Scenario-where does thi person pay tax.

[GregC]

Say for example a chinese sole trader imports sofas into the UK. Gets it sent to a storage facility which charges a fee for storage.

The sole trader then sells the items on ebay and orders delivery over the internet.

The delivery company (for example amtrak) go to the storage facility and collect the sofa.

The storage company charge a small handling fee for dealing with the courier when he comes.

The guy in china has done this all from his computer in china. he is using the storage facility as his address on ebay.

Payments go to him from paypal so no funds are needed in the UK.

So anyoen buying from him in the UK thinks he is a UK company.

What are the tax implications for this guy? Does he have to pay tax in the UK, in China, or both?

There ar epeople doing this on ebay(not dropshipping) and Im wondering are they paying tax?

[trainershack]

they need to pay tax to the relevant authority. if they reside in the uk - the inland revenue. if they reside in china - the chinese equivalent. that is if they are registered as a business. if they are not then they wont pay any (illegally).

[Snorkerz]

There will be import duties / vat to pay when the sofa comes into the UK.

[cjay]

Not sure about your scenario but antone serious about the tax issue should take a look at Gibraltar. I have recently established a buisness there due to its extremely favourable tax regime. No Cap Gians, no vat, fixed rate corp tax in 2008, zero at present and fixed amount of income tax (Not fixed rate, fixed amount) £800 per month.

Cheers
cjay

[GregC]

Im still trying to work this one out.

I rang the inland revenue and they said if someone is selling goods in this country but resides out side this country then they still have to pay tax in this country.

sorry, ive edited this coz im thinking out loud.

[goodluck222]

As mentioned before, he will have to declarer his taxes/transactions to the country he resides in. Otherwise it will all catch up with him sooner or later. No getting around that.
Even if he is never found out, death duties might or will include the taxes he avoided while alive.


goodluck222

[GregC]

But he must also pay tax in this country according to the inland revenue

[Joyous]

The general rule for overseas traders doing business with UK customers is that they are trading in the UK and therefore liable to UK tax on their profits.

It is possible that the income may be taxed twice, ie in the UK and in China. If this is the case and there is an international agreement in place then the trader may be able to claim double taxation relief.

Regards

Joy

[GregC]

Cool, I think that is the definitive answer then.