# Overseas business



## Burt888 (Jul 8, 2012)

My partner may be about to be made redundant, he is wanting to set up a business in Pakistan. He has a Pakistani passport and has ILR for the uk, currently We are living in the uk together. Does anyone on here have any experience of being in 1 country and running a business in another, also does anyone know about the tax rules etc (sure there are plenty) or being able to import the products produced in Pakistan for sale in the Uk. If the money made in the business was kept in Pakistan would there still be money to be paid in the uk or would this be only necessary if the money was in a UK account, tried to research this on internet as don’t want to be breaking any rules but couldn’t really find any answers. Realistically even though the business is in Pakistan we would need some of the money made to be able to live so would somehow need to pay some of the money into a UK bank account, but unsure how we would pay tax or if we would need to pay tax (guessing we will) not sure how money from income made abroad is taxed, anyone with any experience or ideas please get in touch 
Thanks


----------



## Bevdeforges (Nov 16, 2007)

I don't know how things work specifically for the UK, but generally speaking a person is considered to be working in whatever country they are physically located in while doing whatever it is they are paid to do.

Where your money is banked or deposited or where your customers are located is pretty much irrelevant. If your partner continues to be resident in the UK, then chances are he will owe taxes there.


----------



## Moulard (Feb 3, 2017)

Mini-multinationals are difficult beasts - I would strongly recommend getting good advice before you go too far down the rabbit hole.. Every pound you spend will be worth it.

I assume that your partner would be a member, of the (I assume) Limited Liability Company in Pakistan, and would draw an income from the company, either by way of wages, dividends, or both.

I have no doubt that income they draw from the company would be taxable by the UK regardless if it is kept in Pakistan. 

In addition, it is highly likely that under Pakistan tax law, the company may have to withhold income tax at the non-resident rate and pay it to Federal Board of Revenue.

Income of the business would be taxed in Pakistan, along with any other relevant taxes that need to be collected and paid (consider income tax withholding of any employee's wages,) 

Other questions they need to consider...

How you will be selling those goods in the UK? Will transactions occur through a UK resident Branch or Subsidiary? If yes, then there will be a UK Resident Company involved too.

Note that if HMRC deems your partner to be a "dependent agent" of the Pakistani company, it may be deemed to have permanent establishment in the UK, and thus income from UK sales would be taxable; Same would apply if you set up a local office as a fixed place of business for the Pakistani company.

Also worth noting that a if the central management and control of its business is in the UK it can be deemed UK tax-resident business even if it doesn't meet the permanent establishment rules.

If there is no UK company and no permanent establishment in the UK, the next question is to consider how does the UK tax the income of wholly owned / majority shareholder foreign enterprises? I believe the UK has Controlled Foreign Company rules, which may mean that your partner might be subject to personal income tax on company income

Will the Pakistani company hold any UK property that may be subject to UK corporation tax on income received from UK property.

Not trying to scare you off the idea, but just trying to highlight that this is not stuff for one who is faint of heart...

You have to deal with the same international tax issues that a large multi-national must deal with... and thus it is definitely worth paying for good advice, before getting too deeply involved.


----------



## Burt888 (Jul 8, 2012)

Thanks for the replies so far, thoughts are it will be an Asian clothing Manufacturing business, with possible shops in Pakistan, if business went well in future would possibly look at getting a shop in the uk but realistically at the moment there would be no UK sales or possibly only through the internet so no actual business base in the uk, the other option would be to find people in the uk already selling these items and see if they would be interested in placing orders to sell in the uk. If these businesses were interested in selling the items would it be them who would pay the import tax / costs or would the company in Pakistan have to have some kind of license to trade with a company in the UK.

When looking for advice who is it I’d need to be speaking to, would an accountant for example be able to help with any of this or would I be needing to speak to a solicitor or is there special companies who can offer this kind of advice


----------



## NickZ (Jun 26, 2009)

The importer pays duty and VAT but it's been alluded to above the UK uses control for determining tax residency. If you're living in the Uk controlling a company abroad the UK thinks it's an UK company. 

You then need to look at what the other country thinks. What the tax treaty tells you.

You need a good tax lawyer with experience in both countries to set the structure up. 

Not vouching for the website but it discusses some of the issue

https://www.pinsentmasons.com/out-law/guides/maintaining-non-uk-tax-residence


----------



## Burt888 (Jul 8, 2012)

So it all looks very complicated and possibly expensive.... obviously were only in the early stages and possibly no more than just thoughts, 

So we have some money let’s say £20,000 to get that money to Pakistan would we be expected to pay tax on it to the Pakistan government (paid tax in the uk as it was earned through being employed). This money would then be used to start up the business, pay rent on a building buy machinery and materials etc cover cost of employees. Not sure if this is possible but could this money be seen as a business loan and the first £20,000 would not be seen as profit but it would be paid back to us to cover the original money put in to start the business, therefore in the end coming back into our bank account.

If there was someone interested in the UK to import the products for sale in their business then obviously I would expect that they would be set up properly and would be paying the correct tax. Basically they would place an order let’s say 1000 items which the company in Pakistan would then create and package And would then be paid for by the company in the uk into a Pakistan bank account, this would then be ready to be delivered to the UK. At this point the company in the uk would pay for delivery and any other charges applied to items by the uk government (is this correct), once arrived in england the company who has bought the products would sell them just like they sell anything else, these company’s in the uk would probably already have a few years of trade in them as we’d try to find established businesses to buy stock from the company in Pakistan. So basically the company in Pakistan would just be manufacturing the products and have nothing to do with whoever decided to sell the products in the uk.

The business set up in Pakistan would eventually probably be run by my husbands brothers as we don’t have any intentions of living in Pakistan in the long run or even the short term,it’s more we have the money that could set this up and then they’d have jobs etc and future incomes, so really the business wouldn’t even necessarily have to involve my partner at all other than we would be putting in the initial money and would want Atleast that much back. He would possibly help find contacts in the uk as this is where we are based.


----------



## Bevdeforges (Nov 16, 2007)

If you're putting money into the company, then chances are it would be considered a foreign investment on your part and taxation of foreign investments can get very tricky.

If it's a "loan" then you may have to recognize periodic interest earned on the sum, even if no money has actually been returned to you - and it's the interest that will be taxed by the UK. If it's an investment, then your husband will be considered an "owner" (partial or otherwise) in the company and there will probably be some sorts of declarations to be made on that basis. (Also, make sure you know what requirements Pakistan may have for foreign ownership of local businesses.)


----------



## NickZ (Jun 26, 2009)

To me it sounds like you're going way overboard. Obviously you know what you want to do better than us but do you really want to own the whole chain from start to finish?

Instead I'd try and find a contract manufacturer. Your family may know some if not many advertise on Alibaba . Have them make your product. check them out first. Quality,working conditions price reliability and anything else you might think of.

That still leaves you having the sell the product but unless you have personal experience running all the aspects of the business you risk biting off way too much.


----------



## Burt888 (Jul 8, 2012)

Were more looking into the side of manufacturing so alibaba could be somewhere we could possibly advertise the product. If we were to get a base in Pakistan and pay for all the initial investment then leave everything else for family members over there to run and advertise etc would we still be seen as involved in the company as we would have provided the initial money to set up.

Just still trying to work out who pays what when the product is transported to the uk for sale, the company who has ordered the product in the uk pays all fees and the company we have created in Pakistan Just sells the product at the price that covers the cost of production and the profit they want to make or do they need to include say 20% more to cover the cost of I guess would be an export cost as tax. Obviously a company will be paid to transport the goods and this would be added as delivery cost, possibly this company may also pay the import costs so maybe it would all just be added into the total delivery cost.

All seems too complicated for someone who has never run their own business or been self employed but with the job situation at moment everything is worth looking in too


----------



## NickZ (Jun 26, 2009)

It depends on your customers.

A large buyer will be used to handling everything and you could bill them from the factory . They would handle everything else.

A small buyer is less likely to have the experience or willingness to handle the import. You'd need to arrange everything for them. They still end up paying for it but you need to arrange it.

Do you or your family have experience running a textile plant? It just sounds like you're looking at the end of the business requiring the most experience. 

Everything from picking the right location.

To picking equipment.

Staff


Suppliers

Figuring out UK/EU standards

That's off the top of my head.


----------



## Burt888 (Jul 8, 2012)

I wouldn’t say were off into it with no experience his brothers have worked in the industry, but the actual business side would be completely new to anyone involved, again you have given us more ideas to think about. 

If a company in the uk were to purchase the products from our company in Pakistan we would firstly discuss there needs and what they require we would then produce the items and get them ready for delivery, at this point the chosen delivery company would tell us the cost to deliver the product, would this cost include all the fees needed for it to arrive safely with the customer in England or would they get stuck somewhere on the borders with another fee to be paid, surely if a proper company (Royal Mail parcel force dhl etc) was used they would include all the fees, therefore the business in Pakistan would just price the product to sell and the company buying in the uk needs to pay that price plus delivery, obviously the company in Pakistan would get the items to where they need to be for delivery but that would be the of the work for the Pakistan based company. Does this seem like I’m on the right road with these thoughts, mainly based on transportation of product from Pakistan to UK


----------



## NickZ (Jun 26, 2009)

Either is possible. Surf over to amazon.com (The US website) and check out how they show prices for shipping to Europe. They now show prices including vat and an estimate of duties.

But you really need to have all this figured out before you start taking orders. You want to be able to give people answers before they order and not have them wait until you can figure out things. 

The other thing is you'll need to offer samples and maybe even custom options for bigger orders.

Surf over to alibaba and look at your potential competitors. See what they offer. You'll need to be similar.


----------



## Burt888 (Jul 8, 2012)

You have been a massive help and as soon as alibaba was mentioned earlier I went on the site and checked it out, I will have a look on the US version of amazon aswell in a bit. 

If the company was to be set up would it be best for us to register It both in Pakistan and the UK if we are going to have to potentially pay tax either way in the uk, guessing its the same as if it was a business over here and you just pay income tax on profit, both my parents have there own business and are self employed so I know some stuff about that, my sister also just recently registered a cake baking company and her partner is an accountant so there is a few people around who I can speak to about business in the uk it’s just the company being set up in Pakistan and the cross country taxation etc that I am unsure off


----------

