I have a client who is a self-employed photo-therapy artist with UK clients. In 20/21 he sold his only home in UK, permanently moved to Spain, has a Spanish home, and is deemed to be a Spanish tax resident under their rules for 2021 fiscal year onwards.
He will continue his business for UK clients, mostly remotely, but occasionally in person, but he has no permanent place of business or residence in the UK.
Under the SRT he is likely to be non-resident (unless he lied about how may days he intends to come back for this year) but if not, under the tie breaker rules of the DTA between Spain and UK he should be deemed non-UK resident, I think.
My question though is whether articles 5 and 7 of the Double Tax Agreement apply to him and if, so, does doing work for UK clients remotely need to be treated as UK income under Article 7? His Spanish accountant say these articles only apply to companies, but I think that is incorrect?
There isn’t much tax involved each year which is why I haven’t just referred this onto someone else, but was wondering if I am missing something obvious?
Replies (8)
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The location of clients is not important. Where he is performing the work is important. If he is sitting at a desk in Spain and working remotely for clients in the UK, he should probably be registered as a Spanish business. UK sole trade is likely to have ceased effectively, unless he wants to keep it going for the occasional UK visits.
Presumably he should be in the Spanish system and "buying in" to the healthcare system etc?
It doesn't sound right that UK client income is taxed in the UK (unless work done in the UK). Are you sure he has told the Spanish accountant the right information? Nothing lost in translation or a mis communication re where work is done?
We've got French res clients who still go to UK to perform some sole trade work who pay UK tax (and declare in France as part of worldwide income) on this still but most who are remotely working change to a French business. I'm not particularly up to speed on UK/Spain DTA but don't imagine it is wildly different.
Not my field at all and hope you don't mind me intruding.
Out of curiosity and not wanting to throw a spanner in the works, how do you handle work which is specced up by a visit to the UK but then completed remotely in Spain / France / wherever? Fair apportionment?
I think the Spanish accountant is wrong (or misinformed) unless, as has been said above, there is a PE that we haven't been told about. The same applies to @accountantccole's comments about France.
Article 7 definitely applies to sole traders, and a PE is what it says on the tin. Visiting 100 clients at their homes wouldn't make one, and neither would servicing them at, say, a rented 'hub' venue or equivalent.
On the face of what we have been told this looks like all Spanish income.