Our client withholds tax on our design invoices — can we recover it?
Recovery depends on two separate questions, answered in different places. The first is whether the client was obliged to withhold at all. Many countries require a payer to deduct from fees paid abroad unless the recipient establishes a treaty position, and that position usually has to be lodged with the payer before the invoice is paid rather than afterwards. The second is whether your own country will give credit for tax that was correctly withheld. Tax deducted in error is recovered by claim against the foreign revenue authority, which is slow. Tax correctly withheld is recovered through the credit in your own return, and only to the extent the income is foreign-sourced under your home rules. We work out which of the two situations you are in before anything is filed.
Do contractors working abroad make our agency taxable in their country?
They can. A contractor who works only for you, for a long period, from a fixed place in their own country begins to look to that country's revenue authority like your presence there rather than an independent business. Two consequences follow, and they are separate. The country may treat the agency as having a taxable presence, which brings a corporate filing and an allocation of profit to that country. It may also treat the contractor as your employee, which brings payroll registration, deductions and social contributions from the first day of the relationship rather than from the date anyone noticed. The contract wording matters far less than the working pattern: exclusivity, duration, who directs the work and who supplies the equipment.
Some of our developers work from countries our contracts never mention — does that matter?
Yes, and it is usually established by the other country rather than reported by you. Where a person sits is a fact a revenue authority can prove from payroll records, immigration data and the person's own filings, and it does not depend on what the contract names as the place of work. The exposure runs in both directions. The individual may become taxable and reportable in the country they are actually sitting in, and the agency may acquire a payroll obligation there and, if the work is habitual, a taxable presence as well. The practical remedy is a register of where people are actually working, kept in advance of the filing season rather than reconstructed after it.
Why is our software fee being treated as a royalty abroad?
Because the character of the payment decides the withholding, and countries do not all read the same contract the same way. A fee for design and development work performed by your own team is ordinarily business profit, taxable at home unless the agency has a presence in the client's country. A payment for the right to use code, for a licence, or for transferred intellectual property is a royalty, and many countries tax royalties by deduction at source whether or not you have any presence there. Contracts that bundle the build, the licence and ongoing support into a single figure invite the payer to apply the least favourable treatment to the whole amount. Separating and pricing those elements before signature is the practical fix.
Does a long retainer with one overseas client create a permanent establishment?
A retainer by itself does not. What creates the exposure is people and places: staff or long-term contractors working in the client's country, a desk that is effectively yours on their premises, or someone there who habitually negotiates and concludes contracts for the agency. Duration matters, because most treaties treat a presence that persists differently from a visit. A retainer signed and performed from your own country, with occasional travel for workshops, is a different fact pattern from a retainer delivered by two of your people sitting in the client's office for most of the year. The question to answer is where the work is done, by whom, and for how long.
If we become taxable in a client's country, how much do they tax?
Only the profit properly attributable to what the agency does in that country, not the whole contract value. The exercise is to treat the presence there as though it were a separate business: identify the people working in that country, the work they perform, the fees that work earns and the costs of earning them, then compute a profit on that basis. For an agency the revenue side of the evidence usually exists already, because time is recorded against projects in order to bill them. What tends to be missing is the cost side, meaning an allocation of studio overhead, tooling and management time to the people working abroad. Prepare the attribution in the year the presence arises. Reconstructing it once a return is questioned is considerably harder.
Does my child born abroad need a US identification number before I can claim them?
Yes, and which number it is decides which benefits you get. The child credit requires a Social Security number issued in time for the return — an individual taxpayer identification number does not unlock it, though it does let a dependant be claimed for other purposes. For a child born overseas that means starting the consular birth registration and number application early, because the sequence takes longer than a filing season. See ITIN applications.
What happens if the two countries disagree about which of them can tax me?
The treaty has a procedure for exactly that. You apply to the competent authority in your residence country, which takes the case up with its counterpart, and the two negotiate a position that removes the double taxation. Some treaties add binding arbitration if they cannot agree. It is slow and it runs on documents, so the practical work is preserving the record and filing protective claims while the clock runs. See our treaty work.
