How to freelance as a non-UK citizen for an EU-based client?
Freelancer’s Question: I have just been offered a dream remote job, everything about the opening is fantastic and I'm dying to take it! There is just one hiccup: I’m an Australian citizen, and the company offering the freelance contract is based in Europe – Spain specifically. Is there any way I can work for a European-based company but still pay my taxes in Australia? What do I need to do?
As background, I have Googled this every which way I can think to word it and I can't find any advice on this particular conundrum! I’ve been told the opportunity has received a lot of applicant interest and I don't want to lose the job on a technicality, so please let me know quickly!
Expert’s Answer: In your question, you state that the position is remote. Proceeding on the basis that you mean remote working from Australia, our advice is as follows. And believe it or not, it is international freelancing advice that should still hold you in good stead post-Brexit!
Firstly, as an Australian national working remotely for a European client based in Spain, where you pay taxes depends on where you are physically based, tax resident and performing the services.
In this case, you are tax resident in Australia, based in Australia, performing the services in Australia, albeit for a European company. On this basis, you should continue to pay taxes in Australia, either via a payroll company that can offer you PAYG services or via your own Australian Pty Ltd.
If you are using your own company to invoice the end-user (in Spain), as the services are being performed in Australia, you should discuss with a local tax adviser whether ‘Service Tax’ needs to be applied to your invoices.
If the position were to require you to relocate to Spain, then firstly you need to tackle the issue of a Work Permit. As a non-EU national, you will require a work permit before you can start working in Spain.
If this is a contract position (as you imply in the wording of the question), it is unlikely the end-user will act as your work permit sponsor. There are a number of companies in Spain that will act as your sponsor and provide local employment services. And if you decide to go down this route, the company that has sponsored your work permit must be the company that administers your payroll. On that basis, you will work as an employee in Spain.
It is worth considering that under this type of option, the company acting as your employer will want to pass on employment costs, which are very high in Spain. You should, therefore, discuss this in detail with the end-user and you personally should ensure that your pay rate is going to be sufficient to cover all costs. You should keep in mind that you’ll need the rate to offer you an income which still makes moving to Spain an attractive prospect!
Lastly, and just for your reference, if you were a UK limited company contractor, at the current time of advising, there would be no issue for you to use your own UK-registered ‘Ltd’ to work remotely -- for a Spanish end-user in the UK. After April 2020 however, if the IR35 changes are implemented, then you (the contractor) should think about whether a UK Ltd Company is a suitable option. HMRC has not issued guidelines for contractors working on short term international or remote international contracts but if the end-user is based in a country outside of the UK, it is highly unlikely they will be able to assess the placement from an IR35 perspective. IR35 is a UK law and international end-users will not be aware of the legislation requirements. We would, therefore, advise the contractor to assess their situation and whether HMRC would deem them inside or outside of IR35. For now though, this is a hypothetical as you don’t appear to be a UK citizen or a UK Ltd Company. However in a world of tax, compliance, Brexit and IR35 reform, it’s good to know your options!
The expert was Michelle Reilly, CEO of overseas freelance work, tax and compliance advisory 6CATS International.
26th November 2019