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Humphrey_Plugg wrote:

Hi,

I'm not sure if this is the right place to post this query. I'm new to Budapest. Did an English teaching course here and am now looking for teaching work. I was wondering how I go about getting paid. I'm from the UK. I know i will have to do invoices for schools i work for. But I heard something about registering as self-employed and as a business in the UK. And then I pay tax through the UK instead of Hungary because of some EU Reciprocal Txx agreement. Can somebody give me advice on this? Is it legal? How do i do it if it is? Thanks

I'm no expert but I have some knowledge.

There's no "EU agreement" on tax. The model is based upon the OECD guidelines which is much wider than just the EU (OECD includes for example, Canada and the USA).

Basically, if you are here in Hungary for 6 months, then you will be considered resident. Other indicators of tax residence would be having a residence and basing the centre of your life here. The tax rate in Hungary is considerably higher than in the UK, but at the end of the day, you will be issued with a tax certificate by the authorities in either country which can be used to offset taxes in the other country. You would not have to pay twice. If you are registered here, the tax authorities would view you as resident.

Being self-employed in the UK is generally bad news as all of your fees will be considered your income and therefore subject to income tax. This is why many people set up limited companies so they can claim their expenses and reclaim VAT. But the negative side is having to run a limited company, employ an accountant etc. In Hungary, setting up a limited company is really expensive compared to the low cost in the UK.

To make life less complicated, you probably would want to set up here in Hungary as self employed and avoid all that nonsense. You might end up paying more in tax, but you won't have as much hassle. You will need an experienced English/Hungarian speaking accountant to deal with the tax authorities in Hungary on your behalf as it will be unfathomable.

I would be very cautious about VAT. In the UK, you can be fined severely if your income exceeds the VAT registration limit. I doubt you would be in that position just teaching English. Not registering for (or meeting the criteria or being in a position to charge) VAT means you cannot claim VAT back.

One thing to note is that even if you use an accountant, you remain responsible for your own tax affairs so accountants messing it up can easily become a mess in your lap!!

Consult an accountant and i am sure he will advice you acccordingly.

Speak to HMRC and avoid the inevitable hassle. I am doing the same thing over the next couple of months and just want not to have problems down the line.