Withholding tax Brazilian tax paid by employed/self-employed TP

Withholding tax Brazilian tax paid by employed...

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Client worked for a Brazilian company for most of 10/11. Client invoiced the company, and received payment, minus a 15% withholding tax. Whilst the TP claims he was self-employed, all factors look to employment (i.e. no substitution allowed, mutual obligation, no other clients, financial risk, other badges of trade).

All work was carried out in the UK, although the TP did visit Brazil in connection with the employment. The client is now in regular UK employment, and this situation is not expected to reoccur.

Two questions:

1) Should the client have registered a DPNI scheme to deduct class 1 NIs and run a PAYE scheme? Should the client set one up for last year, pay the NIs (and penalties) or not? Since the employer is non UK based, if the client claims to be self employed and pays class 4, who would be liable for class 1 if HMRC disagree?

2) Is this withholding tax allowable for unilateral relief (since there is no DTA between the UK and Brazil) - not sure if  Yates v GCA International Ltd (64 TC37) will apply here since all work done in the UK.

Andrew

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By BRASILPORTUGAL3
02nd Jan 2013 19:24

What happened was that in Brazil there is a law that determines, for any output characteristic with money remittance, should be taxed at 15%.
There are other ways to send remittances abroad originating from Brazil.
But it should be checked each case.
If money entered Brazil for financial investment in the stock market?
If money entered Brazil for investment in companies?
In the above case, there was none of these cases, so the tax is straightforward. Any questions let me know. skp: umm.melo

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