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I have a company which is based in the UK, but I myself don't live in the UK (I do come to the UK from time to time). The company has a registered office address in the UK, but not a physical location. The company sells on-line services, so most of the "trading activities" are done somewhere on a server. I keep company books at my home address, which is also my address that appears in my ID card (and this is in Poland). However, this address isn't actually the address, where I spend most of my time, since I'm a student and for most of the time I live in a third location. The EU VAT directive says that when selling services (art. 45) taxes should be paid in the country where the services are being supplied from. So my question is... if I have a UK company, don't have UK premises, live outside the UK, how important is it that the physical location of the server I'm using is in the UK? If the server was outside the UK, would I have to pay taxes in the country where the server is located?

So far I had no problems with this issue, but I'm just about to fill in VAT registration forms in Poland and Germany, and in those forms I have to specify all places of my business activities, even the unusual ones, so I presume the server location matters.

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2 Answers

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I am in a similar situation - living in Poland, Servers in Germany and soon US (moving them), BUsiness US based. No VAT involved, though ;)

how important is it that the physical location of the server I'm using is in the UK? If

General Consensus is that the server is not a business location. They are a technical artifact but no business decisions are done there - after all, a machine does not decide, it is the code written by people.

You could get a UK VAT and deal with all the UK issues remotely.

But why not just move everything to Poland? Just register a business or a limited liability (capital: 5000 PLN - jokingly low) and pay 19% capital gains tax.

In that case I would put all into your home town, or where you are most of the time for convenience. There is no reason to go through all the hassles with the UK (mostly from you knot being there) without a lot of gain.

Alternatively betray your government ;) Issue everything from UK and wait until the shit hits the fan - not only for VAT, you are also supposed to run all your books in Poland by law and pay taxes there, given that quite obviously the UK setup is a shell only. This CAN get nasty. IF things explode, VAT is your smallest problem - we mostly talk of running a non registered business, tax evasion etc., the whole program. Arms length regulation says you have no business n the UK but pretend, as no activities happen there.

What is the gain from the complex UK setup compared to a polish one? Poland has quiet good laws already in pace ;)

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I decided to register the company in the UK since I sell electronic services in Poland, Germany and the UK. The VAT threshold in the UK is 2.5x higher than in Poland, and when selling to private individuals I don't charge VAT at all. I want to register for VAT in Poland and charge Polish VAT on when selling my products to VAT-registered individuals in Poland so they could avoid VAT reverse charging, about which they seem to have no idea at all. And it's not true that nothing is being "done" within the UK since my co-workers are based in the UK, where content for my software is being created. – lukeshek Jun 3 '12 at 12:29
And another thing - there is no reason to register a Polish company if you already have a company in another member state. I could shift, or at least pretend to shift, all business activities to Poland, and then charge Polish VAT only, but what would it look like to a Brit or German, who buys something from a UK company, and is then charged Polish VAT on the transaction? – lukeshek Jun 3 '12 at 12:32
Ah, you did not say that this is a real company with someone working in the UK and making the business decisions and being the director of the company. – NetTecture Jun 3 '12 at 13:49
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how important is it that the physical location of the server I'm using is in the UK?

It is not important, at all. You are subject to the tax regulations of UK because your company is registered there, and I assume that it is also the only commercial entity of your business. (No branches etc. in anywhere.)

If the server was outside the UK, would I have to pay taxes in the country where the server is located?

No, the server location is irrelevant as I said.

If you can really move your business location easily, I can recommend you to have a look at here. Many giant firms move their headoffices to Ireland or Denmark, as far as I know.

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