Double Taxation on Sole Trader Income

[danonthehill]

I am British sole-trader (an artist) who is resident and pays taxes in the UK. I have been presented with a contract from a Taiwanese company, which I have begun consigning my work for sale with. The contract stipulates the automatic deduction of a 10% income tax from any sales. I have been told (by a Taiwan accountant and the company) that the only way to not pay this is to change to a limited company in the UK and this will not incur the tax when invoicing to Taiwan, and that if I do not do this I will also have to make further tax calculations, submit a tax return, and may have to pay further taxes in Taiwan at year end.

The thought of the cost of 2 accountants, 2 tax returns, double taxation calculations and the likely loss of money due to this seems wrong, and the additional costs/taxation issues of going limited are also not right for me right now. Does anyone know of the simplest and best route forward when facing this kind of issue? Thanks.

[maths]

The exact nature of your activities is unclear to me.

However, I am surprised as to the advice given, in the light of the typical double tax agreement to which the UK is a party.

[danonthehill]

My activities consist of making paintings in the UK, shipping them to Taiwan on a consignment basis i.e. if they are not sold by the Taiwanese company they are returned to me. I invoice the company for payment following any sales of the work, but the contract stipulates the deduction of the 10% income tax in Taiwan.


As the 10% is an advance income tax, but as an individual not an employee it is actually a tax on revenue not profits, I have been advised that I would need to fill in a tax return in Taiwan to calculate my actual tax liability. A Ltd company in the UK would not need to pay this kind of tax. Are you suggesting that the double taxation agreement would allow me to simply pay the 10% tax without going through the process of filling in a tax return in Taiwan and then I could simply claim relief for the 10% through my self-assessment return in the UK?

[maths]

I would suggest that you contact the accountant and ask why, given the UK/Taiwan double tax agreement, you are exposed to any Taiwanese income tax as the agreement indicates that no such tax is payable.