Tax Implications when paying a contractor in Azerbaijan

[Regum_Jim]

Hi there,

I run a UK recruitment agency that supplies permanent staff to construction contractors around the world. Recently I have supplied a candidate to a French company working in Azerbaijan and for some reason they now only want to pay him on a freelance basis. As they haven't signed an employment contract yet I think this is the most likely result.

The company is asking me if they can pay half his monthly rate directly, 3000Euro per month and can I pay the other half, again, 3000Euro per month.

I really don't understand the tax implications and have hunted high and low to get an answer to this problem. They want me to come to them by the end of this week with how much it will cost them to go through my UK company to make sure the candidate gets the 3000Euro after tax.

If anyone has experience of such things I would be very happy to hear from you.

Kind regards,

James

 

[Tax-UK]

Hi James, my understanding is that this type of requests are common in certain countries in Europe because of local tax advantages, but in the UK only creates a lot of confusion because we do not use the same system. I would strongly suggest you contact your accountant for specific details but if the freelancer is split between being a sole trader and a LTD uk based it seems to me that all the freelancer taxes will be paid in the UK and as such there isn't a big problem to consider, he may even not have to pay any taxes if he stays overseas over more than a year.

IR35 also doesn't seem to apply because as you said there are no contracts and in this case he his a genuine freelancer.

If anything it would be better if he was 100% a LTD because of UK tax savings (assuming that there would be some taxes to pay).

Of course the local tax situation is a completely different issue, I know that in Holland they got quite tight with freelancers and require extra paperwork for freelancers staying, over 3 months.