countries (and i am sure Spain is one of them) have a catch-all law saying that Spanish nationals (and i assume your second nationality is Spanish) are to be taxed for their work anywhere if they do not pay taxes somewhere else (which would be the case for you).

    the key risk you are taking is whether the spanish tax authorities can find out that you have any income. (I have done this personally by the way and it worked very nicely)

    - Can such a contract really work? Yes
    - Is it possible not being exposed to any taxes in such a case? Yes
    - What risks I am taking if I accept their contract? Spanish tax authorities to find out and tax you
    - Since I cannot possibly declare anything in Spain, should I insist to pay taxes in Hong Kong to avoid any problem in the future no matter how much time I spend there? I am not sure that is even possible, except if you declare a nominal residence in HK which serves as your tax base

    the other thing to worry about, if i am not mistaken, your PR runs out if you spend more than x time outside of HK. I think it's 2-3 years or so, but i am sure someone can provide more clarity


  5. #5

    Join Date
    Feb 2010
    Location
    London / KennedyTown
    Posts
    41

    This really depends on how your contract is structured.

    If the contract is a personal employment contract, you have little choice - as others have said, you pay the tax where you receive the income (in your case Spain)

    If your contract can be structured (ie. via limited company or from what it sounds like, your employer agrees to structure it for you), then there are a number of options to reduce your tax obligations (even lower than HK).

    Typically you would need to earn a high enough salary to warrant the exercise. It is fairly standard (and legal) for international high-income professionals in consulting, i-banking, law, government, etc, so if your structure is legal you should not have to worry about tax authorities "finding out".

    I'm familiar with the structure you have outlined (its doable) but it is important that you understand the structure yourself - so speak to your firm or an experienced international tax advisor for details.

    The main risk is that tax laws do change all the time - so your firm's legal/tax team need to be reliably informed + current. If you feel you are doing something obviously illegal (ie. simply not declaring personal income) - then I'd advise not to proceed.