If I sell artwork through a gallery based abroad, can they deduct ‘withholding tax’ on my earnings?
‘Withholding tax’ is an amount held by the party making a payment to a payee, which will be paid to the taxation authorities.
It is usually withheld from payment because the paying party has an agreement with the tax authorities to speed up collection of taxes by withholding known amounts of tax, rather than the taxation authority having to pursue all payees to collect tax. A good example of this is when in a full- or part-time job, your employer will take withholding tax from your pay cheque and pass this on, in the form of income tax collections, to the tax authorities.
It is essential that the artist clarifies this point with the gallery at the outset of any relationship, as some tax jurisdictions in the EU require withholding income tax to be deducted until it is clear that the recipient is registered to pay tax in their home country.
An artist should contact their tax office and register their tax status as self-employed; they will then be able to provide the foreign gallery with their tax reference number (Unique Taxpayer Reference, or UTR), which should enable them to make the payment without withholding any tax. For more specific tax advice you should refer any queries to an accountant who deals with artists.