# Reside in Spain, work for UK company. WHAT TAXES??



## malcsblue (Feb 4, 2013)

Hello all, 

New to the forum and have seen many simlar threads but still haven't found a definitive answer. 

Same old situation.... I reside in Spain (Valencia to be exact).

I intend to set up a UK LTD company to avoid the costly monthly Automono payments and also so i can invoice my Spanish clients without VAT and without having to apply the 'Retención'. 

As far as i know there is nothing illegal nor difficult about setting up a UK Limited company and running it from Spain. The problems arise with the issue of tax. Where should i pay income tax, how much should i pay, and what does it entitle me to?

I have sought some professional advice in the UK and have been told that, despite being a Spanish resident, there is no obligation to do a Spanish tax return (which comes as a massive surprise) and in adddition, with a E106/109 i am even entitled to Spanish healthcare, owing to my NI contributions in the UK and a reciporcal arrangement between the two countries....this all sounds a little to good to be true. Does anyone know any different?

Surely as a Spanish resident i have a legal obligation to declare my earnings to 'Hacienda' and pay into the Spanish tax system. If this is the case, how is it done and at what rate?

Sorry for the legnthy explanation but if anyone can shed some light on the matter i would be extremely grateful 

regards.

M


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## Calas felices (Nov 29, 2007)

This wasn't an expert in the pub that advised you, was it?


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## xabiaxica (Jun 23, 2009)

malcsblue said:


> Hello all,
> 
> New to the forum and have seen many simlar threads but still haven't found a definitive answer.
> 
> ...



yes - a lot of people will tell you that you don't have to do a tax return in Spain - & you aren't actually obliged to, but it's best to, as it helps establish residency in the future ( a lot of people who have been here years & never submitted tax returns now wish that they had, because due to a law change last year, they'd be entitled to free healthcare here wheras they weren't previously)

if you are already paying income tax in the UK, because of a reciprocal agreement, you don't have to pay twice - so that's true

it IS also true that if you're paying NI in the UK, you can access state healthcare here, - another reciprocal agreement - but what you need is an S1 form from the DWP in Newcastle (that replaced the E10whatever several years ago)


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## brocher (Mar 21, 2011)

xabiachica said:


> yes - a lot of people will tell you that you don't have to do a tax return in Spain - & you aren't actually obliged to, but it's best to, as it helps establish residency in the future ( a lot of people who have been here years & never submitted tax returns now wish that they had, because due to a law change last year, they'd be entitled to free healthcare here wheras they weren't previously)
> 
> if you are already paying income tax in the UK, because of a reciprocal agreement, you don't have to pay twice - so that's true
> 
> it IS also true that if you're paying NI in the UK, you can access state healthcare here, - another reciprocal agreement - but what you need is an S1 form from the DWP in Newcastle (that replaced the E10whatever several years ago)


.... but S1 only covers for 2 yrears, doesn't it?


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## CapnBilly (Jun 7, 2011)

xabiachica said:


> if you are already paying income tax in the UK, because of a reciprocal agreement, you don't have to pay twice - so that's true
> )


As far as I recall you don't have to submit a return if your income is below €22,000 (from employment in Spain), or you have capital gains below €1,600, or rental income below €1,000. Above that, you must submit a return. In addition, as far as I know, if you are relying on double taxation you need to submit a return, I think the limit is about €11,000, but I might be wrong on that.

If you pay tax in the UK you can offset it against any spanish tax that may be due, BUT you may have to pay more in tax in Spain, as the allowances are not as good as the UK, and generally the rates are higher. So, you need to ensure that you have paid enough. Paying tax doesn't preclude you from paying tax in Spain. I think in the past they haven't bothered, but times they are a changing. 

I noticed the other day, there's a fine for not submitting a return, even when no tax is due. I think it was a €100.


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## Stravinsky (Aug 12, 2007)

And of course, because you have a UK Ltd Company you will pay tax on the company profits as well as the personal tax on your income, and as a Spanish resident you have to declare your income here as well. Dont forget the accountants fees (unless you do them yourself on line)

I'm not sure if, as the total shareholder, if you will have to report the company value to comply with new asset reporting rules.

I'd get a good accountant / gestor if I were you


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## CapnBilly (Jun 7, 2011)

Stravinsky said:


> And of course, because you have a UK Ltd Company you will pay tax on the company profits as well as the personal tax on your income, and as a Spanish resident you have to declare your income here as well. Dont forget the accountants fees (unless you do them yourself on line)
> 
> I'm not sure if, as the total shareholder, if you will have to report the company value to comply with new asset reporting rules.
> 
> I'd get a good accountant / gestor if I were you


You will have to report it if the value exceeds €50,000. And this how the valuation is arrived at, it's translated, but I think you can get the gist. Basically, it seems to the capital and retained profits as reported in the audited accounts.

What is the value against which must be reported if the values ​​and rights representing an interest in a legal entity?

• In the case of securities representing participation in the capital or equity of a privately traded entity, excluding those relating to collective investment schemes will be valued according to the average trading value of the fourth quarter each year (Article 15 of Law 19/1991, of 6 June on Wealth Tax).

• If this is representative values ​​of social equity or equity of an entity (not traded on organized markets), its valuation will be conducted by the theoretical value resulting from the last approved balance sheet, provided it either way mandatory or voluntary, has been subject to review and verification and the audit report be favorable. In the event that the balance has not been audited or the audit report not prove favorable, the assessment will be equally as provided in Article 16 of Law 19/1991, of 6 June on Wealth Tax.


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## xabiaxica (Jun 23, 2009)

brocher said:


> .... but S1 only covers for 2 yrears, doesn't it?



for early retirees, yes - 2 years ish

but for a resident of Spain working for a UK company & paying NI there it lasts as long as that situation lasts






unless the rules change........


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## gus-lopez (Jan 4, 2010)

brocher said:


> xabiachica said:
> 
> 
> > yes - a lot of people will tell you that you don't have to do a tax return in Spain - & you aren't actually obliged to, but it's best to, as it helps establish residency in the future ( a lot of people who have been here years & never submitted tax returns now wish that they had, because due to a law change last year, they'd be entitled to free healthcare here wheras they weren't previously)
> ...


As Xabiachica has mentioned the s1 when used in this situation, has an indefinite validity.
To make things easier they changed many of the form names/numbers to S1. So at least 4 or 5 are now called S1. The others are called A1.


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## NickZ (Jun 26, 2009)

malcsblue said:


> Same old situation.... I reside in Spain (Valencia to be exact).
> 
> I intend to set up a UK LTD company to avoid the costly monthly Automono payments and also so i can invoice my Spanish clients without VAT and without having to apply the 'Retención'.


You need to check the EU cross border VAT rules. I'm too lazy to look but IIRC the VAT would only not be charged if the buyer isn't responsible for VAT. But if that's the case you wouldn't be charging VAT no matter what.

Sounds to me like you would be an employee working in Spain for a non Spanish company. I'd be very careful not expecting to pay taxes in Spain


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## malcsblue (Feb 4, 2013)

thank you all for your comments. a lively thread indeed and lots of food for thought.


another question i'm afraid:

How do i claim VAT on expenditure in Spain: office rent, supplies, logisitics etc. 

How is this done and at what rate?


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## Kitty3 (Apr 30, 2009)

Hi all, interesting thread, I myself had to return to the UK in April as I was told I could not continue to work for a UK company as PAYE and live in Spain for an indefinite period. You must be nationalised for tax in the country where you reside it makes no difference where you conduct that work but is based on where you principally reside. It is set up for those who are on secondment from the UK but is not designed for use beyond two years. In our virtual working world it does seem silly that you can't work for a company based elsewhere in the EU but reside in the country of your choice. There could be some means of contributing to the system in the country in which you reside as you are making a lifestyle choice not to work there too. I am still waiting to hear from my tax advisor if I need to pay back the Hacienda for the 2 years I worked for a UK company but lived in Spain beyond this two year grace period. We have been back for a while now and have made the best of things but we were settled and the children upset to be uprooted. I think the key is to get advice, it should never be assumed you can take your UK job with you when you decide to make a new life abroad even if your company tell you its not a problem with them where you live, it will become a problem for you 3 years down the line.


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## espanian (Mar 2, 2011)

Well, let me know how you get on - is anyone posting on here having genuinely achieved this? I came to Spain almost 2 years ago with an A1 after completing forms in the UK, as advised by HMRC. I have my own limited company there; I too earn my money in the UK but reside in Spain.

I found the A1 to be fairly useless. We managed to get a NIE (don't need the A1 for that) and registered to get a Social Security number, but not for health care. The so called reciprocal agreement is fine in theory but living in Spain for less than 2 years, not retired, not employed (in Spain) and not autonomo is a status that 'the system' does not seem to understand. The NICO (HMRC) office in the UK seemed to have no idea how the reciprocal agreement would work in practice.

They advised us to use our EHIC until we have been in Spain for 2 years, then we can apply for an S1. The EHIC works fine in Urgencia, but you cannot book an appointment with a doctor, and technically should only be used for 6 months. I pointed that out and asked what I was therefore supposed to do for the other 18 months, and I was literally met with silence.

I received such mixed and confused advice from HMRC, and I was at a lost where to go next, so eventually arranged private health insurance. I will brace myself and try again in May (we will have been here 2 years then) and see if I can get an S1.

See Working abroad - Healthcare abroad - NHS Choices for up-to-date advice.

Regarding tax returns, I would say that 'yes' you would need to complete a tax return, but don't take my word for it: Do you need to submit a Spanish tax return?.

Finally, the orginal poster wants to set up a UK limited company and charge their Spanish clients, presumably, in sterling? No sure how that would work.... and not sure you can avoid the VAT either, so please make sure you know what you are doing.


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## malcsblue (Feb 4, 2013)

espanian said:


> Finally, the orginal poster wants to set up a UK limited company and charge their Spanish clients, presumably, in sterling? No sure how that would work.... and not sure you can avoid the VAT either, so please make sure you know what you are doing.


thanks for the info. very helpful. Yes , i agree. the theory is one thing, the practice is another. In response to the above, I hold a UK based euro account with Barclays so will charge my clients in euros. As the tranaction is considered an export (or more technically an 'intra-community tranasction') VAT is not applicable.

Would be great to know how i would go about claiming vat on expenses in Spain however.... my mobile phone bill for example which carries 21% VAT. can i claim this through my UK Ltd company? if so at what rate?


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## grahunt (Jan 22, 2009)

*Setting Up A UK Company*



malcsblue said:


> thanks for the info. very helpful. Yes , i agree. the theory is one thing, the practice is another. In response to the above, I hold a UK based euro account with Barclays so will charge my clients in euros. As the tranaction is considered an export (or more technically an 'intra-community tranasction') VAT is not applicable.
> 
> Would be great to know how i would go about claiming vat on expenses in Spain however.... my mobile phone bill for example which carries 21% VAT. can i claim this through my UK Ltd company? if so at what rate?


You haven't got a problem with setting up a UK company and billing your clients in the UK. However Hacienda will look long and hard at it if the majority of your clients are Spanish. If your clients are from many parts of the World and paying in various currencies then it is much more logical to have the company run from the UK as the red tape is a lot less. 

If you read Spanish then take a look at Borja Prieto's Desencadenado blog as he takes you through the whole process of setting up correctly and explains why it is totally legal. 

as for your VAT offset you will have to be asking that question to HMRC. If you are not charging VAT how can you offset it?


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## sicnarf (Apr 7, 2013)

Hi all - new to the forum and this seemed the most relevant post to my situation.

I came to live in Madrid from the UK in September 2011 with my Spanish wife and daughter. I was working for a Spanish employer until November 2012, when I started working for a UK company again, paying NI and PAYE just like any other employee.

I'm mainly resident in Spain (go the to the office in the UK for 1 week per calendar month), and as I understand it will be considered non-resident in the UK for tax purposes and can probably claim my PAYE tax back from HMRC, I am consulting a UK tax adviser about this - then I will have to do a Spanish tax return for my UK income. I intend to go to a gestor to help me with organising this.

What I'm less clear about is Seguridad Social. Should I start paying contributions as if I was an autonomo so that I'm in the system as far as healthcare/pension rights or is this unnecessary if I'm also paying NI in the UK - I understand there are arrangements in place to allow contributions in one member state to be transferred/considered by another but am really confused about how this is done, when it should be done, etc.

I'm more concerned about pension stuff than healthcare (perhaps foolishly) as we have private health insurance with Sanitas. I'm a way off retirement yet but would like to understand what the implications are of making (or not making) Seg Social contributions - and how to go about it.

Any help/advice greatly appreciated (PS: My spoken Spanish is fine, and reading's OK but I start to lose the plot when trying to read through official websites like Agencia Tributaria or la Seguridad Social)


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## gus-lopez (Jan 4, 2010)

sicnarf said:


> Hi all - new to the forum and this seemed the most relevant post to my situation.
> 
> I came to live in Madrid from the UK in September 2011 with my Spanish wife and daughter. I was working for a Spanish employer until November 2012, when I started working for a UK company again, paying NI and PAYE just like any other employee.
> 
> ...



Just suggestions but can't you apply to Uk HMRC to be paid taxfree & pay here ? 
Or reclaim at year end & pay here ?
The NI contributions are more complicated as you might be able to get an S1 (old E109) for someone whose family is resident here but they aren't ? Then againyou are moreresident here than overthere . Complicated. :confused2:

P.S. It would be beneficail to you in regards to pensions to have paid in ,in more than one EU country , for at least 1 year, as the rate at which your pension is paid by each & every country increases substantially !


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## sicnarf (Apr 7, 2013)

Thanks for your reply



gus-lopez said:


> Just suggestions but can't you apply to Uk HMRC to be paid taxfree & pay here ?
> Or reclaim at year end & pay here ?


Yes for this year I intend to reclaim it from UK and then pay IRPF in Spain


I'll try and arrange an appointment with Seguridad Social to ask them how to go about making contributions - anyone got an idea about how much it's going to cost me per month to do this?


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