Umbrella Company and Limited Company Services

In order to remain compliant in respect of international tax laws when working abroad, contractors need a mechanism by which they can remit income tax to the local authorities. It is often also a legal requirement for agencies to be invoiced by a limited company and not by an individual.

Engaging the services of an umbrella company will resolve both of these issues:

• The umbrella company will be the limited company that invoices the agency for the services of the contractor; and at the same time
• The umbrella company ensures that any income tax due is remitted to the fiscal authorities of the country where the contractor is working.

In their own country, as an alternative to the umbrella company, many contractors choose to establish and run their own limited company. An accountant will ensure that the contractor’s tax affairs are in order and that any tax due is remitted to the tax authorities.

When taking a contract abroad however, it is not possible for the contractor to continue to run their affairs through their home country company without building up a tax liability in the country of work. Tax is due where income is earned, and if all tax is being remitted in the home country, tax remains unpaid in the country where the income is earned.

The costs of establishing a limited company in each country of work can often be prohibitive, therefore the simplest and most cost-efficient way for a contractor to work compliantly outside their home country is via an umbrella company.  Umbrella companies perform the same function on a larger scale, giving the increased protection and flexibility of an employed solution. Taxation compliance is taken care of in the country of work and all administration is taken away from the contractor and dealt with by a tax planning specialist.

At Capital Consulting, we make use of our experience and local knowledge to ensure our umbrella company works effectively for contractors, allowing them to remain fully compliant with local and international tax legislation for both income tax and social security.  We recommend that you contact our tax planning specialists for appropriate advice.