# Dreaded tax



## sim4maz (Jan 15, 2013)

Hi,

We are moving to Spain in the Summer and trying to get my head around the complex rules and regulations. Having lived in France before I am well versed with the intricacies of foreign countries!

If anyone can help me work out the likely implications financially that would be great! Basically, we are moving out as a family of 5 (3 kids - aged 3,6,10). We are approaching with caution so going to rent for a year initially (thus renting our UK property). I have a business in the UK and I will simply work from home and then fly to the UK every other week for a couple of days. Hence all my income is UK based and largely paid on a director dividend basis to myself and my wife. I get paid a salary to match my personal tax allowance in the UK. Thus, my tax is basically paid via corp tax through the business.

I'd like to keep things simple and simply move necessary funds to Spain when needed. So the question is what do I need to declare in Spain to stay out of trouble. Fully expect to have to get private healthcare in place and assume we need to prove we are not going to be a "burden" on the Spanish system. My wife might eventually work part time locally in Spain but initially we'd have no income generated in Spain at all.

If anyone can relate to our circumstances or offer any advice or contacts for spanish (but English speaking) consultants who might be able to advise/help that would be great.

Thanks,
Simon


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## baldilocks (Mar 7, 2010)

In order to become 'resident' in Spain (and you must do so within 90 days) you have to show that you have an income into a Spanish bank account plus healthcare provision. If you have been paying NI in UK this can be by means of the S1 form available from Newcastle but this will only have a limited validity so you will need private healthcare insurance. If you going to reside in Spain, your EHIC is not valid.


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## Stravinsky (Aug 12, 2007)

sim4maz said:


> Hi,
> 
> We are moving to Spain in the Summer and trying to get my head around the complex rules and regulations. Having lived in France before I am well versed with the intricacies of foreign countries!
> 
> ...


You need to declare EVERYTHING.
You will need to declare the value of the company under the new asset reporting rules assuming it and investments are more than €50k
You will need to declare your income to the Spanish tax man as you will reside in Spain for more than 6 months

You see, when you are a Spanish tax rersident your worldwide income is taxed by them.

Thats it .... simply put


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## CapnBilly (Jun 7, 2011)

Stravinsky said:


> You need to declare EVERYTHING.
> You will need to declare the value of the company under the new asset reporting rules assuming it and investments are more than &#128;50k
> You will need to declare your income to the Spanish tax man as you will reside in Spain for more than 6 months
> 
> ...


You'll also need to declare your UK property under the new asset reporting aw, as well as the rental income ( although you'll be able to offset any tax you pay in the UK).


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## Dunpleecin (Dec 20, 2012)

Welcome to the forum.

As you've probably already seen in the above posts, I'm sure there are a lot of people on here who might be able to help in some ways you but it seems to me that your business interests and tax affairs appear quite complex and should really be addressed by an accountant well versed in the Spanish tax system as well as the UK tax system as you are potentially going to cop for both. You will probably find a lot of well meaning people on here will advise on parts of what you want, but as a whole, you're probably better seeking professional advice as there will be various implications such as how often you return to the UK and given that the chancellor is trying to cut down on tax avoidance both by individuals and companies there may be issues surrounding how you intend to go about this. I'm not for a moment suggesting that your move and the points you raise are aimed at paying as little tax as possible, but there is no doubt that if you want a definitive answer then the best people to speak to are the professionals as no one knows your precise circumstances, your company results etc etc. It would be foolhardy to try and advise someone with affairs as complex as yours with some kind of generic answer which might be totally inappropriate.

The advice to "Declare everything" as alluded to before, is probably as good as you'll get.

Surely you intend to get a Spanish accountant too though?


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## zenkarma (Feb 15, 2013)

Hi Simon

I've been reading up on this recently and this is a really good site that seems to explain it all fairly clearly: Spanish income tax


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## xabiaxica (Jun 23, 2009)

zenkarma said:


> Hi Simon
> 
> I've been reading up on this recently and this is a really good site that seems to explain it all fairly clearly: Spanish income tax


yes, that's a really good site 


I do believe we have a link in our FAQs & useful info thread


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## expatmat (Feb 12, 2013)

Simon,
I am in the same situation as yourself and you can structure your business in a more effective way but I can't share the details here on the forum publicly. You can PM me if you'd like to discuss.


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## xabiaxica (Jun 23, 2009)

expatmat said:


> Simon,
> I am in the same situation as yourself and you can structure your business in a more effective way but I can't share the details here on the forum publicly. You can PM me if you'd like to discuss.


you can share it as long as it's legal


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## expatmat (Feb 12, 2013)

My bank details are legal but I won't be sharing them


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## xabiaxica (Jun 23, 2009)

expatmat said:


> My bank details are legal but I won't be sharing them


well obviously not your bank details 


just the process


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## Stravinsky (Aug 12, 2007)

expatmat said:


> Simon,
> I am in the same situation as yourself and you can structure your business in a more effective way but I can't share the details here on the forum publicly. You can PM me if you'd like to discuss.


Well I'm in exactly the same position as the OP as I run a Ltd Company in the UK which is soley UK business. It's a small private members business

The previous company I ran had a turnover of between £4 and £5 million a year, and I had access therefore to some pretty good accountants

There are ways of structuring a business to avoid tax, but they are not always 100% legal, especially when you are dealing with two tax regimes. One thing is for sure, when you are a Spanish resident there are very few ways to hide your assets. You could of course divide the shareholding of a Ltd Company, but not with your spouse because that would be looked upon as the same tax pot by the Spanish. Your company could buy your property, but that is also fraught with problems

It's a shame you cant share your option really, and I'm wondering why


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## sim4maz (Jan 15, 2013)

Hi,
Thanks for all your help so far. Like last comment, my business is purely UK based, we are a web/app design company based in South East of UK and deal solely in serving UK based clients (public sector and larger blue private companies) - turnover roughly £600k and we have 2 offices with about 12 staff. I own the business with 2 others who of course are not relocating to Spain. Given I am not committing 100% to Spain until we have tried a year out there I don't want to start juggling structure of company etc. Happy to pay tax as I am supposed to just want to avoid double paying it or paying unnecessary amounts. My wife already has B shares so we spread my dividend income to minimise personal tax. 

If anyone has any contacts for accountants or advice based on their experience, would love to start with that. Can't PM yet as fairly new ...............

Thanks!
Simon


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## Stravinsky (Aug 12, 2007)

sim4maz said:


> Hi,
> Thanks for all your help so far. Like last comment, my business is purely UK based, we are a web/app design company based in South East of UK and deal solely in serving UK based clients (public sector and larger blue private companies) - turnover roughly £600k and we have 2 offices with about 12 staff. I own the business with 2 others who of course are not relocating to Spain. Given I am not committing 100% to Spain until we have tried a year out there I don't want to start juggling structure of company etc. Happy to pay tax as I am supposed to just want to avoid double paying it or paying unnecessary amounts. My wife already has B shares so we spread my dividend income to minimise personal tax.
> 
> If anyone has any contacts for accountants or advice based on their experience, would love to start with that. Can't PM yet as fairly new ...............
> ...


Where are you moving to Simon
Theoretically you will be tax resident in Spain if you are here for a year and will be required to fill in a tax return. The good news is that there is a dual taxation treaty between the two countries and therefore you shouldnt pay tax twice.

It doesnt really matter that your wife is a shareholder, as she will be tax resident here also.

It doesnt matter that your business is soley UK client based ... the Spanish Tax man will want his pound of flesh, and as I mentioned elsewhere you will also come under the new Spanish asset reporting rules


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## zenkarma (Feb 15, 2013)

sim4maz said:


> If anyone has any contacts for accountants or advice based on their experience, would love to start with that.


Given the complexity of your situation I would strongly advise speaking to an accountant specialising in both English and Spanish tax laws for the best advice on how you should proceed. 

From the minimal research I have done for my own somewhat simpler situation, it's clear that Spanish tax laws are complex and wide ranging in scope.

As others have rightly mentioned if you and your wife are resident in Spain for more than 183 days you are considered by the Spanish authorities a Tax Resident, regardless of whether you have official residency there or not. This then means that your worldwide income (earnt and unearnt), regardless of source will be taxable. This would then require you to fill in a tax return detailing your income and assets.

In my opinion you really do need to seek specialist advice.


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## Stravinsky (Aug 12, 2007)

zenkarma said:


> *Given the complexity of your situation I would strongly advise speaking to an accountant specialising in both English and Spanish tax laws for the best advice on how you should proceed. *
> 
> From the minimal research I have done for my own somewhat simpler situation, it's clear that Spanish tax laws are complex and wide ranging in scope.
> 
> ...


They are very rare. I have one in the UK and one in Spain. UK tax people know nothing about Spanish tax generally, because why would they. Spanish tax consultants look confused when you get into UK tax intricacy and dont forget their main clients are Spanish Nationals.


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## AlanS (Jan 1, 2013)

As an accountant myself ....... I would strongly advise you to speak to a Spanish (based) accountant! Your current nominal salary/remainder as dividends set up is ideal if you are UK based but this of course can be very different if you move to Spain (I don't know Spanish tax rules!).

I assume that your are intending to apply for ordinary residence in Spain? In any case I would advise on leaving the UK to consider whether you should complete a HMRC Form P85 to advise HMRC of your intentions. 

Also be very wary of the averaging rule for the number of days you are allowed to spend in the UK and still remain non-resident if that is your intention.

Good luck!


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## Tilley (Jun 10, 2012)

Hi all

Didn't know if I should start my own thread but have latched on to this one. My plans went a little awry as DS decided to have a gap year, hence why my and hubbies (30 years too late !) gap year or two went on hold.

Am now wondering if we come out and rent for one or two years would we have to make all the new declarations of assets ? ie property in UK we may rent out, different pots of savings all over the shop, capital value of property, pensions etc It all seems a bit complex really for those who want an extended holiday rather than to actually emigrate.

Still reading the forum folks, even though I dont post much, so keep up the good work


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## zenkarma (Feb 15, 2013)

Tilley said:


> Am now wondering if we come out and rent for one or two years would we have to make all the new declarations of assets ?


As far as I understand it - yes.

If you're resident in Spain for more than 183 days you're considered a tax resident and will need to fill in a tax return detailing all your worldwide income whether earnt or unearnt. If it's less than €8,000 you may not have to but there are conditions attached to that.

Useful quick guide here: Spanish income tax


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## Tilley (Jun 10, 2012)

zenkarma said:


> As far as I understand it - yes.
> 
> If you're resident in Spain for more than 183 days you're considered a tax resident and will need to fill in a tax return detailing all your worldwide income whether earnt or unearnt. If it's less than €8,000 you may not have to but there are conditions attached to that.
> 
> Useful quick guide here: Spanish income tax


Many thanks, the more I read the more confused I become.  I know each case is unique and so you have to apply things to your own particular circumstances.

I think that maybe we will need to come back every 182 days or something like that to save getting bound up in endless paperwork. In fairness we may have done that before this legislation was passed, what with commitments we have here etc. so maybe there is no difference. Just means that we have to be well organised I guess.


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## gus-lopez (Jan 4, 2010)

Tilley said:


> I think that maybe we will need to come back every 182 days or something like that to save getting bound up in endless paperwork. In fairness we may have done that before this legislation was passed, what with commitments we have here etc. so maybe there is no difference. Just means that we have to be well organised I guess.


The 183 days is cumulative, therefore you cannot spend more than 6 months here. then 6 months elsewhere.


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## snikpoh (Nov 19, 2007)

Tilley said:


> Many thanks, the more I read the more confused I become.  I know each case is unique and so you have to apply things to your own particular circumstances.
> 
> I think that maybe we will need to come back every 182 days or something like that to save getting bound up in endless paperwork. In fairness we may have done that before this legislation was passed, what with commitments we have here etc. so maybe there is no difference. Just means that we have to be well organised I guess.



But that's any 183 days in any year - the days do not need to be contiguous. 

So, what I'm saying is, you would need to spend 6 months of every year out of the country.


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## zenkarma (Feb 15, 2013)

Tilley said:


> Many thanks, the more I read the more confused I become.  I know each case is unique and so you have to apply things to your own particular circumstances.


Indeed. There's no one size fits all and each situation will be unique.

Spain has a reciprocal tax agreement with the UK so if you pay tax in one country, you won't pay it in the other. It's hard to say which country is best to pay the tax in as each country has advantages and disadvantages.

There's no substitute really for sitting down, reading the guidelines and doing the calculations. Even if you were to get an accountant to do it for you, you'd still need to come up with the figures.


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## Tilley (Jun 10, 2012)

snikpoh said:


> But that's any 183 days in any year - the days do not need to be contiguous.
> 
> So, what I'm saying is, you would need to spend 6 months of every year out of the country.


Oh right, so it is a change that applies to us then, I was thinking that as we dont wish to emigrate it was a situation neutral for us, but looks like we will need to delcare everything as well. Thanks guys, does it inclued premium bonds, ISA's etc that we dont have to declare over here as they are tax exempt ? Thinking about it I guess it will as i assume they are not tax exempt in Spain.

Its all really complicated for an 'oldies' gap year.

What about people who have a lot of equity in a property, but say keep £50,000 on a mortgage for various reasons, surely that bit is owned by the bank still ?

There must be a form somewhere that I can put all this stuff on I guess.  will have to seek it out to make sure we know what we are doing.

We are made of pretty stern stuff and our view has always been dont let the system grind you down, but I can imagine this putting a lot of folk off TBH.

Thanks again for the pointers.


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## zenkarma (Feb 15, 2013)

Tilley said:


> What about people who have a lot of equity in a property, but say keep £50,000 on a mortgage for various reasons, surely that bit is owned by the bank still ?


The link I gave you should answer most of those questions. Mortgage is deductable allowance, but there are rules attached.


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## Tilley (Jun 10, 2012)

zenkarma said:


> The link I gave you should answer most of those questions. Mortgage is deductable allowance, but there are rules attached.


Thank you.


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## snikpoh (Nov 19, 2007)

zenkarma said:


> Indeed. There's no one size fits all and each situation will be unique.
> 
> Spain has a reciprocal tax agreement with the UK so if you pay tax in one country, you won't pay it in the other. It's hard to say which country is best to pay the tax in as each country has advantages and disadvantages.
> 
> There's no substitute really for sitting down, reading the guidelines and doing the calculations. Even if you were to get an accountant to do it for you, you'd still need to come up with the figures.


I didn't think you had a choice? If you are resident in Spain then you have to pay tax here. However, any tax paid in UK can be offset so that you don't end up paying twice.

Bottom line, AFAIK, you MUST pay tax in Spain if you are resident here.


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## zenkarma (Feb 15, 2013)

snikpoh said:


> I didn't think you had a choice? If you are resident in Spain then you have to pay tax here. However, any tax paid in UK can be offset so that you don't end up paying twice.


Yes, absolutely.

The OP raised the question that they may decide to stay less than the 183 days which would automatically make them a Spanish Tax resident. By doing that of course (staying less than 183 days) they would naturally continue to pay UK taxes. So, it may come down to a simple question of which tax authority they would be financially better off with, hence my comment. 

If it subsequently turns out they may be financially better off registering for Spanish Tax, it opens up the possibility of staying longer than 183 days.

Perhaps I didn't make myself clear, sorry.


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## Stravinsky (Aug 12, 2007)

snikpoh said:


> I didn't think you had a choice? If you are resident in Spain then you have to pay tax here. However, any tax paid in UK can be offset so that you don't end up paying twice.
> 
> *Bottom line, AFAIK, you MUST pay tax in Spain if you are resident here.*


Nope, afraid not .... just to be a pain 
Fiscal residency and domicile residency are two different things. You can be a resident as regards domicile, but NOT a fiscal resident.

So ... for instance a Spanish "resident" spending 5 months of the year here can be a tax resident in the UK. If a renter, then there is no tax to pay.


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## snikpoh (Nov 19, 2007)

Stravinsky said:


> Nope, afraid not .... just to be a pain
> Fiscal residency and domicile residency are two different things. You can be a resident as regards domicile, but NOT a fiscal resident.
> 
> So ... for instance a Spanish "resident" spending 5 months of the year here can be a tax resident in the UK. If a renter, then there is no tax to pay.


Yes, OK. I thought by now that we were all on the same page 

I meant 'fiscally or tax resident'.


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## Stravinsky (Aug 12, 2007)

snikpoh said:


> Yes, OK. I thought by now that we were all on the same page
> 
> I meant 'fiscally or tax resident'.


I'm never on the same page. I'm one of the confused.
The above scenario is probably what I am going to do


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## chris&vicky (Feb 6, 2013)

baldilocks said:


> In order to become 'resident' in Spain (and you must do so within 90 days) you have to show that you have an income into a Spanish bank account plus healthcare provision. If you have been paying NI in UK this can be by means of the S1 form available from Newcastle but this will only have a limited validity so you will need private healthcare insurance. If you going to reside in Spain, your EHIC is not valid.


Could you clarify what you mean about your S1 form "will only have a limited validity so you will need private healthcare insurance"? I know the cover is limited by time, depending on your UK NI contributions, but are you saying that you need in addition private cover, or private cover from when the S1 form is no longer valid?


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## xabiaxica (Jun 23, 2009)

chris&vicky said:


> Could you clarify what you mean about your S1 form "will only have a limited validity so you will need private healthcare insurance"? I know the cover is limited by time, depending on your UK NI contributions, but are you saying that you need in addition private cover, or private cover from when the S1 form is no longer valid?



you need private cover from when the S1 is no longer valid - while it's valid you have access to the state healthcare system on the same basis as a Spanish national


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## Guest (Mar 3, 2013)

As I've just mentioned on another post, if you are a resident, you will need to employ a gestoria. Everyone over here has a gestoria. They are inexpensive. Being in the EU, there is dual taxation which means, as a resident you will pay your taxes in Spain or the UK depending on your circumstances. You will not pay tax twice. There are some expats such as ex army or the civil service. Their pensions can only be taxed in the UK. you run a business, but your gestoria will sort all that out with the tax man


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## xabiaxica (Jun 23, 2009)

Tejeda said:


> As I've just mentioned on another post, if you are a resident, you will need to employ a gestoria. Everyone over here has a gestoria. They are inexpensive. Being in the EU, there is dual taxation which means, as a resident you will pay your taxes in Spain or the UK depending on your circumstances. You will not pay tax twice. There are some expats such as ex army or the civil service. Their pensions can only be taxed in the UK. you run a business, but your gestoria will sort all that out with the tax man


you don't _need to _employ a gestor - & not _everyone _does


you're right otherwise though


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## zenkarma (Feb 15, 2013)

Tejeda said:


> Being in the EU, there is dual taxation which means, as a resident you will pay your taxes in Spain or the UK depending on your circumstances. You will not pay tax twice.


That's not strictly true or at least not explained very well. It's not either/or Spain/UK, it can quite easily be both and you can and will have a tax liability in the UK as well as a tax liability in Spain based on the same taxable income.

The UK Inland Revenue and Spanish Hacienda have, as you rightly say, a dual tax treaty. Which essentially means, as you also rightly say, you will not pay the _same_ tax twice. However, given that the UK tax allowances (what you can earn before you start paying tax) and tax rates themselves are somewhat lower than the Spanish equivalents your tax liability in Spain will likely be higher than that in the UK when calculated on exactly the same amount of income.

When this happens (your Spanish tax liability is higher than the UK tax liability), you pay the _difference_ to the Spanish hacienda.

Pedantic maybe, but it's important to understand this and not mislead people into thinking once they've paid UK income tax, no more is due.


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