Withholding Tax – It may be deducted at source!

[James McLauchlan]

I am pretty pissed off with SS7, as they are now trying to take my money through taxes. Did a job in Angola, taxed me around 30%. Before never got taxed in Angola.

Congo last year, a so called “emergency tax” Don,t know what kind of emergency. Mel running out of cash?

Still trying to find out, in which hidden channels this money disappears.
Live in Thailand, no tax. Angola does not take 30% tax. May be somebody has an explanation.

👿 👿 👿 👿

I have gone through a huge learning curve on this subject of late, for very good reason. What I have written below is my take on it, which might not be what you want to hear but could be on the mark.

I would suggest that what you are experiencing is withholding tax. It appears (judging by what you have written) that the Angolan Government are now onto foreign corporations carrying out projects in country and syphoning the profits off without injecting any tax into the local system. Your employer will most likely be withholding tax for your services which they will deduct from your rate unless a waiver has been authorised by the Angolan tax authorities (not much chance of that). They may also incur corporation tax but no element of that should be deducted from your rate.

You are correct in asking them what they tax is, why it is as much as 30% and how long they will hold it for. It could be up to 18 months depending on when their fiscal accounting year ends. They may have to pay the Angolan Government way ahead of that and try to claim it back (fat chance)… or simply hold it in their account in case they get stiffed by the Angolan government at a later date (good chance of that happening). Either way I would suggest that you will pretty much have to take a hit on the 30% and never expect to see it again.

Bearing in mind that, on a freelance front, the trend in the UK appears to be moving towards using people that are ‘one person’ limited companies. Stating the obvious… You are then contracted as an employee of your company and not theirs. At all times you will be employed by your company not theirs. You will operate under your own liability insurance and not theirs.

Should the shit hit the fan… injury, sickness, government tax demands etc just watch them pass the buck right on to your incorporates company (i.e. you) for anything that comes up.
This absolves the contracting company (them) of (just about) all liability for insurances and taxes no matter where they send you!

For those that are Ex-Pat and not expecting to pay tax at any point.
Be aware that even though here may be a reciprocal tax arrangement between some countries in some instances you may see taxes being withheld by your client (employer) at source. They should advise you of this before hand but often they will not and the first you will know about it is what happened to John99 above. The job is done and if the likes of John99 complain after the event they will most likely be told to lump it or be struck off the available for work list.

If you look at the wording of some of these contracts, unless clearly stated otherwise, they hold your limited company liable for all insurances and taxes as required by the country where services are being performed.

I would strongly advise anyone working for any company in any country (other than the one they are a resident of) to ask before hand about withholding tax and get in writing exactly what are the terms for you working with the company. Questions such as your status as an employee (or subcontractor), liability insurance, medical insurance and taxes should all be covered ahead you you heading out of the door! You should at least ask for proof that you are covered by their liability insurance in the country you are providing services in. The same would apply if you work through an agency. They are also a limited company and contract your services in a similar fashion to an ROV Co so all the same questions should be asked.

Most companies will get the job done first and probably drop the tax/liability bombshell on you later. Times are changing and the days of a tax free life are fast drawing to a close for many, no matter where they may live.
Due to the downturn in the fortunes of many economies withholding tax will fast becoming the norm. Governments like it because it takes no account of where you may reside or your status as an ex-pat.

[Herman]

Thanks for that one, James.

Might as well partially be a result of the current work situation.

Some years ago, the company would have paid the taxes, just to get people working there.

May be it is time to set up a company in HongKong. Profit made outside of HongKong is not taxable.

John

[James McLauchlan]

May be it is time to set up a company in HongKong. Profit made outside of HongKong is not taxable.

John

I hear what you are saying John. However, some countries would still hold your company liable for taxes due in their neck of the woods (where services were performed) no matter where it is registered.
How HK taxes your company by way of corporation tax is up to them but the HK authorities have no control over how other countries tax you/your company out-with HK.

With your own incorporated company you have greater responsibilities, but with that should come more control over your own destiny with regards to taxes, insurances etc. Insurance costs are tax deductible.

Good luck! :tup:

[rovnumpty]

Thanks John and James

A timely reminder of the problems of working for an agency.

I recall UKPS/Saipem trying this one a couple of years ago for Azerbiajan. Everybody went once, then didn’t go back. Think they eventually came up with some agreement, but the damage had already been done then.

[Donald Faulds]

Yes, sound like withholding tax. If you pay it in another country you can deduct it from your home country tax. (At least you can in the UK). Employers can’t hide it or not apply. At best you can get the rate upped to compensate (well, you can try!).

Main issue is that lots of people want to pay no tax anywhere. You can get away with it some of the time – but never all of the time.

Egypt, Angola and Brazil are just some of the places where it may apply (and may come as a big surprise at the end). The rules can be very complex.

Maybe the next big UK tax idea for Grumpy Broon and NU Labour

cheers.

[ROV_Monkey]

Edited

[James McLauchlan]

…You pay tax in Angola

Normally, S7 have you sign an Angolan contract. You then pay 30% tax on what an Angolan would earn in the equivalent position

i.e. Not a lot…

It appears that John99 had 30% deducted from his agreed day rate. Maybe he could clarify?
Also did John99 sign a contract for Angola?

So ‘not a lot’ (in John99’s case) appears to be 30% deduction on the full rate. By that I guess something is not quite as you advise.

In the respect of tax what happens to employees of SS7 that go to Angola?

[ROV_Monkey]

Edited

[Herman]

To clarify, I am a dayrater. For a 17 day hitch, I got 1790 Pound withheld. It is still ongoing, will let you know, how it ends.

It works out to be only 27%, but still not happy with that.

[James McLauchlan]

ROV_Monkey
Thanks for the detailed info. I’m sure it’ll be of use to someone.

John99
27% still seems steep when you consider what ROV_monkey has posted.
I hope you don’t mind, but by way of clearing this up (and getting the facts right) I still have a few questions for you though…

• Were you day rate direct or Agency?
• Was a contract sent to you? (often not the case in this game)
• If so.. did it state anything about taxes being deducted at source?

It’s exactly this kind of candid exchange of information that helps reduce the overall musher’s effect that prevails in this game.

[Herman]

Day rater, no Agency involved. I have a general contract with SS7, been doing that for a few years.

This is pretty much the first time it happens to me, so still hoping it turns out to be a mistake.

On the other side,I know a guy, who is day rater as well and being taxed for about 2 years in that dimension in Angola. This keeps my optimism in this matter very small.

[kangaroo]

ISS are withholding tax as well from the source.

Any guys in Asia, beware, they will deduct tax from your quoted day rate.

Guys working in the Philippines, beware, you will be liable for tax from ISS!

[James McLauchlan]

Definition:

Services Tax – ISS
Imposto Sobre Serviços de qualquer natureza – ISS

Basically means: Service or Occupational tax of any nature.

The issue with this type of tax is that there may not be a reciprocal tax agreement between the country you pay taxes in (where you reside) and the country from which the withholding tax has been applied (where you worked).

For those whom do not submit tax returns, of any sort anywhere in the world, this poses a potential problem as there is no way of offsetting that tax against a personal tax allowance nor expenses incurred in the course of your work.
In such cases you’d have to suffer full deduction with no ability to offset/reduce your liability. I guess if you usually do not pay anything… then this is a large hit.

I do have a thought though, for those day rate direct people out there..

If you are experiencing tax being deducted at source by the company you have been contracted to, you may need to confirm your ’employment’ status with that company. Many companies will (when asked) insist you are not an employee but a sub contractor, so if they are deducting/withholding employee tax then they may be wrong in doing so. You should clarify this with them before you head off to work.

The companies you work offshore for/with will not be overly interested in your personal tax situation so will not normally volunteer information that they feel might be detrimental to their bottom line.

Protect yourself because for sure no one else will.
Read your contract (even better – make sure you actually have a contract!) and ensure you know what tax law is being applied by way of withholding tax and the exact percentile figure that should be applied.
An arbitrary 30% (say) is just that… arbitrary! You need cold hard facts so that you know you are not being seen off by way of protecting the financial interests of others.

Many countries do have reciprocal tax agreements between each other. On the subject of withholding tax in many cases, if you apply ahead of the job, a waiver will be issued by the tax authorities of the country you are working in. You are then entitled to not have withholding tax applied and would then be expected to pay your taxes in your country of residence.
I am not for a moment suggesting that Angola will do this but many countries will.

I sense that, with the way things are shaping up globally, in the longer term there will be two status levels of people working offshore. Those that are employed and those whom are subcontracted through their own incorporated company. The days of sub contracting ‘day rate direct’ will probably draw to a close in the best interest of the day rate direct people themselves.
If you are day rate direct you are probably part of the least protected group currently working in the offshore sector. It is for this reason we took the decision a while back to only work as employees of our own incorporated company. As employees, our company covers us with statutory workers compensation insurance, also carries global employers liability insurance plus global third party liability insurance (there are conditions applied for Canada and USA). All costs are tax deductible against company profits.
Doing it this way creates a lot more admin, but we do have the advantage of being company directors of the company we are employed by.
We know for sure that our company will not be employing cheap foreign labour to replace us and we know what our company will pay us by way of monthly salaries. Wherever we are working we know we are protected by various insurances. So no guessing going on there. Running a company in this way allows for many more things to be run through as company expenses and thus our required monthly salaries are lower and our personal tax liabilities are be kept to a minimum.

Apologies if I veered off topic a little there, but it’s all tax related at the end of the day.

[crusty]

Worked in Equatorial Guinea a few years ago and all the UK SS7 guy’s left as SS7 started taking 25 or 30% of there pay for local tax
Heard a romour at the time that the lads from houston payed but a lot less, suspect some idiot at SS7 informs the applicable african government of their employee’s full day rate instead of running with the local equivalent
This is fairly typical of SS7 office stupidity

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